The Consumer Financial Protection Bureau said on Friday (March 18) that, at the agency’s request, a federal district court has entered a final judgment against Morgan Drexen, a debt relief company, with the resolution of a suit brought by the CFPB three years ago.
The total judgment entered — where the firm is prohibited from collecting any more fees from customers — comes to $173 million — of which, $132.8 million is ordered as restitution and the remaining $40 million comes via civil penalty. The CFPB said the latest decision comes in the wake of a stipulated final judgment that was approved in Oct. 2015 against the firm’s CEO, Walter Ledda. Ledda was found by the court to have violated federal law. Ledda has also been ordered to pay restitution and has been banned from providing debt relief services — to the tune of $500,000 and a suspended judgment of $99 million.
Morgan Drexen was sued by the CFPB for violation of the Telemarketing Sales Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act and for levying illegal upfront fees for debt relief services and misrepresenting those services to consumers.
In a statement that accompanied the CFPB’s release, Firector Richard Cordray stated: “The CFPB’s victory sends a strong message that debt relief companies break the law when they defraud struggling consumers, and those actions have consequences for which we will hold them accountable. The court’s orders against Morgan Drexen and Mr. Ledda ensure that they will never again violate the rights of consumers, and the significant penalties imposed reflect the severity of this illegal conduct.”
Under the practices cited by the CFPB, consumers who signed onto the Morgan Drexen services were given two contracts. Of those contracts, one was offered up for debt services and the other for bankruptcy services. Under the terms of the latter services, said the CFPB, little or no debt relief work was actually performed. At the beginning of last year, the CFPB found that Morgan Drexen had falsified bankruptcy petitions that it had submitted as evidence of having provided bankruptcy services. Eventually, the firm sought bankruptcy protection in June 2015 in the wake of the judgment that the firm had acted in bad faith and was ordered to stop any continued debt relief efforts.