The Consumer Financial Protection Bureau filed suit against Walter Ledda and his debt settlement company, Morgan Drexen Inc., for charging illegal upfront fees and deceiving customers.
The CFPB alleges that the company, founded by Ledda in 2007, falsely claims it does not charge upfront fees for its services and misrepresents its ability to alleviate customers’ debt, according to a complaint filed today in federal district court.
In a news release from the bureau, Director Richard Cordray said the CFPB would hold Ledda and Morgan Drexen accountable for their actions.
“This company took advantage of people who were struggling,” Cordray said.
Morgan Drexen has been accused of violating the Telemarketing Sales Rule, which prohibits deceptive telemarketing and generally prohibits debt-relief services from charging fees until after a settlement has been reached. The CFPB also alleges the defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, which criminalizes deceptive acts or practices in the consumer financial marketplace.
The lawsuit alleges Morgan Drexen presented customers with two contracts — one for debt settlement and one for bankruptcy-related services — and charged fees to debt relief customers by labeling them bankruptcy-related services. Morgan Drexen performs little to no bankruptcy work, the CFPB says. Since October 2010, more than 22,000 people have enrolled in the program, generating millions of dollars for the company, the CFPB investigation found.
The Consumer Financial Protection Bureau was created under the 2010 Dodd-Frank Act, and Cordray was confirmed as director this summer. The bureau aims to crack down on those who abuse the financial system and educate Americans about their consumer rights.