CFPB Files Suit Against Deft-Relief Company for Charging Illegal Fees And Deceiving Consumers
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August 21, 2013

The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit in federal district court against a Nevada corporation, Morgan Drexen, Inc., and its president and chief executive officer, Walter Ledda, for charging illegal upfront fees and deceiving consumers.

The company falsely claims that it does not charge consumers upfront fees for debt-relief services and falsely represents to consumers that they will become debt free in months if they work with Morgan Drexen.

"This company took advantage of people who were struggling," said CFPB Director Richard Cordray. "The company charged consumers illegal fees and deceived them about the services provided. We will hold them accountable for these actions."

Morgan Drexen is a nationwide debt-settlement company that was founded by Mr. Ledda in 2007. Mr. Ledda maintains a 93 percent stake in the company and plays an active role in the company's business strategies and practices.

The CFPB alleges that the defendants have violated the Telemarketing Sales Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Telemarketing Sales Rule prohibits deception in telemarketing. It also generally prohibits debt-relief providers from charging a fee for any debt-relief service until it has actually settled, reduced, or otherwise altered the terms of at least one of the consumer's debts. The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits deceptive acts or practices in the consumer financial marketplace.

When consumers sign up for Morgan Drexen's services, the company presents them with two contracts, one for debt-settlement services, and the other for bankruptcy-related services. Based on its investigation, however, the Bureau's believes that little to no bankruptcy work is actually performed for consumers. Consumers are nevertheless charged fees.

The CFPB believes the bankruptcy-related contract is a ruse designed to disguise the illegal upfront fees the company is charging consumers for debt-relief services as bankruptcy-related fees. The Bureau's investigation has revealed that, since October 2010, more than 22,000 Morgan Drexen consumers have enrolled in this program. These consumers have been charged millions of dollars in upfront fees for debt-relief services.

Through this lawsuit, the Bureau seeks to stop the unlawful practices of Morgan Drexen and Mr. Ledda. The Bureau has also requested that the court impose penalties on the company and Mr. Ledda for their conduct and require that restitution be paid to consumers who have been harmed.

A copy of the CFPB's complaint can be viewed here.

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