Attorneys with Ballard Spahr's consumer financial services team represented JPMorgan Chase, the nation's largest credit card issuer, in its successful lawsuit against a group of related debt settlement companies that were defrauding cardholders nationwide. The bank received $4.4 million in damages. This case represents one of the first times a financial institution has taken direct legal action against a debt settlement company.

Hess Kennedy Chartered LLC and its related entities promised cardholders that they  would negotiate a settlement with Chase so that the cardholders would only have to pay Chase cents on the dollar. Hess Kennedy representatives told cardholders to stop making payments to the bank and direct money to them instead. But rather than using the collected money to pay the bank, Hess Kennedy kept the funds toward an up-front payment of their fees. The company charged clients fees of up to 25 percent of their total debt. They also sent mass form letters to Chase on behalf of cardholders, falsely disputing the credit card bills and threatening litigation if collection efforts continued.

Our lawyers filed an action against Hess Kennedy in Wilmington, Delaware, and within months, Hess Kennedy was placed into receivership and the lawyer heading Hess Kennedy was suspended from the practice of law. The receiver found that Hess Kennedy, which had more than 90,000 clients nationwide, was at the center of a web of companies that lured clients with false promises that only put them further into debt. As part of the multi-million dollar settlement, Chase agreed to forgive the credit card debt owed by more than 13,000 defrauded cardholders. A spokeswoman for the bank said the lawsuit and settlement were "a great success for Chase."