WASHINGTON (8/22/13)--The Consumer Financial Protection Bureau (CFPB) has sued Nevada debt-relief firm Morgan Drexen Inc. for allegedly deceiving consumers and charging illegal upfront fees.
Morgan Drexen President/CEO Walter Ledda was also named in the suit.
The company "took advantage of people who were struggling," CFPB Director Richard Cordray said in a bureau release. "The company charged consumers illegal fees and deceived them about the services provided. We will hold them accountable for these actions," he added.
In the suit, the CFPB alleged Morgan Drexen violated the Telemarketing Sales Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act by claiming that consumers:
Would not pay up front for debt-relief services provided by the firm. In reality, the CFPB said, consumers who worked with the firm paid hundreds, if not thousands, of dollars in upfront fees; and
Would be "debt free in months." The CFPB found that only a tiny fraction of consumers who worked with the company ever became debt free.
Consumers who engage with the company are presented with one contract for debt-settlement services and a separate contract for bankruptcy services. A CFPB investigation of the company's practices, however, has shown that Morgan Drexen charges consumers for bankruptcy services while doing little or nothing to address bankruptcy issues, the agency said.
The bureau in a release claimed the bankruptcy service contract "is a ruse designed to disguise the illegal upfront fees the company is charging consumers for debt-relief services as bankruptcy-related fees."
More than 22,000 customers have enrolled in Morgan Drexen's bankruptcy services program since October 2010, reaping millions of dollars in upfront fees for that firm.
The CFPB suit asks Morgan Drexen to stop the illegal activities, and seeks penalties for both the company and the CEO, Ledda.
For the full CFPB release, use the resource link.