McGraw sues lawyers over debt settlement company
Bryan Cohen May. 24, 2011, 3:52am
CHARLESTON, W. Va. (Legal Newsline) - West Virginia Attorney General Darrell McGraw filed suit Friday to ban a debt settlement company from doing business in the state.
The suit, filed in the Circuit Court of Kanawha County, names as defendants: Morgan Drexen's principle owner Walter J. Ledda; attorneys Rachelle McIntyre-Nicholson of West Virginia and Lawrence W. Williamson of Kansas; and the California law firm of Vincent Howard and Damian Nassiri.
In his complaint, McGraw asks that the court enjoin the out-of-state lawyers from practicing law in West Virginia and cease operation of the debt settlement business.
The suit alleges that Morgan Drexen, Inc., a Nevada company based in greater Los Angeles that claims to be a support services company for attorneys providing debt settlement services, is selling debt settlement services to West Virginia consumers and misrepresenting the services are being provided by lawyers. Lawyers who are licensed to practice law in West Virginia are exempt from some state regulations that govern the debt settlement industry.
"Although the debt settlement approach to debt relief may work for some persons, the service has legal consequences and should only be offered by persons licensed to practice law in West Virginia," McGraw said, "My office must protect consumers, especially those who are already facing dire financial circumstances, from paying excessive fees for supposed debt relief services that may in fact leave them in worse financial shape."
McGraw alleges that Morgan Drexen and similar companies say they can assist financially struggling consumers with settling their credit card debt for significantly less than what is owned. Debt settlement companies develop repayment plans so that consumers can pay outstanding debts at a deep discount to avoid being sued or filing for bankruptcy.
Consumers are instructed to make their payments directly to the debt settlement company instead of their creditors, in turn, the debt settlers state they can negotiate with creditors to reduce the amount of debt owned, McGraw says.
By linking to licensed lawyers, Morgan Drexen allegedly maintains it can avoid applicable state debt collection laws and charge higher fees than normal, McGraw says. These lawyers allegedly do no substantive work and are merely renting out their licenses to Morgan Drexen.