ALEXANDRIA, Va. (Legal Newsline) – Law firms accused of running a scheme in which they taught former students how to sue their way out of college debt have settled the racketeering claims against them.

Navient Solutions, the nation’s largest student loan company, sued a group of defendants in October in Virginia federal court, alleging that debt-relief counseling offered by them was actually a tutorial on how to manufacture lawsuits under the federal Telephone Consumer Protection Act, a 1991 law designed to punish telemarketers.

The law firm Krohn & Moss, one of the most active TCPA firms in the country, was the highest-profile target. On April 25, court records show it settled the allegations against it, though terms are confidential.

An April 18 order had required the firm to produce the identities of those who referred nine clients to it.

Another filing shows a settlement with the Law Offices of Ryan Lee on May 1. Remaining defendants include National Consumer Advocates of Northridge, Calif., and MB Consulting & Investing.

“Unlike other firms, the… defendants have not been content to merely seek out clients with colorable TCPA claims,” the complaint says.

“Rather, they have collaborated with the Recruiting Defendants and others to recruit clients to manufacture TCPA claims where no claims previously existed.

MB Consulting owner Michael Biancone has denied participating in any scheme while his company worked with NCAI and fellow defendant Doug Johnson. He also says none of his clients ever mentioned a TCPA scheme after he sent them to NCAI.

Many companies have accused plaintiffs of being in the profession of creating TCPA lawsuits. Instances include:

-A Polish immigrant said to have made more than $800,000 by filing more than 30 lawsuits in New Jersey;

-A woman who bought cheap cell phones and gave them repurposed numbers with Florida area codes because she figured debt collectors would call the numbers to contact the previous owner; and

-A Los Angeles man who attributed his many phone numbers to businesses he runs in classified ad sections to invite calls from other business groups.

Navient said the TCPA, which provides for either $500 per violation or $1,500 for more egregious violations, is being used to cheat it. The alleged scam began with the two recruiting defendants, MB Consulting and NCAI, offering counseling and other debt-relief services to former students struggling to repay loans.

Once recruited, the client was allegedly given a script after stopping payments, intended to help create a TCPA claim when Navient called about the delinquent payments.

The alleged script told the client to confirm the name of the caller, confirm the amount owed on the loan and then say, “I ask that you please stop calling me and correspond with me in writing from this point forward.”

The client maintained a log of calls and communicated with the recruiting defendants, the lawsuit says.

“In the event that (Navient) stopped making telephone calls, clients were advised to contact (Navient) again to discuss their loans,” the suit says.

“This action was aimed at causing (Navient) to begin calling that customer again to increase the potential damages that could be asserted in any given case.”

Once the client appeared to have a chance at making a TCPA claim that, considering the statutory per-violation penalties, was close to equaling the amount of debt he or she still owed, the recruiters passed them off to the law firms using illegal fee-sharing and referral agreements, the lawsuit says.

Navient says it paid more than $1.1 million in settlements to plaintiffs it believes were a part of the scheme, as well as more than $500,000 in attorneys fees.

However, if the scheme didn’t work, the credit rating of the client was ruined, the suit says.

Navient says the scheme caused it to pay settlements to dozens of customers and cancel hundreds of thousands of dollars in student loans.

In January, Judge Leonie Brinkema allowed Navient’s case to move forward, denying motions to dismiss by the defendants.




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