Attorney General Sues Debt Resolution Firm For Fraud
CHICAGO (CBS) -- They already needed help to get out of debt. Now the Illinois Attorney General is charging a national debt resolution company based in Chicago with consumer fraud for getting people in trouble into worse debt.
Last year, 2 Investigator Pam Zekman reported on Legal Helpers, a national bankruptcy law firm based in Chicago that apparently mishandled bankruptcy cases.
Now, Legal Helpers Debt Resolution – which shares some of the same partners – is in hot water with the Illinois Attorney General.
Like other debt resolution companies, Attorney General Lisa Madigan said Wednesday that "Their primary purpose, as this debt settlement scam has always been about, is to squeeze thousands of dollars out of consumers that are already struggling with their debt."
On their behalf, Madigan filed a lawsuit Wednesday, accusing Legal Helpers Debt Resolution – also known as the law firm of Macey Aleman Hyslip and Searns – of consumer fraud.
Madigan said consumers were misled by Legal Helpers into thinking their debt resolution cases will be handled by lawyers.
"They are essentially a referral source for a scavenger industry that is unfortunately seeking to profit from others' financial misfortunes."
The lawsuit alleges that the law firm is just afront to allow those companies to charge non-refundable up-front fees of $500, a $49 monthly maintenance fee and a percentage of the debt resolved.
Forty former clients have filed complaints with Madigan's office.
Asked if the firm ever did anything for any of those clients, Madigan said, "No, they did not resolve their debt."
"People ended up in a far worse financial circumstance working LHDR by signing up for their bogus services," she added.
A law partner with Legal Helpers Debt Resolution said that 15,000 of their clients have gotten results averaging a 55 percent reduction of their debts.
Clients do get a variety of legal services performed by lawyers, he said, and the reputable outside companies hired by Legal Helpers to handle debt reduction deals are supervised by lawyers with Legal Helpers.
Therefore, he said, Legal Helpers can charge up-front fees under Illinois law.
Legal Helpers has refunded money to complaining clients and cooperated with the attorney general's office, but will fight this lawsuit.
