Legal Helpers Debt Resolution LLC, a Chicago-based law firm specializing in consumer debt settlement that was sued last year by Illinois Attorney General Lisa Madigan, will wind down its business nationally, according to the company's general counsel.

Publicity surrounding the lawsuit and $2.1 million settlement reached earlier this month has made it difficult for Legal Helpers to find new customers outside Illinois, and the decision was made to cease operations after servicing its existing clients. The company operates in 38 states.

The settlement was reached after Madigan's office said the firm, rather than providing legal help, served as a "front" to collect hefty fees from struggling consumers. Legal Helpers had denied wrongdoing but also had agreed to stop accepting more Illinois clients under the settlement.

"Once you have something like this, it's very difficult to get your message out," said Jason Searns, the firm's general counsel.

Madigan's office alleged that Legal Helpers contracted out the debt settlement service to non-lawyer, third-party companies. The firm charged nonrefundable fees that included a $500 retainer, a $49 monthly charge and 15% of the total debt, according to the lawsuit.

Illinois lawmakers in 2010 passed legislation that banned charging upfront fees for helping consumers negotiate relief from creditors. The law was crafted in response to a sharp rise in complaints that Madigan's office had received alleging abusive practices by debt settlement operators. Madigan filed seven lawsuits beginning in 2009 against debt settlement companies targeting Illinois consumers.

Firms such as Legal Helpers had sprung up, promising to help consumers cut their debts in half. They claimed they were exempt from restrictions on upfront fees because they offered legal advice about bankruptcy matters in addition to debt settlement. But law enforcement authorities discovered that some of the attorney-driven debt settlement firms were not practicing law but copying the same iffy business practices that led to an industry crackdown in 2010.

Debt counseling is a complicated area that often blurs the line between legal and nonlegal services. Several nonprofits help consumers by working out budgets and negotiating with credit card companies to extend payment terms. Debt counseling also is at the core of what bankruptcy lawyers do.

Clients are generally instructed to stop paying their bills and set aside the money for a future lump-sum repayment, which angers creditors and increases account balances because of interest and late fees. Consumers often end up being sued by creditors or land in bankruptcy.

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