In what can only be described as a bit of irony, the nation’s largest debt relief company, embattled in recent years for its allegedly deceptive business practices involving the use of franchises to avoid state laws regulating attorney-model debt relief operations, was sued by a debt resolution franchisee for allegedly deceiving the franchisee and violating state law.

Legal Helpers, an Illinois-based debt relief company, has had several legal actions filed against it in recent years, including a lawsuit in Ohio and a class action lawsuit in Washington, alleging that the company set up debt resolution franchises in all 50 states that were supposed to be directly overseen by attorneys in those states but were, in fact, nothing more than shells designed to maintain the appearance of attorney involvement. The suits alleged that Legal Helpers used the shell franchises, which had no actual connection to the attorneys in question, to avoid limitations on debt help firms that employed lawyers to provide debt relief services, including state licensing limitations, and to take advantage of ubiquitous state laws that allowed attorneys to avoid advance-fee limitations placed on non-attorney debt relief firms.

Now one of Legal Helpers’ shell franchises, Velocity Processing Debt Resolution, based in Frisco, Texas, has filed a class-action lawsuit against Legal Helpers (as well as the law firm of Macey, Aleman, Hyslip & Searns, partners Thomas Macey, Jeffrey Aleman, Jeffrey Hyslip, Jason Searns, and Dallas attorney C. Bryan Fears) over allegations that the debt resolution company fired Velocity Processing, without due cause and in violation of Illinois franchise law, after Velocity Processing helped build Legal Helpers into a national organization (“Franchise Sues Big Debt Relief Firm,” Courthouse News Service, April 9, 2012).

According to Velocity Processing’s complaint, the defendants sold franchises to debt help firms like the plaintiff’s to take advantage of state and federal laws that make it easier, and more profitable, for attorneys to provide debt relief services. In exchange, franchisees would get marketing help from Legal Helpers and service debt resolution accounts under the Legal Helpers brand. However, “Once Legal Helpers built its national law firm up to a level that had between 15,000 and 20,000 clients nationwide, it terminated its relationship with each and every one of its franchisees on the same day with the same form letter without any notice and without establishing good cause for termination,” the complaint states. “By failing to provide notice and to establish good cause for termination, Legal Helpers violated the Illinois Franchise Disclosure Act.”

“Then, to the shock of everyone,” the complaint continues, “Legal Helpers instructed Global Client Solutions, the payment processor, to stop all contract payments owed to Velocity Processing and its various marketing affiliates. Indeed, given that all of the marketing work performed by the various marketing affiliates of Velocity Processing was completed at the time of termination, Legal Helpers’ unlawful misappropriation of the money constitutes outright theft. For Velocity Processing, it is estimated that Legal Helpers has misappropriated between $800,000 and $1 million from Velocity Processing and its marketing affiliates. Of this amount, Legal Helpers was only entitled to $4,900 for outstanding ‘retainer fees.’ ”

Velocity Processing is seeking a temporary injunction against Legal Helpers while it moves forward with its complaint. Velocity Processing is seeking damages for wrongful termination of franchise, conversion of personal property, money had and received, and personal liability under the Illinois Franchise Act.

Popularity: 1% [?]

Related posts:

1. National Debt Relief Firm Fined $314,000 for Unlicensed Lawyer
2. Debt Collection Firm Sued Over Deceptive Credit Card Mailers
3. Mortgage Debt Relief Firm Sued for Consumer Law Violations in Ohio
4. Credit Card Debt Relief Scam Sued by FTC Over Illegal Fees, Deceptive Practices
5. Debt Collection Firm Sued for Fake Court Hearings