US consumer bureau files lawsuit against Nevada debt-relief firm

WASHINGTON Tue Aug 20, 2013 3:28pm EDT

WASHINGTON Aug 20 (Reuters) - The U.S. consumer watchdog said it filed a lawsuit on Tuesday against a Nevada-based debt settlement company that regulators said charged improper fees and made misleading claims about its services.

The Consumer Financial Protection Bureau said Morgan Drexen charged upfront fees for debt-relief services, even though firms are not allowed to charge such fees until after they have helped settle or reduce borrowers' debt.

The firm also incorrectly led consumers to believe they would be debt-free after a few months of Morgan Drexen's services, the bureau said.

The bureau's lawsuit, filed in the U.S. District Court for the Central District of California, seeks penalties against the company and its chief executive, Walter Ledda.

Morgan Drexen had previously filed its own lawsuit in federal court arguing the consumer bureau overreached when it asked the firm to hand over documents related to its customers.

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