Consumer Finance Insights
March 14, 2017

North Carolina Attorney General Secures Over $35 Million In Settlement With Debt Relief Providers

On March 9, 2017, the North Carolina Attorney General (“AG”) announced that it had settled a lawsuit filed in the Wake County, North Carolina Superior Court against three debt relief companies and two individuals.  As a result of the settlement, the court entered an order banning the companies and individuals from advertising or providing debt relief or legal services in North Carolina.  Consumers had already received $3.5 million in relief under an earlier court order.

The complaint, brought by the AG and the North Carolina State Bar on June 25, 2014, alleged that companies ran an illegal debt relief scheme by charging advanced fees to over 1,400 consumers in exchange for promising to reduce consumers’ credit card debt through settlements with creditors or debt collectors.  The complaint alleged that, in reality, the companies did not provide the services promised.  The North Carolina State Bar joined the action and alleged in the complaint that the companies and individuals advertised themselves as a law firm authorized to and capable of providing legal defense to consumers.  The complaint alleged that not only were the companies and individuals not attorneys, but they also did not assist consumers in finding such representation.  Based on these allegations, the complaint alleged causes of action under North Carolina’s Debt Adjusting Act, N.C. Gen. Stat. § 14-423, for the Unauthorized Practice of Law, N.C. Gen. Stat. §§ 8402.1, 84-4, 84-5, and for unfair and deceptive practices in violation of N.C. Gen. Stat. § 75-1.1.  As a result of the litigation and settlement, the AG secured a total of $6.6 million in consumer relief, and $30 million in civil penalties ($6 million against each company and individual).

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