Class Certified Against Debt Servicers

SAN FRANCISCO (CN) – A federal judge Tuesday certified a class that claims debt servicers conspired to overcharge California consumers and aid and abet others to do so.
     Heather L. Newton sued American Debt Services and three affiliates in 2011, claiming they agreed to settle her debts for half the balance owed, then kept far more money than allowed by California prorating law and kept more fees than allowed, without ever making “a single payment to a creditor on her behalf.”
     Newton claimed that after American Debt Services (ADS) contacted her, she received a “welcome packet” from Quality Support Services (QSS), and account application and debit instructions from Global Client Solutions and Rocky Mountain Bank & Trust (RMBT), all of whom became defendants.
     Newton said the companies told her to register for a “special purpose account” with Rocky Mountain, and to authorize Global Client Solutions to withdraw three non-refundable fees from her bank account.
     When she learned that none of the defendants had contacted any of her creditors, including nonparties Chase Bank and Bank of America, she terminated ADS’s services and asked for a refund, she said.
     The debt servicers refunded only $70 of $4,200 she had paid them, she claimed. She says she paid Bank of America $2,200 from a special purpose account without help from the defendants, who kept the $1,900 she had paid them.
     U.S. District Judge Edward Chen in 2012 denied ADS’s motion to compel arbitration.
     After ADS and QSS defaulted, Newton filed a second amended complaint against RMBT and Global.
     She claimed RMBT violated all three prongs of California’s Unfair Competition Law by breaching a 2009 cease-and-desist order from the Federal Deposit Insurance Corporation.
     Chen partly dismissed that lawsuit in December 2014, finding that Newton’s “unlawful” and “unfairness” prong claims failed because the FDIC order could not be enforced for lack of jurisdiction, or “borrowed” to serve as a predicate law violation under the Unfair Competition Law.
     Newton’s “fraudulent” prong claim also failed, Chen ruled, because she did not specifically respond to the defendants’ summary judgment motion.
     Newton’s lawsuit remained alive, however, as Chen rejected the defendants’ motion on her aiding-and-abetting claims.
     “Not only did the court previously find that both Global and RMBT can be held liable under the UCL for aiding-and-abetting ADS’s and QSS’s violations of the Proraters Law, the court further held that Newton had submitted sufficient evidence to proceed to trial on these claims,” Chen wrote.
     On Tuesday, Chen granted in part Newton’s motion for class certification.
     Chen called the defendants’ “host of arguments” against Newton’s bid for certification “highly irrelevant” and “without merit.”
     The defendants did “make one valid point,” Chen said, rejecting their argument that Newton’s original proposed class was too broad because it was not limited to consumers who actually did business with ADS, the alleged front for the debt settlement enterprise.
     Chen found that Newton’s narrowed class met court requirements.
     “Tightening the class definition to require that all class members actually did business with ADS, as Newton did herself, renders the class potentially certifiable,” the 20-page ruling states.
     The certified class includes California consumers who paid QSS directly, or indirectly through ADS, for debt settlement services during the four years preceding Newton’s original complaint, who opened a special purpose account with RMBT to be administered by Global, and who did not receive a full refund of all fees and charges paid to defendants.
     Newton’s attorneys, William Kennedy and Tavy Dumont with Public Justice, will represent the class.
     “Put simply, the Court is convinced that counsel have the resources necessary to see this case through for the benefit of the class members,” Chen wrote.
     Public Justice, a public interest advocate with offices in Washington, D.C. and Oakland, Calif. said the defendants “leave consumers worse off than ever.”
     “We see a lot of companies out there that offer to help consumers when they start to get in over their heads with credit card debt, but these companies often don’t have the consumers’ best interests at heart,” staff attorney Amy Radon said. “Instead, the ‘help’ they offer turns out to be a scam, and they leave consumers worse off than ever.”
     The defendant companies did not respond to requests for comment.

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