Alder Holdings, LLC
Documents in this case
Case summary
On December 11, 2020, the Consumer Financial Protection Bureau (Bureau) and the Arkansas Attorney General filed a proposed stipulated final judgment and order in the United States District Court for the Eastern District of Arkansas against Alder Holdings, LLC (Alder). Alder is a Utah-based company that sells home-security and alarm systems, primarily door-to-door, throughout the country and has sold its products and services to over 115,000 customers. The complaint alleged that Alder, in extending credit to its customers for its home-alarm products and services, violated the Fair Credit Reporting Act and Regulation V by charging customers who had lower credit scores higher activation-fees, but failing to provide those customers with the required risk-based pricing notice. Arkansas also alleged that Alder violated the Consumer Financial Protection Act of 2010 (CFPA). The order, which the court entered on August 4, 2021, requires Alder to pay a $600,000 civil money penalty, $100,000 of which will be offset if Alder pays that amount to settle related litigation with the State of Arkansas in state court in Arkansas. The order also requires Alder to provide proper notices under FCRA.
Complaint ()
PDF of this document (14 pages)
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U.S. DISTRICT COURT “=
EASTERN DISTRICT ARKANSAS DEC 11 2020 IN THE UNITED STATES DISTRICT COURSAMES W.-McCORMACK, CLERK FOR THE EASTERN DISTRICT OF ARKAN Sir DEF CLERK Case Number: ¥: Jo@V /¥45~- AEZ Bureau of Consumer Financial Protection and the State of Arkansas ex rel. Leslie Rutledge, Attorney General, COMPLAINT Plaintiffs, This case assigned to District Jugge
Alder Holdings, LLC, - and to Magistrate Judge wet
. Defendant.
The Bureau of Consumer Financial Protection (Bureau) andthe State of Arkansas ex rel. Leslie Rutledge, Attomey General (Arkansas), bring this action against Alder Holdings, LLC (Alder) under the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5564, 5565, and the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681s(b)(1)(A), to obtain permanent injunctive relief, a civil money penalty, consumer redress, and other relief for Alder’s violation of FCRA, 15 U.S.C. § 1681m, and Regulation V’s rule regarding Duties of Users Regarding Risk-Based Pricing (Risk-Based Pricing Rule), 12 C.F.R. § 1022.70 et seq.
Jurisdiction and Venue 1. | This Court has subject-matter jurisdiction over this action because it is
brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents
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a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
2.
Venue is proper because Alder is located, resides, and does business in this district. 12 U.S.C. § 5564(f).
Parties 3.
The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer-financial products or services under “Federal consumer financial laws.” 12 U.S.C. § 5491(a). The Bureau has independent litigating authority to enforce Federal consumer financial laws, including FCRA, Regulation V, and the CFPA. 12 U.S.C. §§ 5481(12)(F) & (14), 5564(a) & (b).
4.
Alder is a Utah-based, privately held home-security company. At all times relevant to this Complaint, Alder has done business in this district. Alder sells home-security and alarm systems, primarily door-to-door, throughout the country and has sold its products and services to over 115,000 customers. Alder extends credit to consumers and is therefore a “creditor” under FCRA, 15 U.S.C. § 1681a(r)(5).
5.
At all times relevant to this Complaint, Alder has obtained and used consumers’ credit scores to determine the amount of activation fees for its products
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and services but has not provided consumers with the notice required by FCRA and Regulation V.
The Fair Credit Reporting Act and the Risk-Based Pricing Rule 6.
In 2003, the Fair and Accurate Credit Transactions Act, Public Law No. 108-159, 117 Stat. 1952, amended FCRA to add § 615(h), 15 U.S.C. § 1681m(h), which requires companies to give consumers notice when they provide consumers with less favorable credit terms based on a review of their credit reports, also known as risk-based pricing.
7.
This notice requirement was designed to complement FCRA’s already existing adverse-action-notice provisions and to improve the accuracy of consumer reports. See Fair Credit Reporting Risk-Based Pricing Regulations, 75 Fed. Reg. 2724 (January 15, 2010).
8.
When consumers are alerted to the existence of negative information on their consumer reports, they can choose to check their consumer reports for accuracy and correct any inaccurate information that may affect their ability to obtain the product or service they are seeking or its price. Id. 9.
And when consumers are informed that their credit score may increase the price of a product or service, they can comparison-shop. 10.
FCRA and Regulation V’s Risk-Based Pricing Rule requires that a “person” provide a consumer with a risk-based-pricing notice if the person “uses a
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consumer report in connection with” an application for or extension of credit and, “based in whole or in part on the consumer report,” extends “credit to that consumer on material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers.” 15 U.S.C. § 1681m(h)(1); 12 C.F.R. § 1022.72(a).
11.
FCRA defines a “consumer report” as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for . . . credit or insurance to be used primarily for personal, family, or household purposes.” 15 U.S.C. § 1681a(d)(l). 12.
The Risk-Based Pricing Rule adopts the Equal Credit Opportunity Act’s definition of credit: “the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.” 15 U.S.C. § 1691a(d); 12 C.F.R. § 1022.71(h).
13.
The Risk-Based Pricing Rule defines “material terms” to mean “[i]n the case of credit for which there is no annual percentage rate, the financial term that varies based on information in a consumer report and that has the most
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significant financial impact on consumers, such as a deposit required in connection with credit extended by a telephone company or utility.” 12 C.F.R. § 1022.71(n)(3).
14.
To comply with the rule’s notice requirement, a company could opt to provide all consumers with a credit-score-disclosure notice regardless of credit score or whether the consumer may actually receive less favorable terms, instead of a risk-based-pricing notice.
15.
For companies providing risk-based-pricing notices, the rule provides a number of methods companies may use to determine which consumers would receive “credit on terms that are materially less favorable than those available to a substantial proportion of consumers” and therefore must receive a notice. 12 C.F.R. § 1022.72(b).
16.
A Risk-Based Pricing Notice must contain the following specified information to consumers receiving the materially less favorable terms under 12 C.F.R. § 1022.73(a):
a.
a statement that a consumer report includes information about the consumer’s credit history and the type of information included in that history;
b.
a statement that the terms offered have been set based on information from a consumer report;
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c.
a statement that the terms offered may be less favorable than the terms offered to consumers with better credit histories; d.
a statement that the consumer is encouraged to verify the accuracy of the information contained in the consumer report and has the right to dispute any inaccurate information in the report;
e.
the identity of each consumer reporting agency that furnished a consumer report used in the credit decision; f.
a statement that federal law gives the consumer the right to obtain a copy of a consumer report from the consumer reporting agency or agencies identified in the notice without charge for 60 days after receipt of the notice;
g.
a statement informing the consumer how to obtain a consumer report from the consumer-reporting agency or agencies identified in the notice and providing contact information (including a toll-free telephone number, where applicable) specified by the consumer-reporting agency or agencies; h.
a statement directing consumers to the Consumer Financial Protection Bureau’s website to obtain more information about consumer reports; and
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i.
if the creditor used a credit score, i.
a statement that a credit score is a number that takes into account information in a consumer report, that the consumer’s credit score was used to set the terms of credit offered, and that a credit score can change over time to reflect changes in the consumer’s credit history; ii.
the credit score used in making its credit decision; iii.
the range of possible credit scores under the model used to generate the credit score;
iv.
all of the key factors that adversely affected the credit score, limited to four key factors unless one of the key factors was the number of enquiries to the consumer’s report and in such instance listing five key factors; v.
the date on which the credit score was created; and vi.
the name of the consumer-reporting agency or other person that provided the credit score. 17.
The Risk-Based Pricing Rule provides that a business providing closed-end credit must provide consumers with a risk-based-pricing notice before “consummation of the transaction, but not earlier than the time the decision to approve an application for, or a grant, extension, or other provision of, credit, is
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communicated to the consumer by the person required to provide the notice.” 12 C.F.R. § 1022.73(c)(1)(i).
18.
The Risk-Based Pricing Rule defines “consummation” as “the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. §§ 1022.71(e); 1026.2(a)(13).
Alder’s Business Activities 19.
Alder is a closed-end creditor that grants its customers the right to defer payment for its alarm and security-system equipment over the life of a longterm contract.
20.
Customers receive security monitoring equipment when they agree to a long-term Home Security Contract, generally for 5 years, that requires monthly and other fees.
21.
Customers are typically charged an activation fee, a material term, and then must pay the contract’s monthly fees even if they cancel the monitoring service. Upon cancellation, the customer must pay 90% of the contract’s remaining balance.
22.
Customers may also pay the activation fee over time: they may repay the fee in 3 monthly installments, or the sales representative can raise the price for monitoring by $10 each month until the activation fee is paid off.
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23.
Alder’s customer contracts list retail prices for the equipment that it provides. Alder then effectively uses activation fees, monthly fees, and long-term contracts to recoup, over time, the cost of equipment “given” to customers, and the terms of this deferral vary based on customers’ credit scores. 24.
Alder charges customers 90% of the remaining balance on the contract as a lump sum if they cancel the monitoring service, demonstrating that the residual value is attributed to the equipment, not ongoing monitoring or other services.
25.
And Alder maintains a security interest in the equipment. If a customer does not fulfill his or her commitment to pay the monthly rate for the contract’s full term, Alder retains the right to repossess the equipment and, in fact, does attempt to repossess equipment.
26.
Alder uses a point-based-incentive system for sales representatives’ commissions that penalizes sales representatives who give away too much equipment.
27.
Because Alder allows customers to defer payment for the alarm and security-system equipment over the life of a long-term contract, Alder is extending credit to its customers.
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Alder Determines Pricing by Evaluating a Consumer’s Credit Score.
28.
Alder determines the amount of the activation fee that it charges consumers, which is a material term, by evaluating the consumer’s credit score, without providing consumers notice that their credit scores are being used to determine pricing.
29.
Alder’s sales representatives run a credit check during their door-todoor sales presentations. Further, Alder’s salespeople use tablets or smartphones during their sales pitches that reveal potential customers’ credit scores at the outset of the sales presentation and before they negotiate the contract’s activation fee and other key terms.
30.
Alder’s point-based-commissions program incentivizes the use of risk-based pricing. Sales affiliates lose points and may be penalized for failing to charge higher fees to customers with lower credit scores. 31.
For example, an Alder training quiz explicitly states that sales representatives are “required” to collect different amounts of activation fees from customers based on their credit scores.
32.
Credit-score and pricing data from Alder show an inverse correlation between customers’ credit scores and the amount of the activation fee that Alder charged them, if Alder charged an activation fee at all.
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33.
In fact, Alder is more than twice as likely to charge customers with the lowest credit score an activation fee as those with the highest credit scores. 34.
Customers with the worst credit or no credit score are charged substantially more in average activation fees than customers with the highest credit scores.
35.
For example, 55% of customers with credit scores between 300 and 599 were required to pay activation fees, as opposed to only 19% of customers with credit scores over 800. Forty-nine percent of customers without a credit score or an invalid credit score (one where the credit-reporting agency has invalid or missing information) were also required to pay an activation fee. 36.
The average activation fee paid by customers in the lowest creditscore bracket and without a credit score or with an invalid credit score are $46.18 and $41.15, respectively. But customers with the highest credit scores are, on average, charged only $14.71.
37.
This shows how Alder uses credit scores, in whole or in part, to offer credit to customers on terms that are materially less favorable than those available to a substantial proportion of customers.
38.
The activation fee is material under FCRA and Regulation V. It is essentially a deposit, disparately charged to customers with worse credit, and it has a significant financial impact on consumers.
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39.
Despite engaging in risk-based pricing when it extends credit and obtains and uses consumers’ credit scores to determine the amount of activation fees, Alder does not provide a risk-based-pricing notice to customers informing them that their credit scores could impact whether they would be charged an activation fee and, if so, the amount of the fee. Count One (Asserted by the Bureau and Arkansas) 40.
Plaintiffs incorporate the allegations set for in 1-39 of this Complaint. 41.
Alder has provided credit to consumers on material terms that are materially less favorable terms than those offered to a substantial proportion of other consumers, based on information in consumer reports. 42.
Alder has failed to provide its customers receiving less favorable material terms based on their credit scores with a notice with all the information required by the Risk-Based Pricing Rule before consummation of the transaction. 43.
Alder’s acts or practices, as described above, violate the Risk-Based Pricing Rule.
Count Two (Asserted by Arkansas) 44.
Arkansas incorporates the allegations set for in 1-39 of this Complaint.
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45.
Section 1036(a)(1)(A) of the CFPA makes it unlawful for covered person, such as Alder, to “commit any act or omission in violation of a Federal consumer financial law.” 12. U.S.C. § 5536(a)(1)(A). 46.
The FCRA is a “Federal consumer financial law.” 12 U.S.C. § 5481(12)(F).
47.
By violating the FCRA, as described in Count One, Alder violated the CFPA. 12 U.S.C. § 5536(a)(1)(A).
Demand for Relief The Bureau and the State of Arkansas request that the Court: a.
enjoin Alder from violating the FCRA and Regulation V; b.
order Alder to pay damages, redress, and other monetary relief to consumers;
c.
order Alder to pay disgorgement or compensation for unjust enrichment;
d.
impose a civil money penalty under 12 U.S.C. § 5564(a) of the CFPA; e.
order Alder to pay the costs incurred in connection with prosecuting this action; and f.
award additional relief as the Court may determine to be just and proper.
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Respectfully submitted,
Thomas G. Ward
Leslie Rutledge Enforcement Director
Attorney General Jeffrey Paul Ehrlich Deputy Enforcement Director
/s/ Kate Donoven
Owen P. Martikan
Kate Donoven (Ark. Bar No. 98189) Assistant Litigation Deputy
Senior Assistant Attorney General Arkansas Attorney General’s Office /s/ Benjamin Konop
323 Center Street, Suite 200 Benjamin Konop (OH Bar No. 0073458) Little Rock, AR 72201 Telephone: (202) 435-7265
Telephone: (501) 682-8114 E-mail: [email protected]
Facsimile: (501) 682-8118 Kristina Betts (AZ Bar No. 024859) [email protected] Telephone: (202) 834-2723 E-mail: [email protected] Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Facsimile: (703) 642-4548 Attorneys for Petitioner Bureau of Consumer Financial Protection
Order ()
PDF of this document (17 pages)
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IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF ARKANSAS CENTRAL DIVISION
BUREAU OF CONSUMER FINANCIAL PROTECTION AND THE STATE OF ARKANSAS PLAINTIFFS
v.
Case No. 4:20-cv-01445-KGB
ALDER HOLDINGS, LLC DEFENDANT
ORDER Plaintiffs the Bureau of Consumer Financial Protection (“Bureau”) and the State of Arkansas (“Arkansas”) ex rel. Leslie Rutledge, Attorney General, commenced this civil action on December 11, 2020, to obtain permanent injunctive and monetary relief and civil penalties from defendant Alder Holdings, LLC (“Alder”). The Complaint alleges violations of the Fair Credit Reporting Act (“FCRA”) § 615, 15 U.S.C. § 1681m, and Regulation V’s rule regarding Duties of Users Regarding Risk-Based Pricing (“Risk-Based Pricing Rule”), 12 C.F.R. § 1022.70 et seq., in connection with the defendants’ selling of home-security and alarm system monitoring services. Plaintiffs and Defendant agree to entry of this Stipulated Final Judgment and Order, without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.
THEREFORE, it is ORDERED:
FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action under 12 U.S.C. § 5565(a)(1) and 28 U.S.C. §§ 1331, 1345. 2.
Venue is proper because Alder is located, resides, or does business in this district. 12 U.S.C. § 5564(f).
Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 1 of 17
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3.
Defendant neither admits nor denies any allegations in the Complaint, except that, for purposes of this Order, Defendant admits the facts necessary to establish this Court’s jurisdiction over it and the subject matter of this action. 4.
Defendant waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees. 5.
Entry of this Order is in the public interest. DEFINITIONS 6.
The following definitions apply to this Order: a.
“Consumer Report” has the meaning provided in the FCRA, 15 U.S.C. § 1681a(d), and any amendments thereto. As of the date of entry of this Order, “Consumer Report” is defined under the FCRA as any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for (A) credit or insurance to be used primarily for personal, family, or household purposes; (B) employment purposes; or (C) any other purposes authorized under 15 U.S.C. § 1681b.
b.
“Consumer Reporting Agency” or “CRA” has the meaning provided in the FCRA, 15 U.S.C. § 1681a(f), and any amendments thereto. As of the Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 2 of 17
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date of entry of this Order, “Consumer Reporting Agency” is defined under the FCRA as any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity that, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports. c.
“Credit” has the meaning provided in the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691a(d), and any amendments thereto. As of the date of entry of this Order, “Credit” is defined under ECOA as the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.
d.
“Creditor” has the meaning provided in ECOA, 15 U.S.C. § 1691a(e), and any amendments thereto. As of the date of entry of this Order, “Creditor” is defined under ECOA as any individual, corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association that regularly extends, renews, or continues credit or regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.
Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 3 of 17
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e.
“Credit score” has the meaning in the FCRA, 15 U.S.C. § 1681g(f)(2)(A), and any amendments thereto. As of the date of entry of this Order, “Credit score” is defined under the FCRA as a numerical value or a categorization derived from a statistical tool or modeling system used by any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity that makes or arranges a loan to predict the likelihood of certain credit behaviors, including default (and the numerical value or the categorization derived from such analysis may also be referred to as a “risk predictor” or “risk score”).
f.
“Defendant” means Alder Holdings, LLC and its successors and assigns. g.
“Effective Date” means the date on which the Order is entered by the Court. h.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Bureau, or his or her delegate. i.
“Material terms” has the meaning in Regulation V, 12 C.F.R. § 1022.71(n), and any amendments thereto. As of the date of entry of this Order, “Material terms” is defined under Regulation V as the financial term that varies based on information in a consumer report and that has the most significant financial impact on consumers, such as a deposit required in connection with credit extended by a telephone company or utility or an annual membership fee for a charge card.
j.
“Materially less favorable” has the meaning in Regulation V, 12 C.F.R. § 1022.71(o), and any amendments thereto. As of the date of entry of this Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 4 of 17
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Order, “Materially less favorable” under Regulation V means, when applied to material terms, that the terms granted, extended, or otherwise provided to a consumer differ from the terms granted, extended, or otherwise provided to another consumer from or through the same individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity, such that the cost of credit to the first consumer would be significantly greater than the cost of credit granted, extended, or otherwise provided to the other consumer. For purposes of this definition, factors relevant to determining the significance of a difference in cost include the type of credit product, the term of the credit extension, if any, and the extent of the difference between the material terms granted, extended, or otherwise provided to the two consumers. k.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in the Complaint.
l.
“Risk-Based Pricing Notice” is the notice that must be provided to a consumer under Regulation V, 12 C.F.R. § 1022.72, when a person or an organization, including a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit both: (1) uses a consumer report in connection with an application for, or a grant, extension, or other provision of, credit to that consumer that is primarily for personal, family, or household purposes; and (2) based in whole or in part Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 5 of 17
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on the consumer report, grants, extends, or otherwise provides credit to that consumer on material terms that are materially less favorable than the most favorable material terms available to a substantial proportion of consumers from or through that person.
CONDUCT PROVISIONS I.
Conduct Requirements
IT IS FURTHER ORDERED that:
7.
Defendant and its officers, agents, servants, employees, and attorneys, and all other persons or entities in active concert or participation with any of them, who have actual notice of this Order, whether acting directly or indirectly, are hereby permanently restrained and enjoined from violating § 615(h) of the FCRA, 15 U.S.C. § 1681m(h), and the Risk-Based Pricing Rule, 12 C.F.R. § 1022.70 et seq.
8.
If Defendant (a) uses a consumer report in connection with an application for, or a grant, extension, or other provision of, credit to a consumer that is primarily for personal, family, or household purposes, and (b) based in whole or in part on the consumer report, grants, extends, or otherwise provides credit to that consumer on material terms that are materially less favorable than the most favorable material terms available to a substantial proportion of consumers from or through Defendant, then Defendant must:
a.
Provide the consumer with a Risk-Based Pricing Notice before consummation of the credit transaction.
b.
Include in the Risk-Based Pricing Notice:
Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 6 of 17
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i.
A statement that a consumer report (or credit report) includes information about the consumer’s credit history and the type of information included in that history;
ii.
A statement that the terms offered, such as the annual percentage rate, deposit, or pre-payment requirements have been set based on information from a consumer report;
iii.
A statement that the terms offered may be less favorable than the terms offered to consumers with better credit histories; iv.
A statement that the consumer is encouraged to verify the accuracy of the information contained in the consumer report and has the right to dispute any inaccurate information in the report; v.
The identity of each consumer reporting agency that furnished a consumer report used in the credit decision; vi.
A statement that federal law gives the consumer the right to obtain a copy of a consumer report from the consumer reporting agency or agencies identified in the notice without charge for 60 days after receipt of the notice;
vii.
A statement informing the consumer how to obtain a consumer report from the consumer reporting agency or agencies identified in the notice and providing contact information (including a toll-free telephone number, where applicable) specified by the consumer reporting agency or agencies;
Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 7 of 17
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viii.
A statement directing consumers to the Web site of the Bureau of Consumer Financial Protection to obtain more information about consumer reports; and ix.
If a credit score of the consumer to whom a person grants, extends, or otherwise provides credit is used in setting the material terms of credit:
1.
A statement that a credit score is a number that takes into account information in a consumer report, that the consumer’s credit score was used to set the terms of credit offered, and that a credit score can change over time to reflect changes in the consumer’s credit history; 2.
The credit score used by the person in making the credit decision;
3.
The range of possible credit scores under the model used to generate the credit score;
4.
All of the key factors that adversely affected the credit score, which shall not exceed four key factors, except that if one of the key factors is the number of enquiries made with respect to the consumer report, the number of key factors shall not exceed five;
5.
The date on which the credit score was created; and 6.
The name of the consumer reporting agency or other person that provided the credit score.
Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 8 of 17
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c.
Disclose the Risk-Based Notice in a clear and conspicuous manner. For example, in the case of an electronic disclosure, use a method, such as a pop-up box, which must require customers to indicate that they read and understood the notice (e.g., selecting a button in an app that will only be available once the customer has read the notice). II.
Compliance Plan IT IS FURTHER ORDERED that:
9.
Within 90 days of the Effective Date, Defendant must submit to the Enforcement Director for review and determination of non-objection a comprehensive compliance plan designed to demonstrate to the Bureau that Defendant’s conduct complies with the Risk-Based Pricing requirements of the FCRA and Regulation V and the terms of this Order (Compliance Plan). The Compliance Plan must include, at a minimum: a.
Detailed steps for addressing each action required by this Order; b.
A proposal for training that will be provided to Defendant’s employees designed to ensure that they comply with the FCRA and Regulation V’s risk-based pricing requirements; and c.
Specific timeframes and deadlines for implementation of the steps described above.
10.
The Enforcement Director will have the discretion to make a determination of nonobjection to the Compliance Plan or direct Defendant to revise it. If the Enforcement Director directs Defendant to revise the Compliance Plan, Defendant must make the revisions and resubmit the Compliance Plan to the Enforcement Director within 60 days. Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 9 of 17
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11.
After receiving notification that the Enforcement Director has made a determination of non-objection to the Compliance Plan, Defendant must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan. MONETARY PROVISIONS III.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
12.
Under § 1055(c) of the Consumer Financial Protection Act (“CFPA”), 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and based on the agreement of the parties, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Alder must pay a civil money penalty of $600,000 to the Bureau. Under 12 U.S.C. § 5565(c)(4), the amount Alder must pay will be remitted by $100,000 if Alder pays that amount as a penalty to the State of Arkansas in Arkansas ex rel. Rutledge v. Alder, 60CV-18-2188, Pulaski County Circuit Court, for related conduct.
13.
Within 120 days of the Effective Date, based on the agreement of the parties, Defendant must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.
14.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by § 1017(d) of the CFPA, 12 U.S.C. § 5497(d). 15.
Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, based on the agreement of the parties, Defendant may not: Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 10 of 17
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a.
Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.
Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
16.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendant based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendant must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau, and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action, based on the agreement of the parties.
IV.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
17.
In the event of any default on Defendant’s obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 11 of 17
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amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
18.
Defendant relinquishes all dominion, control, and title to the funds paid to the fullest extent permitted by law, and no part of the funds may be returned to Defendant. 19.
The facts alleged in the Complaint will be taken as true without further proof in any subsequent litigation by or on behalf of the Bureau in a proceeding to enforce this Order, including the Bureau’s rights to any payment or monetary judgment under this Order. 20.
Under 31 U.S.C. § 7701, Defendant, unless it already has done so, must furnish to the Bureau its taxpayer-identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 21.
Within 30 days of the entry of a final judgment, consent order, or settlement in any Related Consumer Action, Defendant must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. COMPLIANCE PROVISIONS
V.
Reporting Requirements IT IS FURTHER ORDERED that:
22.
Defendant must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 12 of 17
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Order; the filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or address. Defendant must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development. 23.
Within 7 days of the Effective Date, Defendant must: a.
Designate at least one telephone number and email, physical, and postal addresses as points of contact that the Bureau may use to communicate with Defendant;
b.
Identify all businesses for which Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; c.
Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales. 24.
Defendant must report any change in the information required to be submitted under Paragraph 23 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
25.
Within 90 days of the Effective Date, and again one year after the Effective Date, Defendant must submit to the Enforcement Director an accurate written compliance progress report sworn to under penalty of perjury (Compliance Report), which, at a minimum: a.
Lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which Defendant has complied with each such paragraph and subparagraph of this Order; b.
Describes in detail the manner and form in which Defendant has complied with the Compliance Plan; and Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 13 of 17
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c.
Attaches a copy of each Order Acknowledgment obtained under Section VI unless previously submitted to the Bureau.
VI.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
26.
Within 7 days of the Effective Date, Defendant must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury. 27.
Within 30 days of the Effective Date, Defendant must deliver a copy of this Order to each of its board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order.
28.
For 5 years from the Effective Date, Defendant must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section V, any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities. 29.
Defendant must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Order under this Section. 30.
Within 90 days of the Effective Date, Defendant must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that date under Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 14 of 17
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Paragraphs 27 and 28 and a copy of all signed and dated statements acknowledging receipt of this Order under Paragraph 29.
VII.
Recordkeeping IT IS FURTHER ORDERED that:
31.
Defendant must create and retain all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau. Defendant must retain these documents for at least 5 years after creation and make the documents available to the Bureau upon the Bureau’s request. VIII.
Notices IT IS FURTHER ORDERED that:
32.
Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Alder Holdings, LLC, Case No. 4:20-cv-01445,” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]:
Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552
33.
The Enforcement Director may, in his or her discretion, modify any non-material requirements of this Order (e.g., reasonable extensions of time and changes to reporting Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 15 of 17
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requirements) if he or she determines good cause justifies the modification. Any such modification by the Enforcement Director must be in writing.
IX.
Compliance Monitoring IT IS FURTHER ORDERED that:
34.
Within 14 days of receipt of a written request from the Bureau, Defendant must submit additional Compliance Reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents. 35.
For purposes of this Section, the Bureau may communicate directly with Defendant, unless Defendant retains counsel related to these communications. 36.
Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview. The person interviewed may have counsel present.
37.
Nothing in this Order will limit the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process. X.
Release 38.
The Bureau releases and discharges Defendants from all potential liability for violations of law that the Bureau has or might have asserted based on the practices described in the Complaint, to the extent such conduct occurred before the Effective Date and the Bureau knows about it as of the Effective Date. The Bureau may use the practices described in the Complaint in future enforcement actions against Defendants and their affiliates, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of Case 4:20-cv-01445-KGB Document 11 Filed 08/04/21 Page 16 of 17
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violations or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and ensure compliance with this Order, or to seek penalties for any violation of this Order.
XI.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
39.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
It is so ordered this 4th day of August, 2021.
_______________________________
Kristine G. Baker United States District Judge
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