CFPB Wins Temporary Injunction Against Debt Settlement Company

Debt settlement company World Law Group thought it could skirt FTC rules by partnering with a lawyer and rebranding its offerings as “legal services.” That plan may not work much longer. The CFPB filed suit against World Law Group this month, alleging the company collected some $67 million in up-front fees from nearly 21,000 consumers since 2010 without doing much at all to help any of those consumers with their debt load. The U.S. District Court of the Southern District of Florida seems to agree. The court issued a temporary injunction against the debt settlement company this week, freezing company assets.

World Law Group “lured consumers with false promises of help from lawyers and collected millions in illegal upfront fees,” said CFPB Director Richard Cordray. “We are seeking to put an end to this scheme and prevent more consumers from being harmed.”

It has not been legal for companies to charge up-front fees in exchange for promised future debt management services since 2010, when the FTC amended the Telemarketing Sales Rule (TSR) in an attempt to rein in the growing number of debt relief companies targeting debt-saddled consumers.

It just so happens that right around 2010, according to the CFPB’s complaint, the management team behind two debt repair companies, Orion and Family Capital Investment & Management LLC (FCIAM), engaged in a plan to avoid TSR rule enforcement by partnering with a law firm – the aforementioned World Law Group – and offering essentially the same services for the same up-front fees, while marketing them as legal services performed by actual lawyers. The company claimed, in fact, that it had lawyers lined up in every state to help customers with their debt negotiations and that those negotiations would allow customers to pay back less then what they owe.

The CFPB alleges that the company not only violated the FTC’s Telemarketing rules, but also UDAAP, by:

1. Charging illegal up-front fees. According to the complaint, approximately 99% of consumers paid up-front fees, including initial fees, attorney monthly fees and bundled legal service fees, amounting to hundreds of dollars.
2. Promising legal representation without intent to deliver any. In practice, few if any of World Law Group’s customers had access to actual legal representation, according to the CFPB. Instead, company employees (i.e., non-lawyers) performed nearly all of the work, including negotiating with creditors and handling lawsuits if creditors sought to collect the debt through litigation.

The temporary injunction follows a temporary restraining order, also issued by the Southern District of Florida Court.