The Consumer Financial Protection Bureau filed a lawsuit against Morgan Drexen and its president and CEO Walter Ledda for allegedly deceiving customers by charging upfront illegal fees this week.

The CFPB alleges Morgan Drexen falsely claimed that it does not charge customers upfront fees for debt-relief services. Furthermore, the CFPB claims the firm wrongfully gave consumers the impression that working with Morgan Drexen would allow them to become debt free within a matter of months.

"This company took advantage of people who were struggling," said CFPB Director Richard Cordray. 

He added, "The company charged consumers illegal fees and deceived them about the services provided. We will hold them accountable for these actions."

The CFPB claims that Morgan Drexen and its president and CEO violated the Telemarketing Sales Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Morgan Drexen pushed back at both claims when it filed its own lawsuit against the CFPB earlier this summer.

The Telemarketing Sales rules prohibits deception in telemarketing and generally prohibits debt-relief providers from charging a fee for any type of debt-relief service.

When customers signed up from Morgan Drexen’s services, the company presented them with two contacts — one for debt-settlement services and the other for bankruptcy-related services, the CFPB says.

Since October 2010, more than 22,000 Morgan Drexen consumers have enrolled in the program, according to the bureau’s investigation.

"These consumers have been charged millions of dollars in upfront fees for debt-relief services," the CFPB said in a statement.

Morgan Drexen also is accused of violating the Telemarketing Sales Rule, as well as the Dodd-Frank Act, for allegedly making two false claims in advertisements: one promising no upfront fees, and another promising borrowers they could obtain debt-free status within months.

"The company claims that consumers will not pay upfront fees for debt-relief services, when, in reality, they typically pay hundreds, if not thousands, of dollars in upfront fees," the CFPB asserted.

They continued, "Morgan Drexen claims that consumers will be ‘debt free in months when, in fact, only a tiny fraction of consumers who work with the company ever become debt free."

Morgan Drexen and a bankruptcy attorney affiliated with the firm filed a separate lawsuit against the CFPB in a federal court earlier this year.  

In the suit, the parties accused the CFPB of overstepping its grounds by requesting privileged attorney-client information.

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