The CPFB filed suit on Tuesday against Morgan Drexen and President and CEO Walter Ledda over allegations that the company charged illegal upfront fees for debt-relief services and deceived consumers over the potential outcome of its services.
“This company took advantage of people who were struggling,” CFPB Director Richard Cordray said. “The company charged consumers illegal fees and deceived them about the services provided. We will hold them accountable for these actions.”
Founded by Ledda in 2007, Morgan Drexen is a national debt-settlement firm. The CFPB alleged that the defendants violated the Telemarketing Sales Rule and Dodd-Frank Act by leading consumers to believe they would be debt-free in just a few months if they purchased the company’s services.
Morgan Drexen presented potential customers with two contracts: one for debt-settlement services and the other for bankruptcy-related services. The CFPB said, however, that little, if any, bankruptcy work is performed, though the company still charges the consumer fees.
Additionally, the CFPB investigation found that over 22,000 Morgan Drexen consumers have enrolled in the program since October 2010 and that consumers have been charged millions in up-front fees.
The company claims in its advertisements that consumers will not pay upfront fees and that consumers will be “debt free in months,” though only a small percentage of consumers who use the company’s services become debt-free.