Consumer Class Action
After the 2008 financial crisis, hundreds of thousands of Americans were defrauded into paying millions of dollars in fees to dubious “debt settlement” scams. These companies promised to settle consumers’ debts for “pennies on the dollar,” but often ended up taking up-front fees and delivering nothing in return, The for-profit debt relief industry, which purports to help indebted consumers “negotiate” with their creditors to lower their debts, has been criticized by many consumer advocates—as well as the Federal Trade Commission and the Government Accountability Office—for widespread allegations of fraud and abuse.
In July 2011, Paynter Law filed a consumer protection class-action lawsuit in federal court in Washington State against Meracord, LLC (formerly NoteWorld, LLC), a major player in the for-profit debt relief industry. The lawsuit alleged that Meracord violated the federal Racketeer Influenced Corrupt Organizations Act (“RICO”) by conspiring, along with scores—if not hundreds—of “front-end” debt settlement companies to defraud indebted consumers by falsely representing their services, the fees they would charge, and other important facts. The complaint also alleged that Meracord’s actions violated Washington State law by, among other things, charging illegal fees and failing to disclose important information to consumers.
The consumers in the suit lost thousands of dollars in debt settlement scams; one plaintiff lost over $12,000 in fees she paid for services that were promised but never received. The lawsuit sought to represent all consumers who have established Meracord/NoteWorld accounts related to any debt settlement program.
The Washington Court certified a Class in the litigation and awarded the Class $1.45 billion in damages against Meracord. Paynter Law was appointed Class Counsel, along with Hagens Berman Sobol Shapiro LLP.
Unfortunately, by that point, the company had already gone out of business. But where others might have given up, we got creative. We brought a class-action lawsuit against the insurance company that had issued the surety bonds backing Meracord’s business licenses. (As far as we could tell, no one had ever brought a class action against licensing bonds—our lawsuit was the first of its kind.) After continually insisting that their surety bonds did not cover the claims consumers we represented, the insurance companies ultimately ended up paying out over $15,000,000—representing nearly 90% of their maximum total exposure on the bonds. After approving the final settlement, the federal judge presiding over the case noted that “plaintiffs’ counsel, through great persistence and just plain hard work for the class members, achieved what can only be regarded as an extraordinarily good result.”