The Consumer Financial Protection Bureau has obtained a $172 million judgment against Morgan Drexen, a debt relief company.
The company was accused of charging upfront fees to consumers and misrepresenting services it provided. The order also included Walter Ledda, the founder and CEO of Morgan Drexen.
“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,” said CFPB Director Richard Cordray in a statement. “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.”
When consumers signed up for Morgan Drexen’s services, they were presented with two contracts – one for debt settlement work and one for bankruptcy-related services, according to the CFPB. The CFPB sued after it uncovered that “little or no” bankruptcy work was performed for consumers, and the contract that was presented to consumers was actually “a ruse” that was intended to hide the fees being charged for debt relief work.
The CFPB then found that Morgan Drexen was falsifying evidence to make it look like it was doing bankruptcy-related work.
Morgan Drexen has declared bankruptcy. The company was ordered to repay $132 million to consumers and pay $40 million into the CFPB’s Civil Penalty Fund. Ledda is being forced to pay $500,000 to the CFPB to repay consumers, surrender assets, leave the debt relief business, and pay $1 to the CFPB’s Civil Penalty Fund. The fine is not larger because of Ledda’s lack of financial resources.
A pair of attorneys – Vincent Howard and Lawrence Williamson – have taken control of Morgan Drexen and have “continued the company’s unlawful conduct,” according to the CFPB. There is an ongoing legal battle between the CFPB and the pair of attorneys regarding the allegations.