On February 7, 2017, the CFPB and New York Attorney General filed a lawsuit against a New Jersey-based law firm and its owner for allegedly engaging in deceptive business practices and false advertising that lured 9/11 first responders and NFL concussion victims into obtaining costly cash advances on lawsuit and settlement payouts.
New York Attorney General, Eric Schneidermann, stated that the defendants “used deceptive tactics to charge unlawfully high interest rates for advances on settlement and compensation funds, allowing them to profit off the backs of these unsuspecting individuals.”
According to the CFPB’s press release, the defendants specifically targeted first responders to the September 11, 2001 attack on the World Trade Center. Many of these first responders, who suffer from respiratory illnesses and cancers related to their exposure to dust and debris at the World Trade Center site, were to receive funds resulting from lawsuits or victim-compensation funds, such as the Zadroga fund, established by Congress to assist first responders with medical costs and lost income.
The defendants also targeted former NFL players who had been diagnosed with neurodegenerative diseases such as chronic traumatic encephalopathy (CTE), Alzheimer’s, or Parkinson’s disease. These individuals were plaintiffs in the NFL class-action lawsuit that resulted in a settlement fund that was approved by a court in 2015.
According to the complaint, the defendants are in the business of offering to advance funds to consumers who are entitled to receive compensation from victim compensation funds or lawsuit settlements.
Not all of the money from the compensation and settlement funds is immediately available to recipients, so the defendant would contact consumers and offer the consumer an up-front payment, which the consumers were obligated to repay upon receiving the balance of their payout. According to the complaint, the defendants mischaracterized the transactions as “assignments” when they were actually functioned as loans with interest rates in excess of New York state-law usury limits. The defendants also misrepresented the terms of repayment, often collecting more than twice the amount originally advanced.
According to the CFPB and the New York Attorney General, the defendants allegedly violated the Consumer Financial Protection Act’s (CFPA) prohibition on deceptive and abusive acts and practices by:
- Misrepresenting the terms of the transaction: The defendants used confusing and complicated contracts that obscured the terms of the transaction and interfered with consumers’ ability to understand the terms, costs, and conditions of the deal.
- Lying about expediting consumers’ payout claims: The defendants falsely claimed that they could expedite funding and “cut through red tape.” In reality, the defendants did not have the authority to affect when victim compensation or settlement payouts would occur.
- Deceiving consumers about when they would receive funds: The defendants promised that consumers would receive funds “within several days” of entering into a contract. Some consumers, however, did not receive funds until months after it was promised.
- Illegally collecting payments: Despite the fact that the transactions are void, unenforceable, and uncollectible under New York law, the defendant attempted to recover its money anyway.
The lawsuit asks the court to enjoin the defendants from committing future violations of the CFPA and New York law and to declare the contracts null and void. The CFPB and New York Attorney General are also seeking damages, civil money penalties and restitution for consumers.
The defendants in the lawsuit are RD Legal Funding LLC, RD Legal Finance LLC, RD Legal Funding Partners LP, and Roni Dersovitz, who is the founder and owner of the entities.
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