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IN THE MATTER OF: THE DEBT ANSWER, 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 Sections 36a-671 to 36a-671d, 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(a) of the Connecticut General Statutes, the Commissioner, through the Consumer Credit Division (“Division”) of the Department of Banking, 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 that:
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-52 of the Connecticut General Statutes provides, in pertinent part, that:
(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, that:
(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-671a(c) of the Connecticut General Statutes provides, in pertinent part, that:
Upon complaint, the Banking Commissioner may review any fees or charges assessed by a person offering debt negotiation services and order the reduction of such fees or charges or repayment of such amount of the fees or charges that the commissioner deems excessive, taking into consideration the fees that other persons performing similar debt negotiation services charge for such services and the benefit to the consumer of such services. . . .
II. MATTERS ASSERTED
| 1. |
Respondent is a Texas limited liability company with places of business at 9330 Amberton Parkway, Suite 2322, Dallas, Texas, and 12655 N. Central Expressway, Suite 800, Dallas, Texas. |
| 2. |
On September 30, 2010, a Connecticut resident filed a complaint with the Commissioner, which complaint indicated that on or about May 2010, the Connecticut resident entered into an agreement with Respondent for debt negotiation services. The complaint also states that the Connecticut resident entered into a written contract with a third-party service provider (“TPSP”) (“TPSP Agreement”), in which the Connecticut resident appointed and authorized the TPSP to provide services related to the Connecticut resident’s contract with Respondent. Specifically, the TPSP Agreement authorizes and appoints the TPSP to debit funds from a bank account designated by the Connecticut resident via an Automated Clearing House (“ACH”) authorization and to deposit and hold those funds in a trust account. According to the terms of the TPSP Agreement, the debits from the Connecticut resident’s designated bank account into the trust account are made for the purpose of satisfying the terms of the debt settlements negotiated by Respondent under separate contract between the Connecticut resident and Respondent, and for paying fees to the TPSP and Respondent. The complaint further states that from May 24 through September 22, 2010, $2,424.90 was debited from the Connecticut resident’s account for such services, however, no services were performed. |
| 3. |
By letter dated October 14, 2010, the Division informed Respondent that it may be engaged in the business of debt negotiating in this state without a license and advised that “persons engaged in the business of debt negotiation in this state without a license must immediately cease and desist from such activity until the required license has been procured”. (Emphasis omitted.) The October 14, 2010, letter also requested that Respondent provide a list of all Connecticut consumers that Respondent has serviced for loan modifications and/or debt settlement. |
| 4. | By letter dated November 30, 2010, Respondent, through its attorney, stated that “[p]ursuant to your request, enclosed please find a listing of the Connecticut consumers enrolled in . . . [Respondent’s] debt negotiation program as of October 1, 2009. The majority of the consumers listed therein are categorized as inactive; meaning they are no longer enrolled. Presently, . . . [Respondent] provides services to four (4) Connecticut consumers”. No such listing was included with the letter. |
| 5. | By e-mail dated December 13, 2010, Respondent’s attorney provided the Division with an attachment entitled “Connecticut Clients Written After October 1, 20]2009” [sic]. The attachment contained a list of sixty-four (64) names with total fees collected in the amount of $61,678.02. |
| 6. | From at least May 24, 2010 to the present, Respondent offered to engage in debt negotiation services in this state via various media, including the Internet. |
| 7. | Respondent’s website states that it provides debt settlement and debt negotiation services. It states that Respondent “is a debt renegotiation company helping consumers across the country deal with intolerable amounts of credit card debt and other unsecured debts”. |
| 8. | As of mid-July 2010, Respondent is the identified debt settlement company on one hundred sixteen (116) TPSP Agreements entered into on or after October 1, 2009, with Connecticut residents who negotiated or agreed to the terms of an underlying service contract with Respondent in person, by mail, by telephone or via the Internet while physically present in this state and pursuant to which Respondent has collected or is collecting from such debtors fees for debt negotiation. |
| 9. | From March 2010 through July 2010, at least one hundred ten (110) Connecticut residents remitted payments to Respondent in excess of amounts that debt negotiators may charge for services pursuant to the Schedule of Maximum Fees established by the Commissioner on or about October 1, 2009. |
| 10. |
At no time relevant hereto was Respondent licensed to engage or offer to engage in debt negotiation in this state, nor did Respondent qualify for an exemption from licensure.
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III. STATUTORY BASIS FOR ORDER TO CEASE
AND DESIST AND IMPOSITION OF CIVIL PENALTY
Section 36a-671 of the Connecticut General Statutes states, in pertinent part, that:
(a) As used in this section and sections 36a-671a to 36a-671d, inclusive, (1) “debt negotiation” means, for or with the expectation of a fee, commission or other valuable consideration, assisting a debtor in negotiating or attempting to negotiate on behalf of a debtor the terms of a debtor’s obligations with one or more mortgagees or creditors of the debtor . . . [and] (2) “debtor” means any individual who has incurred indebtedness or owes a debt for personal, family or household purposes . . . .
(b) No person shall engage or offer to engage in debt negotiation in this state without a license issued under this section for each location where debt negotiation will be conducted. . . . A person is engaging in debt negotiation in this state if such person: . . . (2) has a place of business located outside of this state and the debtor is a resident of this state who negotiates or agrees to the terms of the services contract in person, by mail, by telephone or via the Internet while physically present in this state . . . .
Section 36a-671a(b) of the Connecticut General Statutes provides, in pertinent part, that:
Whenever it appears to the commissioner that any person has violated, is violating or is about to violate the provisions of sections 36a-671 to 36a-671d, inclusive, . . . the commissioner may take action against such person . . . in accordance with sections 36a-50 and 36a-52.
Section 36a-671b(b) of the Connecticut General Statutes provides that:
No person offering debt negotiation services may receive a fee, commission or other valuable consideration for the performance of any service the person offering debt negotiation services has agreed to perform for any consumer until the person offering debt negotiation services has fully performed such service. A person offering debt negotiation services may receive reasonable periodic payments as services are rendered, provided such payments are clearly stated in the contract. The commissioner may establish a schedule of maximum fees that a debt negotiator may charge for specific services.
The Schedule of Maximum Fees established by the Commissioner states, in pertinent part, that:
Initial Fee:
A debt negotiator of unsecured debt may charge the debtor a reasonable one-time initial or set-up fee in an amount not to exceed fifty dollars ($50).
Service Fees:
A debt negotiator of unsecured debt may charge a monthly service fee not to exceed eight dollars ($8) for each creditor that is listed in the debt negotiation service contract. The total service fee charged to a debtor may not exceed forty dollars ($40) per month.
Aggregate Fees:
A debt negotiator of unsecured debt may collect total aggregate fees including the initial fee and service fees, not to exceed ten percent (10% ) of the amount by which the consumer’s debt is reduced as part of each settlement as agreed to in the debt negotiation service contract as each settlement is achieved. A debt negotiator may not charge more than ten percent (10%) of the amount by which the consumer’s debt is reduced on the basis that the consumer has entered into a debt negotiation contract for joint obligations of a consumer and a consumer’s spouse or other member of the consumer’s household.
| 1. |
Respondent’s offering to engage in debt negotiation in this state without obtaining the required license, as more fully described in paragraphs 1, 6 and 7 of the Matters Asserted, constitutes a violation of Section 36a-671(b) of the Connecticut General Statutes. Such violation forms the basis to issue an order to cease and desist pursuant to Sections 36a-671a(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-671a(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. The Commissioner intends to impose a civil penalty upon Respondent not to exceed Ten Thousand Dollars ($10,000), subject to Respondent’s right to a hearing on the allegations set forth above. |
| 2. |
Respondent’s engaging in debt negotiation in this state on and after October 1, 2009, with 116 debtors and collecting fees without obtaining the required license, as more fully described in paragraphs 1 through 5, inclusive, and 8 and 10 of the Matters Asserted, constitutes a violation of Section 36a-671(b) of the Connecticut General Statutes. Such violations form the basis to issue an order to cease and desist pursuant to Sections 36a-671a(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-671a(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. The Commissioner intends to impose a civil penalty upon Respondent not to exceed One Hundred Thousand Dollars ($100,000), subject to Respondent’s right to a hearing on the allegations set forth above. |
| 3. |
Respondent’s engaging in debt negotiation services on and after October 1, 2009, with at least 110 Connecticut residents and collecting fees under terms which did not comply with Section 36a-671b(b) of the Connecticut General Statutes and the schedule of maximum fees established by the Commissioner pursuant to said section, as more fully described in paragraphs 1 through 5, inclusive, and 9, of the Matters Asserted, constitutes 110 violations of Section 36a-671b(b) of the Connecticut General Statutes. Such violations form the basis to issue an order to cease and desist pursuant to Sections 36a-671a(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-671a(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. The Commissioner intends to impose a civil penalty upon Respondent not to exceed One Million One Hundred Thousand Dollars ($1,100,000), subject to Respondent’s right to a hearing on the allegations set forth above. |
IV. FINDING AND STATUTORY BASIS FOR
TEMPORARY ORDER TO CEASE AND DESIST
The Commissioner finds that public welfare requires immediate action to issue a temporary order requiring Respondent to cease and desist from violating Sections 36a-671(b) and 36a-671b(b) of the Connecticut General Statutes 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 the interests of Connecticut residents are being materially prejudiced by Respondent’s receiving monies from Connecticut residents and failing to perform the contracted services for at least one such resident, and that the interests of additional Connecticut residents also may be materially prejudiced. The Commissioner also deems the fees paid by the Connecticut resident to Respondent to be excessive, after taking into consideration the fact that (1) the maximum fee schedule issued by the Commissioner only permits fees to be collected upon successful completion of the debt negotiation services contract, (2) the debt negotiation services contract was not successfully completed, and (3) the Connecticut resident received no benefit from such contract.
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-671a(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-671a(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 The Debt Answer, LLC, immediately CEASE AND DESIST from violating Sections 36a-671(b) and 36a-671b(b) of the Connecticut General Statutes. This Temporary Order shall become effective upon receipt by The Debt Answer, 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.
THE COMMISSIONER FURTHER ORDERS, pursuant to Sections 36a-52(b) and 36a-671a(c) of the Connecticut General Statutes, that: Not later than 10 days from 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, The Debt Answer, LLC shall provide:
| 1. |
Repayment of $2,424.90 to the Connecticut resident identified in Exhibit A, by cashier’s check, certified check or money order; and |
| 2. |
Evidence of such repayment to Marlene M. Mannix, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or marlene.mannix@ct.gov. |
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-671(b) and 36a-671b(b) of the Connecticut General Statutes, and 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(a) 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 June 9, 2011, 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-671(b) and 36a-671b(b) of the Connecticut General Statutes, and may order a civil penalty in an amount not to exceed One Million Two Hundred Ten Thousand Dollars ($1,210,000) be imposed upon Respondent.
So ordered at Hartford, Connecticut
this 6th of April 2011. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 8th day of April 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 The Debt Answer, LLC, Attention: Lloyd Regner, Member, 12655 N. Central Expressway, Suite 800, Dallas, Texas 75243, registered mail no RB028037836US; The Debt Answer, LLC, Attention: Lloyd Regner, Agent, 9330 Amberton Parkway, Suite 2322, Dallas, Texas 75243, registered mail no. RB028037840US; and The Debt Answer, LLC, Attention: Robby H. Birnbaum, Esq., Greenspoon Marder, P.A., Trade Centre South, Suite 700, 100 West Cypress Creek Road, Fort Lauderdale, Florida 33309, registered mail no. RB028020124US.
________/s/_________
Doniel Kitt
Prosecuting Attorney