Ironically, a large Costa Mesa debt settlement company files for bankruptcy – Orange County Register


Morgan Drexen Inc. of Costa Mesa, which has raised millions of dollars a year selling debt and bankruptcy settlement services to lawyers and consumers, filed a Chapter 7 liquidation application in Santa Ana on Thursday.

The company, which estimates it has between 1,000 and 5,000 creditors, recorded $ 8 million in assets against $ 9.9 million in liabilities. In its bankruptcy filing, the company said it had revenue of $ 34.66 million in 2013, but that revenue fell to $ 22.89 million last year.

The bankruptcy filing came the same day a federal judge in Santa Ana, Josephine Staton, froze Morgan Drexen’s assets.

This order was issued at the request of the Federal Bureau for Financial Consumer Protection, which, in 2013 sued Morgan Drexen for his debt settlement services. The CFPB is seeking $ 90.7 million in restitution for nearly 60,000 consumers who it says were billed illegal fees for debt relief services by Morgan Drexen, but received little or no no return services.

In calling for an asset freeze, the Consumer Financial Protection Bureau noted that Judge Staton found on April 21 that during the trial, Morgan Drexen misled the court and his own lawyer by falsifying evidence.

Staton found that Morgan Drexen had “engaged in practices which undermined the integrity of the judicial process.”

In its asset freeze order, Staton wrote that it prevents Morgan Drexen from transferring, dissipating or concealing assets to ensure funds are available so the court can award final relief for consumers.

One of the problems with the CFPB lawsuit was a claim by Morgan Drexen that she was helping consumers by drafting – but not necessarily filing – bankruptcy petitions for customers., that they could use as leverage to try to settle their debts.

The CFPB complained that there was only anecdotal evidence that the threat of bankruptcy leads to greater debt reduction and better settlements and argued that Morgan Drexen provides bankruptcy services and prepares petitions. bankrupt simply to charge an upfront fee to already troubled customers for debt settlement services.

The CFPB claimed that Morgan Drexen “was bundling unnecessary bankruptcy services into the (service) set to cover up the fact that they continued to charge upfront fees for what were essentially debt relief services.” wrote the judge in an order.

As the lawsuit progressed, the CFPB discovered that Morgan Drexen had attempted to strengthen his case by fabricating bankruptcy documents that did not exist before the agency filed a lawsuit. The judge reviewed the evidence and agreed, writing in an order “the defendants blatantly tampered with evidence, then withheld this fact from the court, opposing lawyer and even their own lawyer at all times.”

A day after filing for bankruptcy, Morgan Drexen suffered another legal setback on Friday. The District of Columbia Circuit Court of Appeals for the United States upheld a lower court ruling dismissing Morgan Drex’s lawsuit claiming the Consumer Financial Protection Bureau is an unconstitutional agency.

The appeals court did not rule on the merits of this claim – it ruled that Morgan Drexen did not have standing to pursue this claim in the District of Columbia since she had had the opportunity to raise the issue. same claim in the California litigation.

The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau and in recent years Morgan Drexen has made headlines with his unsuccessful efforts to have the agency declared unconstitutional.

Morgan Drexen complained that it is unconstitutional because the powers delegated to the CFPB are too broad, it is headed by a single director who can only be dismissed for cause, it is funded outside the normal process of appropriation and judicial review of its actions is limited. All of this, Morgan Drexen complained unsuccessfully, violates the constitutional theory of the separation of powers.

Judge Staton in Santa Ana earlier rejected these claims in the California lawsuit.

Morgan Drexen officials could not immediately be reached for comment on the bankruptcy.

On its website, the company said on March 30 that attorneys using Morgan Drexen’s proprietary computing platform and licensed software have helped over 21,000 Americans who are “battling their crushing debt.”

And he complained to the CFPB, accusing in an open letter in November that “the very people the CFPB was created to help are hurt as the CFPB fights to take down companies like Morgan Drexen, which provide support services to lawyers, which in turn allows access to the one thing that Can Really Help Troubled Americans – Affordable Legal Services To Combat Abusive Tactics Used By Skilled And Effectively Trained Bank Collectors.

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