McGraw wins case against debt settlement company
CHARLESTON, W.Va. (Legal Newsline) - A West Virginia judge has permanently enjoined Illinois attorney Robert K. Lock Jr. and New York lawyer Philip M. Manger and their company, Credit Collections Defense Network LLC, from doing business in the state.
West Virginia Attorney General Darrell McGraw had sued CCDN and its owners, claiming they were engaged in unlawful debt settlement activities in West Virginia.
In the lawsuit, McGraw asked the Court to enjoin the defendants from conducting any business in the state since they were not licensed to practice law in West Virginia and were running a debt settlement business that provided no relief to the state's consumers.
CCDN, a Nevada company based in Chicago with additional offices in Brick, N.J., claimed to assist consumers who were struggling financially by providing debt settlement services.
"The use of debt relief services can have serious legal and financial consequences and my office will continue to scrutinize the debt relief industry to protect our consumers," McGraw said in a statement.
"We are particularly concerned with attorneys from out of state claiming to provide legal services when they cannot legally practice law in West Virginia."
Kanawha County Circuit Judge Jennifer Bailey Walker granted judgment to McGraw against Lock and Manger for the permanent injunction and also imposed a $130,000 civil penalty against each defendant. It also entered judgment for $21,985.15 in restitution to consumers who paid the defendants but received no meaningful debt settlement services in return.
Reacting to widespread abuse of financially vulnerable consumers, the federal government recently adopted rules restricting how debt settlement services can be sold over the telephone.
According to McGraw's office, debt settlement companies, such as CCDN, contact consumers offering to negotiate with creditors on behalf of the consumer. Additionally, the companies claim to develop payment plans that help consumers repay outstanding debts, obtain deep discounts or eliminate the debts altogether, allowing consumers to avoid lawsuits or bankruptcy, McGraw says.
However, after making payments to debt settlement companies, consumers often receive little or no debt relief and can find themselves in even worse credit and financial situations, the Attorney General's Office explained.