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IN THE MATTER OF: GLOBAL CLIENT SOLUTIONS, LLC ("Respondent") * * * * * * * * * * * * * * * * * * |
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TEMPORARY ORDER TO NOTICE OF INTENT TO IMPOSE AND NOTICE OF RIGHT TO HEARING |
I. LEGAL AUTHORITY AND JURISDICTION
The Banking Commissioner (“Commissioner”) is charged with the administration of Part V of Chapter 668, Sections 36a-595 to 36a-610, inclusive, of the Connecticut General Statutes, “Money Transmission Act”, and Sections 36a-655 to 36a-665, inclusive, of the Connecticut General Statutes contained in Part II of Chapter 669 of the Connecticut General Statutes, “Debt Adjusters and Debt Negotiation”.
Pursuant to the authority granted by Section 36a-17 of the Connecticut General Statutes, the Commissioner, through the Consumer Credit Division of the Department of Banking (“Department”), has investigated the activities of Respondent to determine if it has violated, is violating or is about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner.
Section 36a-17(a) of the Connecticut General Statutes provides:
The commissioner, in the commissioner’s discretion, may make such public or private investigations or examinations within or outside this state, concerning any person subject to the jurisdiction of the commissioner, as the commissioner deems necessary to carry out the duties of the commissioner.
Section 36a-608(a) of the Connecticut General Statutes provides:
The commissioner shall make such investigations and conduct such hearings as the commissioner considers necessary to determine whether any licensee or any other person has violated or is about to violate any of the provisions of sections 36a-595 to 36a-610, inclusive, or whether any licensee has acted in such manner as otherwise would justify the suspension or revocation of the license. The provisions of section 36a-17 shall apply to such investigation.
Section 36a-52 of the Connecticut General Statutes provides, in pertinent part:
(a) Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. The notice shall be deemed received by the person on the earlier of the date of actual receipt, or seven days after mailing or sending. Any such notice shall include: (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the general statutes . . . alleged to have been violated; (4) a short and plain statement of the matters asserted; and (5) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice. If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice, unless the person fails to appear at the hearing. After the hearing, the commissioner shall determine whether an order to cease and desist should be issued against the person named in the notice. If the person does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner shall issue an order to cease and desist against the person. No such order shall be issued except in accordance with the provisions of chapter 54.
(b) If the commissioner finds that the public welfare requires immediate action, the commissioner may incorporate a finding to that effect in the notice sent in accordance with subsection (a) of this section and issue a temporary order requiring the person to cease and desist from the activity which constitutes such alleged violation and to take or refrain from taking such action as in the opinion of the commissioner will effectuate the purposes of this section. Such temporary order shall become effective on receipt and, unless set aside or modified by a court, shall remain in effect until the effective date of a permanent order or dismissal of the matters asserted in the notice.
Section 36a-50(a) of the Connecticut General Statutes provides, in pertinent part:
(1) Whenever the commissioner finds as the result of an investigation that any person has violated any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. The notice shall be deemed received by the person on the earlier of the date of actual receipt or seven days after mailing or sending. Any such notice shall include: (A) A statement of the time, place, and nature of the hearing; (B) a statement of the legal authority and jurisdiction under which the hearing is to be held; (C) a reference to the particular sections of the general statutes . . . alleged to have been violated; (D) a short and plain statement of the matters asserted; (E) the maximum penalty that may be imposed for such violation; and (F) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.
(2) If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice unless such person fails to appear at the hearing. After the hearing, if the commissioner finds that the person has violated any such provision, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by law, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner may, as the facts require, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person.
(3) Each action undertaken by the commissioner under this subsection shall be in accordance with the provisions of chapter 54.
Section 36a-608(c) of the Connecticut General Statutes provides, in pertinent part:
Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any provision of sections 36a-595 to 36a-610, inclusive, . . . the commissioner may take action against such person in accordance with sections 36a-50 and 36a-52.
Section 36a-657(b) of the Connecticut General Statutes provides:
Whenever it appears to the commissioner that any person has violated, is violating or is about to violate the provisions of sections 36a-655 to 36a-665, inclusive, or any licensee or any proprietor, director, officer, member, partner, shareholder, trustee, employee or agent of such licensee has committed any fraud, misappropriated funds or failed to perform any agreement with a debtor, the commissioner may take action against such person or licensee in accordance with sections 36a-50 and 36a-52.
II. MATTERS ASSERTED
| 1. |
Respondent is an Oklahoma limited liability company with an office at 4500 South 129th East Avenue, Suite 175, Tulsa Oklahoma.
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a. Unlicensed Debt Adjuster Activity
| 2. |
From at least October 2009 through July 2010, Respondent acted as a third-party payment processor that processed payments nationwide for consumers enrolled in debt settlement programs and specialized in providing disbursement accounts that allowed such consumers to save funds to pay down their debts. Such disbursement accounts were held at banks, including Rocky Mountain Bank & Trust Florence, Florence, Colorado (“Rocky Mountain”) and a bank in Oklahoma (“Bank”). In Connecticut, during such time period, Respondent received over $75,000 in fees in connection with the receipt and distribution of funds among creditors to pay outstanding debts on behalf of hundreds of Connecticut consumers enrolled in debt settlement programs. |
| 3. |
On April 2, 2009, the Federal Deposit Insurance Corporation (“FDIC”), citing allegations that Rocky Mountain had engaged in unsafe or unsound banking practices and had violated laws and/or regulations, issued an Order to Cease and Desist against Rocky Mountain (“Order”). Among other things, the Order required Rocky Mountain to provide adequate and effective oversight over its third-party relationships, specifically focusing on monitoring the activities of third-party payment processors and their debt settlement company customers. In particular, the Order required Rocky Mountain to review, revise and implement policies to ensure that:
• payment processors, ACH originators and debt settlement companies rectify harmful consumer activity or Rocky Mountain would be required to cease operations with the payment processor, ACH originator and/or debt settlement company; • disclosures provided to consumers accurately reflect the obligations by and among Rocky Mountain, payment processors, ACH originators and consumers; • marketing materials of payment processors, ACH originators and debt settlement companies comply with consumer protection laws and regulations; and • payment processors, ACH originators and debt settlement companies address consumer complaints and take all necessary corrective action in a timely manner. On or about September 2010, Rocky Mountain terminated its relationship with Respondent to maintain disbursement accounts for consumers enrolled in debt settlement programs, and Respondent transferred many of its consumer disbursement accounts to the Bank. |
| 4. |
On May 12, 2011, the Washington Supreme Court held that Respondent had engaged in debt adjusting activity pursuant to Washington law by “receiving” funds into a custodial account in its own name and distributing money to creditors in payment or partial payment of consumers’ debt upon the negotiation of settlements of consumers’ debt by debt settlement companies.
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| 5. |
Respondent is not currently and has never been licensed to engage in the business of debt adjustment in this state, nor does Respondent qualify for an exemption from such licensure.
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b. Unlicensed Money Transmission Activity
| 6. |
From at least October 2009 through September 2011, Respondent received monies or monetary value for current or future transmission or transmitted monies or monetary value in Connecticut by exercising ownership or control of bank accounts through which Connecticut consumers’ funds were transmitted prior to disbursement to creditors and debt settlement companies. |
| 7. |
In particular, Respondent initiated ACH transfers or drafts to transfer funds from primary bank accounts of its consumers to its custodial accounts held at the Bank and credited the amount of the transfers to consumer special purpose accounts. Consumer special purpose accounts represent beneficial interests in one or more of Respondent’s custodial accounts and do not represent individual bank accounts held at the Bank. In addition, Respondent processed disbursements from its Bank custodial accounts to debt settlement companies and creditors, and charged the amount of such disbursements to the applicable consumer special purpose accounts. The Bank did not have any direct knowledge of individual consumers’ transactions, nor were consumers able to withdraw or transfer their funds on their own, without the involvement and authorization of Respondent. |
| 8. |
Respondent also exercised ownership or control of consumers’ monies by requiring that all funds debited from a consumer’s primary bank account and deposited into Respondent’s Bank custodial account be held in the custodial account for a minimum of three (3) days from the date of deposit prior to withdrawal or distribution. In addition, Respondent’s agreements with consumers provided that consumers’ monies would be held at a bank chosen by Respondent and provided Respondent with authority to transfer a consumer’s account to another FDIC – insured institution at any time. On at least one occasion, Respondent utilized this authority to transfer consumers’ monies to a new FDIC – insured institution.
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| 9. |
Since July 2010, the Department has requested that Respondent cease and desist from engaging in unlicensed money transmission. In particular, letters were sent to Respondent on July 15, 2010 and May 11, 2011, and a meeting was held at the Department’s offices on May 5, 2011, notifying Respondent of the Department’s concerns. To date, Respondent has failed to adequately address the Department’s concerns. |
| 10. |
Respondent is not currently and has never been licensed to engage in money transmission in this state, nor does Respondent qualify for an exemption from licensure. In addition, Respondent is neither an agent of a person licensed to engage in money transmission in this state nor an agent of a person exempt from licensure.
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c. Failure to Cooperate with the Commissioner
| 11. |
Respondent failed to cooperate with the Commissioner by failing to produce all documents responsive to the Commissioner’s numerous requests for information. In particular, the Commissioner made several requests for information commencing in May 2011, and issued a subpoena to Respondent on June 6, 2011. Certain documents requested, including, but not limited to, all of Respondent’s bank agreements and business plans were not provided by Respondent. On at least one occasion, Respondent admitted it was “not inclined to produce the remainder of the information you have requested . . .”. A final attempt by the Department to seek compliance with its subpoena was made by letter dated July 29, 2011. To date, no response to the Department’s July 29, 2011 letter has been received.
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d. False or Misleading Statement to the Commissioner
12.
e. False or Misleading Statements to Consumers
13.
14.
15.
III. STATUTORY BASIS FOR ORDER TO CEASE
AND DESIST AND IMPOSITION OF CIVIL PENALTY
Section 36a-2(38) of the Connecticut General Statutes defines “licensee” to mean:
[A]ny person who is licensed or required to be licensed pursuant to the applicable provisions of . . . [Title 36a].
Section 36a-17(d) of the Connecticut General Statutes provides:
Any person who is the subject of any such investigation, examination or proceeding shall make its records available to the commissioner in readable form; provide personnel and equipment necessary, including, but not limited to, assistance in the analysis of computer-generated records; provide copies or computer printouts of records when so requested; furnish unrestricted access to all areas of its principal place of business or wherever records may be located; and otherwise cooperate with the commissioner.
Section 36a-53a of the Connecticut General Statutes provides:
No person shall make or cause to be made orally or in any document filed with the commissioner or in any proceeding, investigation or examination under this title, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.
Section 36a-53b of the Connecticut General Statutes prior to October 1, 2011, provided:
No licensee or registrant shall, in connection with the activity for which such person is licensed or registered: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
Section 36a-53b of the Connecticut General Statutes, as amended by Public Act 11-216, provides:
No person shall, in connection with any activity subject to the jurisdiction of the commissioner: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
Section 36a-597(a) of the Connecticut General Statues provides:
No person shall . . . engage in the business of money transmission, without a license issued by the commissioner as provided in section 36a-600. No person shall engage in such business . . . except as an agent of a person that has been issued a license by the commissioner as provided in section 36a-600 or an entity or a person exempt under section 36a-609 and in accordance with section 36a-607.
Section 36a-655 of the Connecticut General Statutes defines “debt adjustment” to mean:
[F]or or with the expectation of a fee, commission or other valuable consideration, receiving, as agent of a debtor, money or evidences thereof for the purpose of distributing such money or evidences thereof among creditors in full or partial payment of obligations of the debtor[.]
Section 36a-656(a) of the Connecticut General Statutes, as amended by Public Act 11-216, provides, in pertinent:
No person shall engage in the business of debt adjustment in this state without a debt adjuster license. . . .
| 1. |
Respondent’s engaging in the business of money transmission without a license, as more fully described in paragraphs 2, 4 and 6 through 10, inclusive, of the Matters Asserted, constitutes a violation of Section 36a-597(a) of the Connecticut General Statutes, which forms the basis to issue an order to cease and desist pursuant to Sections 36a-608(c) and 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty upon Respondent pursuant to Sections 36a-608(c) and 36a-50(a) of the Connecticut General Statutes. Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation. |
| 2. |
Respondent’s engaging in the business of debt adjustment without a license, as more fully described in paragraphs 2, 4, 5 and 7 of the Matters Asserted, constitutes a violation of Section 36a-656(a) of the Connecticut General Statutes, as amended, which forms the basis to issue an order to cease and desist pursuant to Sections 36a-657(b) and 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty upon Respondent pursuant to Sections 36a-657(b) and 36a-50(a) of the Connecticut General Statutes. Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation. |
| 3. |
Respondent’s failure to cooperate with the Commissioner, as more fully described in paragraph 11 of the Matters Asserted, constitutes a violation of Section 36a-17(d) of the Connecticut General Statutes, which forms the to issue an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty upon Respondent pursuant to Section 36a-50(a) of the Connecticut General Statutes. Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation.
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| 4. |
Respondent’s statement in its letter to the Department that consumers open bank accounts in their own name with a bank of their choice, as more fully described in paragraph 12 of the Matters Asserted, when, in fact, the Bank did not have any knowledge of individual consumer transactions and accounts were opened at the bank of Respondent’s choice, as more fully described in paragraphs 7, 8 and 12 of the Matters Asserted, constitutes making a statement to the Commissioner which is, at the time and in the light of the circumstances under which it is made, false or misleading in a material respect, in violation of Section 36a-53a of the Connecticut General Statutes, which forms the basis to issue an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty upon Respondent pursuant to Section 36a-50(a) of the Connecticut General Statutes. Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent not to exceed One Hundred Thousand Dollars ($100,000) per violation. |
| 5. |
Respondent’s statements that consumers maintain complete control of their bank accounts and Respondent only works with reputable debt settlement companies, as more fully described in paragraphs 14 and 15 of the Matters Asserted, when in fact, several consumers complained of the lack of knowledge and control of their accounts and the majority of debt settlement companies that Respondent dealt with in Connecticut were unlicensed, as more fully described in paragraphs 7, 8 and 13 through 15, inclusive, of the Matters Asserted, constitutes making untrue statements of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, in violation of Section 36a-53b of the Connecticut General Statutes in effect prior to October 1, 2011, and Section 36a-53b of the Connecticut General Statutes, as amended, which forms the basis to issue an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty upon Respondent pursuant to Section 36a-50(a) of the Connecticut General Statutes. Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation. |
IV. FINDING AND STATUTORY BASIS FOR
TEMPORARY ORDER TO CEASE AND DESIST
The Commissioner finds that the public welfare requires immediate action to issue a temporary order requiring Respondent to cease and desist from violating Sections 36a-17(d), 36a-53a and 36a-597(a) of the Connecticut General Statutes, Section 36a-53b of the Connecticut General Statutes in effect prior to October 1, 2011, and Sections 36a-53b and 36a-656(a) of the Connecticut General Statutes, as amended, and to take such other action as set forth herein to effectuate the purposes of Section 36a-52(b) of the Connecticut General Statutes, in that several Connecticut residents are being harmed by Respondent’s false or misleading statements to consumers regarding the nature of the debt settlement companies in connection with which it administers consumer disbursement accounts, and Respondent’s false or misleading statements to consumers regarding consumer’s ownership and control of such accounts. Moreover, Respondent has received tens of thousands of dollars in fees for their services from Connecticut consumers who are already struggling financially while not being duly licensed with the Department as a debt adjuster or money transmitter.
V. TEMPORARY ORDER TO CEASE AND DESIST, NOTICE OF INTENT TO ISSUE
ORDER TO CEASE AND DESIST, NOTICE OF INTENT TO IMPOSE
CIVIL PENALTY AND NOTICE OF RIGHT TO HEARING
WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct which forms the basis to issue an order to cease and desist pursuant to Sections 36a-608(c), 36a-657(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-608(c), 36a-657(b) and 36a-50(a) of the Connecticut General Statutes;
AND WHEREAS, the Commissioner has made the finding required under Section 36a-52(b) of the Connecticut General Statutes.
THE COMMISSIONER THEREFORE ORDERS, pursuant to Section 36a-52(b) of the Connecticut General Statutes, that Global Client Solutions, LLC immediately CEASE AND DESIST from violating Sections 36a-17(d), 36a-53a and 36a-597(a) of the Connecticut General Statutes and Section 36a-53b of the Connecticut General Statutes in effect prior to October 1, 2011, and Sections 36a-53b and 36a-656(a) of the Connecticut General Statutes, as amended. This Temporary Order shall become effective upon receipt by Global Client Solutions, LLC, and, unless set aside or modified by a court, shall remain in effect until the effective date of a permanent order or dismissal of the matters asserted in this Temporary Order.
NOW THEREFORE, notice is hereby given to Respondent that the Commissioner intends to issue an order requiring Respondent to CEASE AND DESIST from violating Sections 36a-17(d), 36a-53a and 36a-597(a) of the Connecticut General Statutes and Section 36a-53b of the Connecticut General Statutes in effect prior to October 1, 2011, and Sections 36a-53b and 36a-656(a) of the Connecticut General Statutes, as amended, and that the Commissioner intends to impose a CIVIL PENALTY upon Respondent as set forth herein, subject to Respondent’s right to a hearing on the allegations set forth above.
A hearing will be granted to Respondent if a written request for a hearing is received by the Department of Banking, Consumer Credit Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following its receipt of this Temporary Order to Cease and Desist, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing as set forth in Sections 36a-52(a) and 36a-50 of the Connecticut General Statutes. This Temporary Order to Cease and Desist, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing shall be deemed received on the earlier of the date of actual receipt, or seven days after mailing or sending. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a hearing officer and sets the date of the hearing in accordance with Section 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on January 25, 2012, at 10 a.m. at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the Connecticut General Statutes, unless Respondent fails to appear at the requested hearing. At such hearing, Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
If Respondent does not request a hearing within the time prescribed, the Commissioner will issue an order that Respondent cease and desist from violating Sections 36a-17(d), 36a-53a and 36a-597(a) of the Connecticut General Statutes and Section 36a-53b of the Connecticut General Statutes in effect prior to October 1, 2011, and Sections 36a-53b and 36a-656(a) of the Connecticut General Statutes, as amended, and may order a civil penalty not to exceed One Hundred Thousand Dollars ($100,000) per violation be imposed upon Respondent.
So ordered at Hartford, Connecticut
this 30th of November 2011. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 30th day of November 2011, the foregoing Temporary Order to Cease and Desist, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing was sent by registered mail, return receipt requested to Global Client Solutions, LLC, Attention: Brent Hampton, General Counsel, 4500 South 129th East Avenue, Suite 175, Tulsa, Oklahoma 74134, registered mail no. RA878574701US; and GreenspoonMarder, Attention: Robby H. Birnbaum, Esq., Trade Centre South, Suite 700, 100 West Cypress Creek Road, Fort Lauderdale, Florida 33309-2140, registered mail no. RA878574715US.
________/s/_________
Stacey L. Serrano
Prosecuting Attorney