Chase goes after debt elimination scam

[Demosthenes]

Chase Bank Accuses Florida Law Firms of Running Debt-Relief Scam
Bud Newman
Daily Business Review
03-06-2008

Chase Bank USA is suing two Coral Springs, Fla., attorneys specializing in reducing consumer debt and South Florida affiliates, claiming they are engaging in blatantly illegal and fraudulent practices.

The federal suit filed Friday in Wilmington, Del., accuses Hess Kennedy Chartered, lawyer Laura Hess, Edward Kennedy, affiliated companies and others of using "an unlawful debt elimination scheme" relying on lawsuits challenging valid credit card charges.

Attorney Jeffrey Campos of Coral Springs and the Legal Debt Center, which has the same Coral Springs address and suite number as Hess' law firm, also are named as defendants. In addition, attorneys general in Florida, North Carolina and West Virginia are looking into Hess Kennedy's operations, and the Florida Bar has moved to suspend Hess' license.

The bank suit claims its credit card customers were urged to falsely claim nonexistent billing errors on monthly statements to avoid payment or have the debt erased.

Nationwide, Chase said more than 3,800 credit card holders have used such tactics to avoid paying more than $25 million in legitimate debts.

The Chase attorney who filed the suit, Beth Moskow-Schnoll in Wilmington, declined to comment. A spokeswoman for the bank declined to comment.

The six-count complaint seeks injunctive relief and punitive damages to prevent the defendants from operating a debt reduction "scheme." The complaint claims "tortuous interference with contractual relations" between Chase and its customers, abuse of process, conspiracy and violations of Delaware trade practices and fraud laws.

Chase is asking the court to declare that "billing error disputes asserted by Chase's card members who are represented or assisted by defendants are sham" claims.

Chase also wants the defendants to notify "each card member whom defendants have previously advised, assisted or represented" that the disputes do not eliminate the obligation to pay outstanding debts. Calls to Hess, Kennedy and Campos were not returned. The first item that pops up in a Google search for Hess Kennedy refers to Hess Kennedy Co., an international law firm. Clicking on that reaches Laura Hess & Associates P.A. Hess and Campos are Florida Bar members, but Kennedy is not listed as a member of the Florida Bar. The Florida Bar filed a contempt petition Feb. 11 against Hess with the Florida Supreme Court, seeking a three-month license suspension. The petition noted the high court in 2005 "publicly reprimanded Hess and placed her on probation for three years," but eight new complaints were filed about her work during the probation period.

In a statement dated Oct. 4 on the Hess Kennedy Web site, the company described itself as a law firm that "believes that integrity, honesty and values play a major role in the culture of a company." It said customers can "rest easy" when working with the firm.

Florida Attorney General Bill McCollum hasn't been resting. His office filed a civil suit Feb. 21, claiming Hess Kennedy and its affiliates have bilked thousands of consumers by promising to reduce or eliminate out-of-control credit card or other debts for a fee. Fees appear to vary, according to several online complaints that customers posted about problems they had with the company. A Rhode Island man said Hess Kennedy charged him $700 but paid none of his credit card bills and his "credit rating has been destroyed by these people." A Minnesota woman claimed she was charged $500 for credit counseling and was referred to Hess Kennedy about getting a refund but concluded it was "a bunch of ripoffs." The North Carolina attorney general's office has filed a suit with allegations similar to the Chase action. The Better Business Bureau of Southeast Florida has received 140 complaints about the firm and given it a failing grade.

The West Virginia attorney general's office obtained an injunction Dec. 14 barring Florida attorneys employed by Hess Kennedy from settling West Virginia consumer debts until they comply with a state investigation. The monthly service fee for debt settlement firms is capped at 2 percent of consumer payments in West Virginia, where state investigators say it appears Hess Kennedy has been charging more.

The Chase and state suits make essentially the same claims. They say Hess Kennedy and the affiliated Consumer Law Centers in Boca Raton and Delray Beach, Fla., falsely told customers that their credit card companies had violated the federal Fair Credit Billing Act. The law firm or the customers then wrote letters to credit card companies disputing all charges. In a Feb. 21 news release, McCollum said Hess and related companies falsely told clients that they "did not have to pay creditors and creditors could not sue or otherwise take action against them" once the letters were sent to credit card companies claiming FCBA violations. Chase's federal court suit said defendants misled card members into believing they can stop payments on debts dating back years "until Chase investigates and resolves the purported 'billing error disputes' to their satisfaction."

"Defendants' conduct is entirely in bad faith and serves no legitimate purpose," the Chase suit said. "Defendants' ulterior goals are to extract fees from card members who should be paying the money to Chase to satisfy their debts and to maliciously harass Chase in an improper (albeit unsuccessful) attempt to coerce the elimination of their clients' legitimate debts."

[Prof]

Six months ago I tried to file a complaint with the Fla. Bar and the Fla. AG concerning this "firm." In a credit card arbitration (I was the arbitrator), the Respondent had stated, in defense, that she had given A LOT OF MONEY to this "firm", and had been assured that her credit card debt, including the one in dispute, was being "taken care of." The credit card account owner had not received a dime.

However, the Fla. Bar and the Fla. AG would not accept my referral because the "firm" correspondence did not identify a responsible Fla. attorney, just the law firm. Because I could not give either the Bar or the AG an attorney's name, my referral was refused without any attempt to aid me or get to the bottom of the mess.

GOOD FOR CHASE!!!!!!

[ErsatzAnatchist]

I just filed a complaint with the NH Banking Commission against this Firm for unlicensed and illegal Debt Adjustment Services. I suspect my client will never get any money back. I hope that punch the ticket of every attorney in this scam and send them to prison as well. I looked at the website and this looks like a regular debt settlement/adjustment company at first glance. Their were a few hints about some of the "dispute everything" and "credit is not money" type scams.

Nothing peeves me more than companies who take advantage of people who are desperate by offering fake solutions and just stealing their money.

[Prof]

I just filed a complaint with the NH Banking Commission against this Firm for unlicensed and illegal Debt Adjustment Services. I suspect my client will never get any money back. I hope that punch the ticket of every attorney in this scam and send them to prison as well. I looked at the website and this looks like a regular debt settlement/adjustment company at first glance. Their were a few hints about some of the "dispute everything" and "credit is not money" type scams.

Nothing peeves me more than companies who take advantage of people who are desperate by offering fake solutions and just stealing their money.

Bravo.

[Judge Roy Bean]

This reminds me of the whack-a-mole game.

There is so much distrust (desevedly, IMHO) of credit card companies that ignorant people are more than willing to pay someone to toss a monkey wrench into the works.

[Prof]

This reminds me of the whack-a-mole game.

There is so much distrust (desevedly, IMHO) of credit card companies that ignorant people are more than willing to pay someone to toss a monkey wrench into the works.

Actually, having done an insignificant number of credit card arbitrations* (20 or so), I find that about 2% dispute the claims of the card account holder, either factually or on one of the "sui" fictions. Most of the debtors respond and state that they simply cannot pay the debt because of circumstances.

Many have struggled mightly -- and here is where the abuse comes in -- in the face of ever increasing interest rates, penalities, etc., so that each month, irrespective of the pitance paid in "good faith," the debt grows.

In most cases, converting the debt to an arbitration award or judgment cuts the accrual of fees and penalties and limits the interest rate to the judgment rate.

* Most of the arbitrations I do are for NAF and most involve ICANN domain name disputes; I very rarely get a credit card matter.

[twixxy]

Well if anyone is waiting on the FL AG to do anything, plan on waiting a few years. The New Leaf victims are still waiting for resolution and those scammers started their program in 2003, was finally shut down in 2005, but was given 6 weeks to come up with a business plan but the then AG Charlie Crist (now Gov) which actually gave them 6 more weeks to rake in as much money as they could. This case still has not gone to court or been settled.

[Judge Roy Bean]

Update: As I recall, it was Laura Hess that was disbarred.

This is by no means the only such case. Hess Kennedy (yet another bogus law firm) in FL was shut down last year and the lead attorney was disbarred from practicing law. And this same game has been going on for a very long time, with similar firms getting shut down as far back as the 1990s for scamming consumers in the exact same fashion. (There really is “nothing new under the sun” when it comes to the debt industry!)

http://www.zipdebt.com/blog/attorney-debt-settlement