Home > Personal Finance > CFPB Sues Firm for Allegedly Scamming 9/11 First Responders

Comments 0 Comments

A firm accused of scamming 9/11 first responders and former NFL players into giving them large chunks of their compensation funds via costly advance payment deals has been sued by federal and state authorities.

RD Legal Funding, based in Cresskill, New Jersey, was sued by the Consumer Financial Protection Bureau and the New York State Attorney General’s office, the agencies announced Tuesday. The firm is accused of persuading victims who were awaiting payouts to accept advance payments from RD Legal, then pay large fees when their settlement payments arrived.

In one case the CFPB says was typical, a first-responder victim paid $33,000 for an $18,000 advance on a $65,000 payout from the Zadroga Fund, set up by Congress to compensate 9/11 first responders dealing with high medical costs.

RD Legal also is accused of targeting former NFL players diagnosed with neurodegenerative diseases and thus entitled to payments from a class action lawsuit settlement, the CFPB said.

“It is unconscionable that RD Legal scammed 9/11 heroes and NFL concussion victims out of millions of dollars,” said CFPB Director Richard Cordray, in a press release announcing the action. “We allege that this company and its owner lined their pockets with funds intended to cover medical care and other critical expenses for people who are sick and sidelined. Our lawsuit seeks to end this illegal scheme and get money back to those entitled to receive it.”

RD Legal also is accused of telling consumers they would speed up the payout process by cutting through red tape when the firm had no ability to do so. RD Legal also allegedly failed to provide advances to consumers for months after they were promised.

“The allegations contained in that lawsuit and accompanying press statements are outrageous and without merit,” said David K. Willingham, counsel for RD Legal, in an emailed statement. “Indeed, in January 2017, RDLF was forced to take action and sued both the CFPB and NYAG for engaging in an inappropriate overreach of their legal authority and failing to engage with RDLF on basic legal issues surrounding its contracts for the purchase and sale of the legal receivables at issue in both lawsuits. The claims made today by the CFPB and NYAG misunderstand and falsely characterize clear documents with those parties as “loans,” and falsely state that RDLF is ‘scamming’ the affected parties when it did nothing more than provide immediate liquidity – in the form of an arm’s length transaction – to people who voluntarily sought the benefits of early funding.”

Alleged Actions ‘Simply Shameful’

“The alleged actions by RD Legal — scamming 9/11 heroes and former NFL players struggling with severe injuries—are simply shameful,” said New York Attorney General Eric Schneiderman, in the same press release issued by the CFPB. “RD Legal used deceptive tactics to charge unlawfully high interest rates for advances on settlement and compensation funds, allowing them to profit off the backs of these unsuspecting individuals.”

The “funding fee,” in industry language,  can often be around 100%, as it was in the examples cited above by the CFPB.

This is not the first time RD Legal has caught the attention of federal authorities. Last year, it was sued by the Securities and Exchange Commission for allegedly defrauding investors who had bought into its hedge fund, designed to raise money to make such advance payouts. RD Legal denies those accusations.

The American Legal Finance Association, a trade association that represents consumer legal funding companies, says these payouts should not be regulated as loans because they are “non-recourse transactions,” meaning there is no collateral, and there’s no guarantee that the advance will be repaid.

“Consumer legal funding is used by victims of accidents who are struggling to make ends meet while they wait for a resolution in their case who have typically exhausted other financial options and often do not have access to traditional forms of credit,” the organization says on its website. “Legal funding fills a void in the financial products arena.”

But consumer advocates say it’s critical that federal authorities regulate bank-like activities from non-bank entities.

“Gone are the days when the financial services industry was dominated by hometown banks that served customers well and gave their kids a lollipop. Today, nonbank financial companies offer products to millions of consumers,” said Rohit Chopra, senior fellow at the Consumer Federation of America, in a statement reacting to Tuesday’s lawsuit. “Americans need a strong consumer agency to restore law and order to the financial services industry. This oversight isn’t just a win for consumers, it’s a win for every lender who shouldn’t have to compete against fraudsters.”

Image: kali9

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team