BounceBack, Inc. and Gale Krieg
Documents in this case
- Complaint · · 15 p.
- Amended complaint · · 16 p.
- Stipulation · · 21 p.
Case summary
On December 9, 2020, the Bureau filed a lawsuit in the United States District Court for the Western District of Missouri against BounceBack, Inc. BounceBack, based in Kansas City, Missouri, operates bad-check pretrial-diversion programs on behalf of more than 90 district attorneys’ offices throughout the United States. The Bureau alleged that since at least 2015, in the course of administering these bad-check pretrial-diversion programs, BounceBack used district-attorney letterheads to threaten more than 19,000 consumers with prosecution if they did not pay the amount of the check, enroll and pay for a financial-education course, and pay various other fees. BounceBack did not reveal to consumers that BounceBack—and not district attorneys—sent the letters, or that district attorneys almost never prosecuted these cases, even against consumers who ignored BounceBack’s threats. In fact, in most cases, BounceBack did not refer cases for prosecution at all. BounceBack’s letters also failed to include disclosures required under the Fair Debt Collection Practices Act (FDCPA). The Bureau alleged that BounceBack’s conduct violated the FDCPA, was deceptive under both the FDCPA and the Consumer Financial Protection Act of 2010 (CFPA), and that its violations of the FDCPA constituted violations of the CFPA.
On August 27, 2021, the Bureau filed an amended complaint, which also named BounceBack’s president and majority owner, Gale Krieg, and alleged that Krieg exercised control over BounceBack and violated the CFPA because, among other things, he materially participated in and oversaw BounceBack’s deceptive activities. On September 21, 2021, the Bureau filed a proposed stipulated final judgment and order to resolve the lawsuit, which the court entered on November 1, 2021. The stipulated judgment and order requires BounceBack and Krieg to pay about $1.4 million to redress consumers, which amount would be suspended based upon defendants’ demonstrated inability to pay more upon BounceBack’s and Krieg’s compliance with the certain provisions of the judgment and order including paying a $30,000 civil money penalty. The order also permanently bans BounceBack and Krieg from, inter alia, engaging in debt collection related to any consumer financial product or service.
Complaint ()
PDF of this document (15 pages)
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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MISSOURI
Bureau of Consumer Financial Protection,
Plaintiff, Vv. CASE NO.
BounceBack, Inc.,
Defendant.
COMPLAINT
The Bureau of Consumer Financial Protection brings this action against
BounceBack, Inc. and alleges as follows.
INTRODUCTION
1. The Bureau brings this action under §§ 807 and 809 of the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. 8§ 1692e & 1692¢, and 8§ 1031(a), 1036(a), 1054, and 1055 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a), & 5565, to address false, deceptive, or misleading practices in connection with the collection of debt.
JURISDICTION AND VENUE
2. This Court has subject-matter jurisdiction because this action is “brought
under Federal consumer financial law,” 12 U.S.C. § 5565(a)(4), presents a federal
question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C.
§ 1345.
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3. This Court has personal jurisdiction over BounceBack because the causes of action arise from BounceBack’s conduct in this district.
4. Venue is proper in this district because BounceBack is located, resides, and does business in this district. 12 U.S.C. § 5564(f).
PARTIES
5. The Bureau is an agency of the United States charged with regulating the offering and provision of consumer-financial products and services under “Federal consumer financial laws,” 12 U.S.C. § 5491(a), including the CFPA, 12 U.S.C. § 5481(14). The Bureau has independent litigating authority, including the authority to enforce the CFPA. 12 U.S.C. § 5564(a), (b).
6. Because BounceBack is a corporation, it is a “person” under the CFPA. 12 US.C. § 5481(19).
7. At all times relevant to this Complaint, BounceBack has been a “covered person” under the CFPA because it “engages in offering or providing a consumer financial product or service.” 12 U.S.C. § 5481(6)(A).
FACTS Overview
8. BounceBack, Inc., is a privatelyowned company based in Kansas City, Missouri. It operates back-check pretrial-diversion programs on behalf of more than 90 district attorneys (DAs) throughout the United States. BounceBack’s pretrial-diversion program generally operates as follows.
9. Merchants primarily submit dishonored checks to BounceBack through its
affiliate, Check Connection, Inc.
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10. Aftera merchant reports a dishonored check to Check Connection, Check Connection adds it to a list of dishonored checks by jurisdiction and sends it to the pertinent DA for review.
11. In nearly all cases, without receiving further direction from the DA, BounceBack then attempts to enroll the check writers in its pre-trial diversion program, which requires a check writer to pay the debt and also enroll in, pay for, and complete a financial-education course.
12. On rare occasions, merchants send the names of check writers directly to the local DA, who then forwards to BounceBack the names of specific check writers who it wants enrolled in the pretrial-diversion program. In most cases, however, Check Connection generates a list of check writers that it sends to BounceBack, which enrolls those check writers in its collections program without ever receiving direction from the DA to doso.
13. BounceBack then sends two to four letters, on DA letterhead, to the check writers in an effort to collect the outstanding debts and enroll them in the financialeducation course.
14. The letters tell check writers that they could face criminal prosecution and conviction, but that they can avoid prosecution by paying the amount of the dishonored check, along with certain administrative fees, and completing a financial-education course. The recipient is instructed to pay the total fees owed to the “Check Enforcement Program” (in reality BounceBack), including a fee for the financial-education course that ranges from $100 to $165. If the check writer pays these amounts, then BounceBack sends the amount of the dishonored check to the merchant, pays small fees to the merchant and the DA, and keeps the balance.
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15. | BounceBack does not identify itself to check writers and does not inform them that it is a debt collector.
16. Although BounceBack’s letters appear to come directly from the DA and suggest that check writers will face criminal charges if they do not comply, DAs almost never prosecute such cases.
17. Moreover, nearly all jurisdictions have given BounceBack one set of criteria for sending warning letters to check writers and enrolling them in a financialeducation course, and a separate, more stringent set of criteria for referring a case back to the DA for potential prosecution when a check writer fails to respond to a letter. Given these distinct criteria, not all check writers who receive BounceBack’s warning letters are even eligible for prosecution under the DAs’ prosecution criteria.
18. Inmostcases, BounceBack does not refer cases for prosecution, even if the check writer fails to respond to the letter, does not pay the alleged outstanding debt and fees, or fails to complete the financial-education course.
19. | BounceBack has sent collection letters to more than 19,000 consumers since January 1, 2015.
BounceBack is a Debt Collector Under the FDCPA
20. BounceBack is a debt collector under the FDCPA.
21. Under 15 U.S.C. § 1692a(6), a debt collector is “any person who uses any instrument or instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect directly or indirectly, debts owed or due or asserted to be owed or
due another.”
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22. The FDCPA provides that an entity operating a bad-check diversion program through a contract with a DA may not be considered a debt collector if the entity complies with certain statutory requirements. BounceBack did not comply with those requirements.
23. Inmostcases, BounceBack contacts check writers and attempts to collect on dishonored checks and enroll the check writers in its pre-trial diversion program without the DA having made a determination that “probable cause of a bad check violation under State penal law exists, and that contact with the alleged offender for purposes of participation in the program is appropriate,” as required by 15 U.S.C.
§ 1692p(a)(2)(C)Gv)(D.
24. Inaddition, BounceBack’s letters do not contain a clear and conspicuous statement that if the alleged offender notifies the private entity or the DA in writing, not later than 30 days after being contacted for the first time pursuant to 15 U.S.C.
§ 1692p(a)(2)(C) (iv), that there is a dispute pursuant to 15 U.S.C. § 1692p(a), then further restitution efforts will not be pursued until the DA or an employee of the DA authorized to make such a determination makes a determination that there is probable cause to believe that a crime has been committed, as required by 15 U.S.C.
§ 1692p(a)(2)(C)(v) (ID).
False, Deceptive, or Misleading Representations in Connection with Collecting a Debt
a. BounceBack falsely represents that nonpayment will result in criminal prosecution.
25. Ifa DAexpresses interest in using BounceBack’s services, BounceBack sends it an initial packet explaining its pretrial-diversion program. The packet contains templates of the collection letters BounceBack will send to check writers, which the DA
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can change according to its preferences. Most DAs make few, if any, changes to the
template.
26. BounceBack’s collection letters state in several ways that a check writer
who does not pay the outstanding check amount and fees for the pretrial-diversion
rogram may face “criminal charges” or “criminal prosecution”: y
a.
b.
“WARNING OF CRIMINAL CHARGES”;
“the total amount must be received . .. to avoid possible criminal charges being filed”;
“pay the total listed below to avoid the possibility of criminal prosecution”;
“It is still possible to avoid a CRIMINAL CONVICTION”;
“WARNING... You have 48 hours to contact the Check Enforcement Program, before your case is forwarded to final review ... Ifthe check(s) is not taken care of, a criminal complaint and a WARRANT may be issued commanding you to appear in court and CRIMINAL PROCEEDINGS may result”;
“Failure to make payment in full within THIRTY (30) DAYS from the date of this notice may be used as evidence in a possible criminal prosecution”;
“If payment can be arranged and compliance with the conditions of the Check Enforcement Program are met, you may yet be able to prevent the possibility of a WARRANT FOR YOUR ARREST being issued”;
“TO COMPLY: 1) Pay the full dollar amount shown within thirty days. 2) Complete the Check Writer’s Financial Training Course”;
“ALL check writers whose checks have been referred to the Check Enforcement Program MUST complete the Educational Requirement to discharge the case as part of this diversion program”;
“FAILURE TO COMPLETE THE EDUCATIONAL REQUIREMENT CAN CAUSE YOUR CASE DIVERSION TO BE REVOKED.”
27. These threats are in almost all instances false.
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28. Each DA gives BounceBack criteria for sending out its collection letters, and different, often more stringent, criteria for determining which cases will be referred back to the DA for a review for prosecution.
29. BounceBack sends collection letters to check writers who do not meet the DAs’ criteria for referral for prosecution.
30. For example, at least 29 of the more than 90 jurisdictions that BounceBack has contracted with will not prosecute check writers if the dishonored check is below a certain amount, but BounceBack nevertheless threatens those check writers with prosecution.
31. Moreover, even ifa check writer qualifies for prosecution, Bounce Back rarely refers cases for potential prosecution.
32. Most DAs refuse to prosecute dishonored-check cases even if check writers fail to respond to BounceBack’s letters.
33. Finally, almost none of the check writers who enroll in the financialeducation course return the confirmation that they have completed the course, and many never complete the course. Contrary to the threats in BounceBack’s letters, BounceBack never refers those check writers to the DA for possible prosecution.
b. BounceBack creates the false impression that the collection letters it sends are coming directly froma DA.
34. | BounceBack’s letters are sent on DA letterhead and appear to be statements from the DA.
35. For instance, a typical letter bears the DA’s name and seal at the top. The letter also tells the check payer to send payment to the “[DA’s] Check Enforcement
Program,” followed by an address that is actually BounceBack’s address.
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36. The letter nowhere states that it was sent by BounceBack, even though the letter comes directly from BounceBack, not a DA.
c. BounceBack’s collection letters do not reveal that BounceBack is a debt collector.
37. BounceBack sends letters that fail to state anywhere that BounceBack is a debt collector or that any information it obtains will be used for collections purposes, nor does BounceBack disclose in subsequent letters or phone calls with check writers that it is a debt collector.
38. Moreover, because its letters are sent on DA letterhead using the DA’s seal and refer to the DA’s “Check Enforcement Program,” it is unlikely that a recipient would suspect that the letter is being sent bya debt collector.
d. BounceBack fails to include certain required dispute notices in its collection letters.
39. |BounceBack’s collection letters fail to contain several required disclosures.
40. Several of BounceBack’s letters state, “YOU MUST EITHER COMPLY BY MAKING PAYMENT OR NOTIFY THE CHECK ENFORCEMENT PROGRAM IN WRITING THAT YOU WISH TO DISPUTE THIS MATTER NO LATER THAN 30 DAYS AFTER RECEIVING THIS NOTICE,” and “PAYMENT OR DIS[P]UTE MUST BE MADE WITHIN THIRTY (30) DAYS FROM THE DATE OF THIS LETTER.”
41. Butthese same letters do not disclose that unless a recipient disputes the validity of the debt within 30 days, the debt will be assumed valid; that if a recipient disputes the validity of the debt within 30 days, the collector must verify the debt; or that if a recipient makes a request within 30 days, the collector will provide the original
creditor’s name and address.
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VIOLATIONS OF LAW COUNT 1— Violations of the FDCPA Falsely Representing that Nonpayment Would Result in Criminal Prosecution
42. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
43. Section 1692e(4) of the FDCPA prohibits “[t]he representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.” 15 U.S.C § 1692e(4).
44. Section 1692e(5) of the FDCPA prohibits “[t]he threat to take any action that cannot legally be taken or that is not intended to be taken.” 15 U.S.C § 1692e(5).
45. Inconnection with collecting or attempting to collect debt from consumers, BounceBack represented to consumers, directly or indirectly, expressly or by implication, that nonpayment of a debt would result in arrest or imprisonment.
46. In fact, neither BounceBack nor the DAs intended to take such action.
47. These acts and practices violated § 807(4) and (5) of the FDCPA, 15 U.S.C. § 1692e(4) & (5).
COUNT 2— Violations of the FDCPA Distributing Written Communications that Falsely Represented to be Issued by a State Official or Agency 48. The Bureau re-alleges and incorporates by reference paragraphs 1-41. 49. Section 1692e(9) prohibits the “use or distribution of any written
communication which simulates or is falsely represented to be a document authorized,
issued, or approved by any court, official, or agency of the United States or any State, or
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which creates a false impression as to its source, authorization, or approval.” 15 U.S.C. § 1692e(9).
50. Section 1692e(14) further prohibits “[t]he use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization.” 15 U.S.C. § 1692e(14).
51. Inconnection with collecting or attempting to collect debt from consumers, BounceBack represented to consumers, directly or indirectly, expressly or by implication, that written communications distributed to consumers were issued from an official or agency of a State.
52. Infact, the communications were from BounceBack, which used the names of the DAs in connection with collecting or attempting to collect debts from consumers.
53. These acts and practices violated § 807(9) and (14) of the FDCPA, 15 U.S.C. § 1692e(9) & (14).
COUNT 3—Violations of the FDCPA Using False Representations and Deceptive Means to Collect a Debt
54. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
55. Section 1692e(10) of the FDCPA prohibits the “use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 15 U.S.C. §§ 1692e(10).
56. BounceBack falsely represented that the failure to (a) pay the fees listed, including the dishonored-check amount, administrative fees, and fees for the financialeducation course, and (b) complete the financial-education course, would lead to criminal prosecution, when in fact it would not for the vast majority of debtors.
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57. Moreover, BounceBack designed its collection letters to appear to come directly from the DA when in fact they did not.
58. These acts and practices violated § 807(10) of the FDCPA, 15 U.S.C. § 1692e(10).
COUNT 4— Violations of the FDCPA Failing to Reveal that BounceBack was a Debt Collector
59. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
60. Section 1692e(11) of the FDCPA prohibits the “[t]he failure to disclose in the initial written communication with the consumer... that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector.” 15 U.S.C. § 1692e(11).
61. | BounceBack’s initial communications to consumers did not include that required disclosure.
62. These acts and practices violated § 807(11) of the FDCPA, 15 U.S.C. § 1692e(11).
COUNT 5— Violations of the FDCPA Failure to Include Required Dispute Notices
63. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
64. Section 1692g(a) of the FDCPA provides that “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice
containing” several specific disclosures.
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65. Among these are the amount of the debt, the name of the creditor owed, and specific statements about how a consumer can dispute a debt and the effect of doing so. 15 U.S.C. § 1692g(a)(1)-(5).
66. BounceBack’s collection letters failed to make the specific disclosures required by § 1692g(a)(3), (4) & (5).
67. These acts and practices violated § 809(a) of the FDCPA, 15 U.S.C.
§ 16928 (a).
COUNT 6—Violations of the CFPA Deceptive Representations that Failure to Pay the Alleged Debt and Program Fees Would Result in Prosecution
68. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
69. BounceBack’s collection letters contained threats that not paying the alleged debt and required pretrial-diversion program fees would result in prosecution when, in fact, it would not.
70. These representations were false because, in most cases, the DAs did not intend to prosecute individuals who received collection letters threatening further action or prosecution. And almost none of the check writers who failed to respond to BounceBack’s collection letters were ever referred to a DA for “review for prosecution.”
71. | BounceBack’s misrepresentations were likely to mislead consumers acting reasonably under the circumstances.
72. | BounceBack’s misrepresentations were material because they were likely to affect the conduct or decisions of consumers regarding whether to pay the alleged debt and any other program fees.
73. Therefore, BounceBack engaged in deceptive acts or practices that violated the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
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COUNT 7— Violations of the CFPA Deceptive Representations that Failure to Complete the Financial-Education Course Would Result in Prosecution
74. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
75. BounceBack’s collection letters stated that failure to complete the financial-education course would result in criminal prosecution.
76. In fact, these representations were false because very few check writers returned proof that they completed the financial-education course, but no check writers were ever referred for criminal prosecution for that reason.
77. BounceBack’s misrepresentations were likely to mislead consumers acting reasonably under the circumstances.
78. | BounceBack’s misrepresentations were material because they were likely to affect the conduct or decisions of consumers regarding whether to pay the program fees for the financial-education course.
79. Therefore, BounceBack engaged in deceptive acts or practices that violated the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
COUNT 8— Violations of the CFPA Deceptive Representations that Notices Were froma DA
80. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
81. | BounceBack’s collection letters gave the impression that they came directly from a DA when, in fact, they did not.
82. BounceBack’s misrepresentations were likely to mislead consumers acting
reasonably under the circumstances.
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83. | BounceBack’s misrepresentations were material because they were likely to affect the conduct or decisions of consumers regarding whether to pay the alleged debt and program fees.
84. Therefore, BounceBack engaged in deceptive acts or practices that violated the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
COUNT 9— Violations of the CFPA
85. The Bureau re-alleges and incorporates by reference paragraphs 1-41.
86. Acovered person’s violation of a federal consumer-financial law violates the CFPA. 12 U.S.C. §8 5536(a)(4)(A), 5481(14).
87. The FDCPA isa federal consumer-financial law. 12 U.S.C. § 5481(12) & (14).
88. BounceBack’s FDCPA violations are each a violation of 12 U.S.C.
§ 5536(a)(1)(A).
DEMAND FOR RELIEF
The Bureau requests that the Court, as permitted by 12 U.S.C. § 5565:
a. enjoin BounceBack from committing future violations of the FDCPA; b. enjoin BounceBack from committing future violations of the CFPA; c. award damages or other monetary relief against BounceBack;
d. order BounceBack to pay redress to consumers;
e. order disgorgement of BounceBack’s ill-gotten gains;
f. impose civil money penalties on BounceBack;
g. order BounceBack to pay the costs incurred in connection with
prosecuting this action; and
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award additional relief as the Court may determine to be just and proper.
Respectfully submitted,
THOMAS G. WARD Enforcement Director JEFFREY PAUL EHRLICH Deputy Enforcement Director OWEN MARTIKAN Assistant Litigation Deputy
s/ Stephanie Duff-O’Bryan
STEPHANIE DUFF-O’BRYAN
(TX No. 24087448; NY No. 5026224) Enforcement Attorney
Telephone: 202-435-9358
e-mail: Stephanie.Duff-OBryan @cfpb.gov JAMES MEADE
(DC No. 414732)
Senior Litigation Counsel
Telephone: 202-431-1179
e-mail: James.Meade @cfpb.gov
Bureau of Consumer Financial Protection 1700 G Street, NW
Washington, D.C. 20552
Designated Attorney for Receipt of Service:
JEFFREY P. RAY
(Missouri No. 35632)
Deputy United States Attorney e-mail: [email protected]
Charles Evans Whittaker Courthouse 400 East Ninth Street, Fifth Floor Kansas City, MO 64106
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Amended complaint ()
PDF of this document (16 pages)
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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MISSOURI
Bureau of Consumer Financial Protection,
Plaintiff,
v.
BounceBack, Inc. and Gale Krieg,
Defendants.
CASE NO. 5-20-CV-06179-BP
AMENDED COMPLAINT
The Bureau of Consumer Financial Protection brings this action against BounceBack, Inc. and Gale Krieg and alleges as follows.1 INTRODUCTION 1.
The Bureau brings this action under §§ 807 and 809 of the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. §§ 1692e & 1692g, and §§ 1031(a), 1036(a), 1054, and 1055 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a), & 5565, to address false, deceptive, and misleading practices in connection with the collection of debt.
JURISDICTION AND VENUE 2.
This Court has subject-matter jurisdiction because this action is “brought under Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal
1 All parties have consented in writing to the filing of this Amended Complaint pursuant to Federal Rule of Civil Procedure 15(a)(2). Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 1 of 16
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question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
3.
Venue is proper in this district because Defendants are located, reside, and do business in this district. 12 U.S.C. § 5564(f). PARTIES 4.
The Bureau is an agency of the United States charged with regulating the offering and provision of consumer-financial products and services under “Federal consumer financial laws,” 12 U.S.C. § 5491(a), including the CFPA, 12 U.S.C. § 5481(14). The Bureau has independent litigating authority, including the authority to enforce the CFPA. 12 U.S.C. § 5564(a), (b).
5.
Because BounceBack is a corporation, it is a “person” under the CFPA. 12 U.S.C. § 5481(19).
6.
At all times relevant to this Complaint, BounceBack has been a “covered person” under the CFPA because it “engages in offering or providing a consumer financial product or service.” 12 U.S.C. § 5481(6)(A). 7.
Krieg is the majority owner, president, and a managing member of BounceBack and has materially participated in the conduct of its affairs. Krieg is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i)-(ii). Because he is a “related person,” he is also a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B).
FACTS Overview
8.
Gale Krieg formed BounceBack, Inc., in 1992. BounceBack is a privately owned company based in Kansas City, Missouri. It operates bad-check pretrial-diversion Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 2 of 16
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programs on behalf of more than 90 district attorneys (DAs) throughout the United States. BounceBack’s pretrial-diversion program generally operates as follows. 9.
Merchants submit dishonored checks to BounceBack through its affiliate, Check Connection, Inc.
10.
After a merchant reports a dishonored check to Check Connection, Check Connection adds it to a list of dishonored checks by jurisdiction and sends it to the pertinent DA for review.
11.
In nearly all cases, without receiving further direction from the DA, BounceBack then attempts to enroll the check writers in its pre-trial diversion program, which requires a check writer to pay the debt and also enroll in, pay for, and complete a financial-education course.
12.
On rare occasions, merchants send the names of check writers directly to the local DA, who then forwards to BounceBack the names of specific check writers who it wants enrolled in the pretrial-diversion program. In most cases, however, Check Connection generates a list of check writers that it sends to BounceBack, which enrolls those check writers in its collections program without ever receiving direction from the DA to do so.
13.
BounceBack then sends two to four letters, on DA letterhead, to the check writers in an effort to collect the outstanding debts and enroll them in the financialeducation course.
14.
The letters tell check writers that they could face criminal prosecution and conviction, but that they can avoid prosecution by paying the amount of the dishonored check, along with certain administrative fees, and completing a financial-education course. The recipient is instructed to pay the total fees owed to the “Check Enforcement Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 3 of 16
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Program” (in reality BounceBack), including a fee for the financial-education course that ranges from $100 to $165. If the check writer pays these amounts, then BounceBack sends the amount of the dishonored check to the merchant, pays small fees to the merchant and the DA, and keeps the balance.
15.
BounceBack does not identify itself to check writers and does not inform them that it is a debt collector.
16.
Although BounceBack’s letters appear to come directly from the DA and suggest that check writers will face criminal charges if they do not comply, DAs almost never prosecute such cases.
17.
Moreover, nearly all jurisdictions have given BounceBack one set of criteria for sending warning letters to check writers and enrolling them in a financialeducation course, and a separate, more stringent set of criteria for referring a case back to the DA for potential prosecution when a check writer fails to respond to a letter. Given these distinct criteria, not all check writers who receive BounceBack’s warning letters are even eligible for prosecution under the DAs’ prosecution criteria. 18.
In most cases, BounceBack does not refer cases for prosecution, even if the check writer fails to respond to the letter, does not pay the alleged outstanding debt and fees, or fails to complete the financial-education course. 19.
BounceBack has sent collection letters to more than 19,000 consumers since January 1, 2015.
20.
Krieg exercises control over BounceBack, including the marketing, advertising, and sales, and was responsible for developing the company’s policies and procedures, including its collection policies and procedures.
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BounceBack is a Debt Collector Under the FDCPA 21.
BounceBack is a debt collector under the FDCPA.
22.
Under 15 U.S.C. § 1692a(6), a debt collector is “any person who uses any instrument or instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect directly or indirectly, debts owed or due or asserted to be owed or due another.”
23.
The FDCPA provides that an entity operating a bad-check diversion program through a contract with a DA may not be considered a debt collector if the entity complies with certain statutory requirements. BounceBack did not comply with those requirements.
24.
In most cases, BounceBack contacts check writers and attempts to collect on dishonored checks and enroll the check writers in its pre-trial diversion program without the DA having made a determination that “probable cause of a bad check violation under State penal law exists, and that contact with the alleged offender for purposes of participation in the program is appropriate,” as required by 15 U.S.C. § 1692p(a)(2)(C)(iv)(I).
25.
In addition, BounceBack’s letters do not contain a clear and conspicuous statement that if the alleged offender notifies the private entity or the DA in writing, not later than 30 days after being contacted for the first time, under 15 U.S.C. § 1692p(a)(2)(C)(iv), that there is a dispute under 15 U.S.C. § 1692p(a), then further restitution efforts will not be pursued until the DA or an employee of the DA authorized to make such a determination makes a determination that there is probable cause to Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 5 of 16
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believe that a crime has been committed, as required by 15 U.S.C. § 1692p(a)(2)(C)(v)(III).
False, Deceptive, or Misleading Representations in Connection with Collecting a Debt
a.
BounceBack falsely represents that nonpayment will result in criminal prosecution.
26.
If a DA expresses interest in using BounceBack’s services, BounceBack sends it an initial packet explaining its pretrial-diversion program. The packet contains templates of the collection letters that BounceBack will send to check writers, which the DA can change according to its preferences. Most DAs make few, if any, changes to the template.
27.
BounceBack’s collection letters state in several ways that a check writer who does not pay the outstanding check amount and fees for the pretrial-diversion program may face “criminal charges” or “criminal prosecution”: a.
“WARNING OF CRIMINAL CHARGES”;
b.
“the total amount must be received . . . to avoid possible criminal charges being filed”;
c.
“pay the total listed below to avoid the possibility of criminal prosecution”;
d.
“It is still possible to avoid a CRIMINAL CONVICTION”; e.
“WARNING . . . You have 48 hours to contact the Check Enforcement Program, before your case is forwarded to final review . . . If the check(s) is not taken care of, a criminal complaint and a WARRANT may be issued commanding you to appear in court and CRIMINAL PROCEEDINGS may result”;
f.
“Failure to make payment in full within THIRTY (30) DAYS from the date of this notice may be used as evidence in a possible criminal prosecution”;
g.
“If payment can be arranged and compliance with the conditions of the Check Enforcement Program are met, you may yet be able to Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 6 of 16
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prevent the possibility of a WARRANT FOR YOUR ARREST being issued”;
h.
“TO COMPLY: 1) Pay the full dollar amount shown within thirty days. 2) Complete the Check Writer’s Financial Training Course”; i.
“ALL check writers whose checks have been referred to the Check Enforcement Program MUST complete the Educational Requirement to discharge the case as part of this diversion program”; and j.
“FAILURE TO COMPLETE THE EDUCATIONAL REQUIREMENT CAN CAUSE YOUR CASE DIVERSION TO BE REVOKED.” 28.
The threats in BounceBack’s collection letters are in almost all instances false.
29.
Each DA gives BounceBack criteria for sending out its collection letters, and different, often more stringent, criteria for determining which cases will be referred back to the DA for a review for prosecution. 30.
BounceBack sends collection letters to check writers who do not meet the DAs’ criteria for referral for prosecution. 31.
For example, at least 29 of the more than 90 jurisdictions with which BounceBack has contracted will not prosecute check writers if the dishonored check is below a certain amount, but BounceBack nevertheless threatens those check writers with prosecution.
32.
Moreover, even if a check writer qualifies for prosecution, BounceBack rarely refers cases for potential prosecution. 33.
Most DAs refuse to prosecute dishonored-check cases even if check writers fail to respond to BounceBack’s letters.
34.
Finally, almost none of the check writers who enroll in the financialeducation course return the confirmation that they have completed the course, and Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 7 of 16
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many never complete the course. Contrary to the threats in BounceBack’s letters, BounceBack never refers those check writers to the DA for possible prosecution. b.
BounceBack creates the false impression that the collection letters it sends are coming directly from a DA.
35.
BounceBack’s letters are sent on DA letterhead and appear to be statements from the DA.
36.
For instance, a typical letter bears the DA’s name and seal at the top. The letter also tells the check payer to send payment to the “[DA’s] Check Enforcement Program,” followed by an address that is actually BounceBack’s address. 37.
The letter nowhere states that it was sent by BounceBack, even though the letter comes directly from BounceBack, not a DA. c.
BounceBack’s collection letters do not reveal that BounceBack is a debt collector.
38.
BounceBack sends letters that fail to state anywhere that BounceBack is a debt collector or that any information it obtains will be used for collections purposes, nor does BounceBack disclose in subsequent letters or phone calls with check writers that it is a debt collector.
39.
Moreover, because its letters are sent on DA letterhead using the DA’s seal and refer to the DA’s “Check Enforcement Program,” it is unlikely that a recipient would suspect that the letter is being sent by a debt collector. d.
BounceBack fails to include certain required dispute notices in its collection letters.
40.
BounceBack’s collection letters fail to contain several required disclosures. 41.
Several of BounceBack’s letters state, “YOU MUST EITHER COMPLY BY MAKING PAYMENT OR NOTIFY THE CHECK ENFORCEMENT PROGRAM IN Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 8 of 16
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WRITING THAT YOU WISH TO DISPUTE THIS MATTER NO LATER THAN 30 DAYS AFTER RECEIVING THIS NOTICE,” and “PAYMENT OR DIS[P]UTE MUST BE MADE WITHIN THIRTY (30) DAYS FROM THE DATE OF THIS LETTER.” 42.
But these same letters do not disclose that unless a recipient disputes the validity of the debt within 30 days, the debt will be assumed valid; that if a recipient disputes the validity of the debt within 30 days, the collector must verify the debt; or that if a recipient makes a request within 30 days, the collector will provide the original creditor’s name and address.
VIOLATIONS OF LAW COUNT 1—Violations of the FDCPA Against BounceBack Falsely Representing that Nonpayment Would Result in Criminal Prosecution
43.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 44.
Section 1692e(4) of the FDCPA prohibits “[t]he representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.” 15 U.S.C § 1692e(4).
45.
Section 1692e(5) of the FDCPA prohibits “[t]he threat to take any action that cannot legally be taken or that is not intended to be taken.” 15 U.S.C § 1692e(5). 46.
In connection with collecting or attempting to collect debt from consumers, BounceBack represented to consumers, directly or indirectly, expressly or by implication, that nonpayment of a debt would result in arrest or imprisonment.
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47.
In fact, neither BounceBack nor the DAs intended to take such action. 48.
BounceBack’s acts and practices violated § 807(4) and (5) of the FDCPA, 15 U.S.C. § 1692e(4) & (5).
COUNT 2— Violations of the FDCPA Against BounceBack Distributing Written Communications that Falsely Represented to be Issued by a State Official or Agency
49.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 50.
Section 1692e(9) prohibits the “use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.” 15 U.S.C. § 1692e(9).
51.
Section 1692e(14) further prohibits “[t]he use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization.” 15 U.S.C. § 1692e(14). 52.
In connection with collecting or attempting to collect debt from consumers, BounceBack represented to consumers, directly or indirectly, expressly or by implication, that written communications distributed to consumers were issued from an official or agency of a State.
53.
In fact, the communications were from BounceBack, which used the names of the DAs in connection with collecting or attempting to collect debts from consumers.
54.
BounceBack’s acts and practices violated § 807(9) and (14) of the FDCPA, 15 U.S.C. § 1692e(9) & (14).
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COUNT 3—Violations of the FDCPA Against BounceBack Using False Representations and Deceptive Means to Collect a Debt
55.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 56.
Section 1692e(10) of the FDCPA prohibits the “use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 15 U.S.C. §§ 1692e(10). 57.
BounceBack falsely represented that the failure to (a) pay the fees listed, including the dishonored-check amount, administrative fees, and fees for the financialeducation course and (b) complete the financial-education course, would lead to criminal prosecution, when in fact it would not for the vast majority of debtors. 58.
Moreover, BounceBack designed its collection letters to appear to come directly from the DA when in fact they did not. 59.
BounceBack’s acts and practices violated § 807(10) of the FDCPA, 15 U.S.C. § 1692e(10).
COUNT 4—Violations of the FDCPA Against BounceBack Failing to Reveal that BounceBack was a Debt Collector
60.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 61.
Section 1692e(11) of the FDCPA prohibits the “[t]he failure to disclose in the initial written communication with the consumer . . . that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector.” 15 U.S.C. § 1692e(11). 62.
BounceBack’s initial communications to consumers did not include that required disclosure.
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63.
BounceBack’s acts and practices violated § 807(11) of the FDCPA, 15 U.S.C. § 1692e(11).
COUNT 5—Violations of the FDCPA Against BounceBack Failure to Include Required Dispute Notices
64.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 65.
Section 1692g(a) of the FDCPA provides that “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing” several specific disclosures.
66.
Among the specific disclosures required by the FDCPA are the amount of the debt, the name of the creditor owed, and specific statements about how a consumer can dispute a debt and the effect of doing so. 15 U.S.C. § 1692g(a)(1)-(5). 67.
BounceBack’s collection letters failed to make the specific disclosures required by § 1692g(a)(3), (4) & (5).
68.
BounceBack’s acts and practices violated § 809(a) of the FDCPA, 15 U.S.C. § 1692g(a).
COUNT 6—Violations of the CFPA Against All Defendants Deceptive Representations that Failure to Pay the Alleged Debt and Program Fees Would Result in Prosecution
69.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 70.
BounceBack’s collection letters contained threats that not paying the alleged debt and required pretrial-diversion program fees would result in prosecution when, in fact, it would not.
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71.
These representations were false because, in most cases, the DAs did not intend to prosecute individuals who received collection letters threatening further action or prosecution. And almost none of the check writers who failed to respond to BounceBack’s collection letters were ever referred to a DA for “review for prosecution.” 72.
BounceBack’s misrepresentations were likely to mislead consumers acting reasonably under the circumstances.
73.
BounceBack’s misrepresentations were material because they were likely to affect the conduct or decisions of consumers regarding whether to pay the alleged debt and any other program fees.
74.
Krieg knew or should have known that BounceBack’s collection letters contained threats that not paying the alleged debt and required pretrial-diversion program fees would result in prosecution when, in fact, it would not, and he took no steps to stop or prevent the company from sending these letters to consumers, even though he had authority to do so. In addition, Krieg engaged in this practice by, for example, developing and overseeing BounceBack’s unlawful collection policies and activities.
75.
Therefore, Defendants engaged in deceptive acts or practices that violated the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). COUNT 7—Violations of the CFPA Against All Defendants Deceptive Representations that Failure to Complete the Financial-Education Course Would Result in Prosecution
76.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 77.
BounceBack ’s collection letters stated that failure to complete the financial-education course would result in criminal prosecution. Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 13 of 16
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78.
In fact, these representations were false because very few check writers returned proof that they completed the financial-education course, but no check writers were ever referred for criminal prosecution for that reason. 79.
BounceBack’s misrepresentations were likely to mislead consumers acting reasonably under the circumstances.
80.
BounceBack’s misrepresentations were material because they were likely to affect the conduct or decisions of consumers regarding whether to pay the program fees for the financial-education course.
81.
Krieg knew or should have known that BounceBack’s collection letters stated that failure to complete the financial-education course would result in criminal prosecution when, in fact, it would not, and he took no steps to stop or prevent the company from sending these letters to consumers, even though he had authority to do so. In addition, Krieg engaged in this practice by, for example, developing and overseeing BounceBack’s unlawful collection policies and activities. 82.
Therefore, Defendants engaged in deceptive acts or practices that violated the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). COUNT 8—Violations of the CFPA Against All Defendants Deceptive Representations that Notices Were From a DA
83.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 84.
BounceBack’s collection letters gave the impression that they came directly from a DA when, in fact, they did not.
85.
BounceBack’s misrepresentations were likely to mislead consumers acting reasonably under the circumstances.
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86.
BounceBack’s misrepresentations were material because they were likely to affect the conduct or decisions of consumers regarding whether to pay the alleged debt and program fees.
87.
Krieg knew or should have known that BounceBack’s collection letters gave the impression that they came directly from a DA when, in fact, they did not, and he took no steps to stop or prevent the company from sending these letters to consumers, even though he had authority to do so. In addition, Krieg engaged in this practice by, for example, developing and overseeing BounceBack’s unlawful collection policies and activities.
88.
Therefore, Defendants engaged in deceptive acts or practices that violated the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). COUNT 9—Violations of the CFPA Against BounceBack
89.
The Bureau re-alleges and incorporates by reference paragraphs 1-42. 90.
A covered person’s violation of a federal consumer-financial law violates the CFPA. 12 U.S.C. §§ 5536(a)(1)(A), 5481(14). 91.
The FDCPA is a federal consumer-financial law. 12 U.S.C. § 5481(12) & (14).
92.
BounceBack’s FDCPA violations are each a violation of 12 U.S.C. § 5536(a)(1)(A).
DEMAND FOR RELIEF
The Bureau requests that the Court, as permitted by 12 U.S.C. § 5565: a.
enjoin Defendant BounceBack from committing future violations of the FDCPA;
b.
enjoin Defendants from committing future violations of the CFPA; Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 15 of 16
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c.
award damages or other monetary relief against Defendants; d.
order Defendants to pay redress to consumers; e.
order disgorgement of Defendants’ ill-gotten gains; f.
impose civil money penalties on Defendants; g.
order Defendants to pay the costs incurred in connection with prosecuting this action; and h.
award additional relief as the Court may determine to be just and proper.
Respectfully submitted,
CARA M. PETERSEN
Acting Enforcement Director
JEFFREY PAUL EHRLICH
Deputy Enforcement Director
OWEN MARTIKAN
Assistant Litigation Deputy
s/ Stephanie Duff-O’Bryan STEPHANIE DUFF-O’BRYAN (TX No. 24087448; NY No. 5026224) Enforcement Attorney Telephone: 202-435-9358 e-mail: [email protected]
Bureau of Consumer Financial Protection 1700 G Street, NW Washington, D.C. 20552
Designated Attorney for Receipt of Service:
JEFFREY P. RAY (Missouri No. 35632) Deputy United States Attorney e-mail: [email protected] Charles Evans Whittaker Courthouse 400 East Ninth Street, Fifth Floor Kansas City, MO 64106 Case 5:20-cv-06179-BP Document 17 Filed 08/27/21 Page 16 of 16
Stipulation ()
PDF of this document (21 pages)
Page 33
IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI ST. JOSEPH DIVISION
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v. No. 20-06179-CV-SJ-BP
BOUNCEBACK, INC.,
—S OS SS
Defendant.
ORDER GRANTING JOINT MOTION FOR ENTRY OF FINAL JUDGMENT
The Bureau of Consumer Financial Protection (Bureau) commenced this civil action on December 9, 2020, to obtain injunctive and monetary relief and civil penalties from BounceBack, Inc. The Amended Complaint (Complaint) alleges that BounceBack, Inc. violated §§ 807 and 809 of the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. §§ 1692e and 1692g, and §§ 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a) and 5536(a), in connection with the collection of consumer debt, including its bad-check debt-collection practices, and that Gale Krieg violated §§ 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B), in connection with the same.
The Bureau and Defendants BounceBack and Gale Krieg agree to entry of this Stipulated Final Judgment and Order (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. Their Joint
Motion for Entry of Judgment, (Doc. 18), is GRANTED and judgment is entered as follows:
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FINDINGS
1. This Court has jurisdiction over the parties and the subject matter of this action.
2. Defendants neither admit nor deny the allegations in the Complaint, except as specified in this Order. For purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.
3. Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claims they 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.
4. Entry of this Order is in the public interest. DEFINITIONS 5. The following definitions apply to this Order: a. “Affected Consumers” includes any consumer who paid financial
accountability or education course fees, directly or indirectly, to Defendants during the Relevant Period in relation to a Bad Check Violation.
b. “Assisting Others” includes, but is not limited to:
i. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including, but not limited to, any telephone sales script, direct mail solicitation, or the text of any Internet website, email, or other electronic communication;
ii. providing names of, or contributing to the generation of, potential
customers;
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ill. participating in or providing services related to the offering, sale, or servicing of a product, or the collection of payments for a product; iv. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity;
v. investing or loaning money;
vi. providing customer service support functions, including handling consumer complaints and refund requests; and vii. renting or otherwise providing office space. “Bad Check Violation” means a violation of the applicable State criminal law relating to the writing of dishonored Checks; “Check” means a draft, payable in United States dollars, on demand and drawn on or payable through or at an office of a depository institution, whether or not negotiable, that is handled for forward collection or return, including a substitute check and a traveler’s check, but not including a noncash item;
“Collection” means any procedure or action pursued by Defendants to obtain payments related to a Debt;
“Consumer Financial Product or Service” is synonymous in meaning and equal in scope to the definition of the term, as of the Effective Date, in § 1002(5) of the CFPA, 12 U.S.C. § 5481(5), and, subject to applicable restrictions contained in the CFPA, includes, but is not limited to: i. extending credit and servicing loans, including acquiring, purchasing,
selling, brokering, or other extensions of credit (other than solely
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extending commercial credit to a person who originates consumer credit transactions);
il. engaging in deposit-taking activities, transmitting or exchanging funds, or otherwise acting as a custodian of funds or any financial instrument for use by or on behalf of a consumer;
ili. providing check cashing, check collection, or check guaranty services;
iv. providing financial advisory services to consumers on individual financial matters or relating to proprietary financial products or services, including providing credit counseling to any consumer or providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure;
v. collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers, used or expected to be used in connection with any decision regarding the offering or provision of a Consumer Financial Product or Service; or
vi. collecting debt related to any Consumer Financial Product or Service.
g. “District Attorney” or “DA” means a State or district attorney—the chief elected or appointed prosecuting attorney in a district, county (as defined in § 2 title 1, United States Code), municipality, or comparable jurisdiction, including State attorneys general who act as chief elected or
appointed prosecuting attorneys in a district, county (as so defined),
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municipality or comparable jurisdiction, who may be referred to by a variety of titles such as district attorneys, prosecuting attorneys, commonwealth’s attorneys, solicitors, county attorneys, and _ state’s attorneys, and who are responsible for the prosecution of State crimes and violations of jurisdiction-specific local ordinances;
h. “Debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction.
1. “Defendants” mean BounceBack, Inc. (BounceBack), its successors and assigns, and Gale Krieg and by any other name by which he might be
known, individually, collectively, or in any combination.
j. “Effective Date” means the date on which the Order is entered on the docket.
k. “Enforcement Director” means the Assistant Director of the Office of
Enforcement for the Consumer Financial Protection Bureau, or his or her delegate;
l. “Pre-Trial Bad Check Diversion Program” means any pre-charge pretrial diversion program operated by Defendants on behalf of a District Attorney for consumers who have allegedly committed a Bad Check Violation;
m. “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 Defendants based on substantially the same facts
as described in the Complaint.
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n. “Relevant Period” includes the period from January 1, 2015, to the Effective Date.
CONDUCT PROVISIONS
Pursuant to the parties’ agreement, the Court ORDERS as follows:
I. Permanent Ban on Debt Collection Activity
6. Defendants, whether acting directly or indirectly, are permanently banned from: a. the collection of Debt related to any Consumer Financial Product or Service; b. the collection of Debt arising from or related to dishonored Checks and the collection of any fees associated with a Pre-Trial Bad Check Diversion Program.
Provided, however, that Defendants may offer payment plans that allow installment payments towards fees owed for pre-trial diversion programs not prohibited by this Order.
II. Compliance with all Applicable Laws
7. Defendants and their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, may not:
a. violate the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.,
(FDCPA);
b. violate the Consumer Financial Protection Act, 12 U.S.C. § 5481 et seq., (CFPA); and
c. in connection with the advertising, marketing, promotion, offering for
sale, or performance of any Consumer Financial Product or Service
misrepresent or Assist Others in misrepresenting, expressly or impliedly,
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any fact material to consumers, such as: the total costs; any material restrictions, limitations, or conditions; or any material aspect of its performance, efficacy, nature, or central characteristics.
III. Customer Information
8. Defendant Gale Krieg and Defendant BounceBack, and its officers, agents, servants, employees, and attorneys, and all other Persons in active concert or participation with any of them who receive actual notice of this Order, whether acting directly or indirectly, may not:
a. disclose, use, or benefit from customer information, including names, addresses, telephone numbers, email addresses, social security numbers, other identifying information, or any data that enables access to a customer’s account (including a credit card, bank account, or other financial account), that Defendants obtained before the Effective Date in connection with a Pre-Trial Bad Check Diversion Program;
b. attempt to collect, sell, assign, or otherwise transfer any right to collect payment from any consumer who purchased or agreed to purchase services or products in connection with a Pre-Trial Bad Check Diversion Program from Defendants.
However, customer information may be disclosed if requested by a government agency or required by law, regulation, or court order.
IV. Order to Pay Redress
9. A judgment for monetary relief and damages is entered in favor of the Bureau and
against Defendants, jointly and severally, for the full amount consumers paid to Defendants for
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(1) Defendants’ financial-accountability course, (ii) program fees, minus those fees disbursed to merchants or DAs, and (111) payment plans entered into with Defendants sfor program costs, which is no less than one million four hundred eighty-one thousand seven hundred seventy-three dollars ($1,481,773); however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 12 of this Section and Sections VI (Order to Pay Civil Money Penalty) and VII (Additional Monetary Provisions) and subject to Section V (Effect of Misrepresentation or Omission Regarding Financial Condition) of this Order.
10. With regard to any redress that Defendants pay under this Section, if Defendants receive, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendants secure a tax deduction or tax credit with regard to any federal, state, or local tax, Defendants must: (a) immediately notify the Enforcement Director in writing, and (b) within ten (10) days of receiving the funds or monetary benefit, Defendants must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraph 9 will be reduced by the amount of the Additional Payment and the Additional Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 9.
11. Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or to the Bureau’s agent according to applicable statutes and regulations to be used for redress for injured consumers, including, but not limited to, refund of moneys, restitution, damages, or other monetary relief, and for any
attendant expenses for the administration of any such redress.
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12. Within 60 days of this Order, Defendants must submit to the Bureau a report
(Accounting Report) that states, for each person from whom Defendant BounceBack, since 2014,
has received any money or fees on behalf of a DA, or pursuant to any contract between
BounceBack and a DA, in connection with a Pre-Trial Bad Check Diversion Program:
a. the identity and contact information of the check writer, including name, address, phone number, and email address;
b. the date(s) BounceBack sent an offer of enrollment or offer for participation in any Pre-Trial Bad Check Diversion Program to the check writer;
c. the amount of the alleged dishonored check;
d. the amount collected by BounceBack for the alleged dishonored check amount;
e. the amount collected by BounceBack for enrollment in a financialaccountability course;
f. the amount collected by BounceBack for a merchant fee;
g. the amount collected by BounceBack for a DA program fee;
h. the fees collected by BounceBack for any payment plan entered into;
i. any fees collected by BounceBack that are not included in (d), (e), (f), (g), or (h), including a description of those fees;
j. any monies disbursed to merchants; and
k. any monies disbursed to the DA;
13. If the Bureau determines, in its sole discretion, that redress to consumers is
wholly or partially impracticable or if funds remain after redress is completed, the Bureau shall
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deposit the remaining funds in the U.S. Treasury as disgorgement. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this Paragraph.
14. Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right.
V. Effect of Misrepresentation or Omission Regarding Financial Condition
15. The suspension of the monetary judgment entered in Section IV (Order to Pay Redress) of this Order is expressly premised on the truthfulness, accuracy, and completeness of Defendant BounceBack’s financial statements and supporting documents submitted to the Bureau on or about December 1, 2020, December 16, 2020, and March 3, 2021, which Defendant BounceBack asserts are truthful, accurate, and complete, and which include:
a. Financial Statement of Defendant BounceBack, including the attachments, signed on December 1, 2020 by Gale Krieg and submitted to the Bureau on or about December 1, 2020;
b. Supplemental financial information submitted on December 16, 2020 and March 3, 2021; and
c. Defendant BounceBack’s oral testimony provided on May 15, 2019.
16. —_ If upon motion by the Bureau, the Court determines that Defendants have failed to disclose any material asset or that any of the financial statements or their oral testimony contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the monetary judgment entered in Section IV (Order to Pay Redress) and, without further adjudication, shall reinstate the monetary judgment
entered in Section IV of this Order, and the full judgment in Paragraph 9 of Section IV (Order to
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Pay Redress) and Paragraph 19 of Section VI (Civil Money Penalty) shall be immediately due and payable, less any amounts paid to the Bureau under Sections IV and VI of this Order.
17. If the Court terminates the suspension of the monetary judgment under this Section, the Bureau will be entitled to interest on the judgment, computed from the date of entry of this Order, at the rate prescribed by 28 U.S.C. § 1961, as amended, on any outstanding amounts not paid.
18. Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order.
VI. Order to Pay Civil Money Penalty
19. | Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(3), a judgment for a civil money penalty is entered in favor of the Bureau and against Defendants BounceBack, Inc. and Gale Krieg, jointly and severally, in the amount of $30,000. This nominal penalty is based on Defendants’ limited ability to pay as attested to in the financial statements listed in Section V (Effect of Misrepresentation or Omission Regarding Financial Condition) above.
20. Within 10 days of the Effective Date, Defendants 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.
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21. 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).
22. Defendants 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, Defendants may not:
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, retmbursement 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.
23. Defendant Gale Krieg agrees that the civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, as to Gale Krieg, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).
VII. Additional Monetary Provisions
24. Inthe event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
25. Defendants relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to
Defendants.
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26. The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding by or on behalf of the Bureau based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau, including in a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case.
27. The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under § 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each Defendant, even in such Defendant’s capacity as debtor-in-possession.
28. Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau their taxpayer-identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
29. Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled to, nor may Defendants benefit by, any offset or reduction of any 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 Defendants based on the civil money penalty paid in this
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action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendants 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.
30. Upon written request of a representative of the Bureau, any consumer reporting agency must furnish consumer reports to the Bureau concerning Gale Krieg under § 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 1681 b(a)(1), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
VIII. Reporting Requirements
31. Defendants 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 Order; the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or address. Defendants must provide this notice at least 30 days before the development or as soon as practicable after the learning about the development, whichever is sooner.
32. Within 7 days of the Effective Date, each 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;
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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.
33. Within 7 days of the Effective Date, Defendant Gale Krieg must:
a. identify his telephone numbers and all email, Internet, physical, and postal
addresses, including all residences; and
b. describe in detail his involvement in any business for which he performs
services in any capacity or which he wholly or partially owns, including his title, role, responsibilities, participation, authority, control, and ownership.
34. Defendants must report any change in the information required to be submitted under Paragraphs 32 and 33 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.
35. Within 90 days of the Effective Date and again one year after the Effective Date, each 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; and
b. attaches a copy of each Order Acknowledgment obtained under Section IX (Order Distribution and Acknowledgment), unless previously submitted to
the Bureau.
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IX. Order Distribution and Acknowledgment
36. Within 7 days of the Effective Date, each Defendant must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
37. Within 30 days of the Effective Date, Defendant BounceBack and Defendant Gale Krieg, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of this Order to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order.
38. For 10 years from the Effective Date, Defendant BounceBack and Defendant Gale Krieg, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section VIII (Reporting Requirements), as well as any future 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.
39. Defendants 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 E-Sign Act, 15 U.S.C. §§ 7001-7006, within 30 days of delivery, from all persons receiving a copy of this Order under this Section.
40. Within 90 days of the Effective Date, Defendants must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that date under Paragraphs 37 and 38 and a copy of all signed and dated statements acknowledging receipt of
this Order under Paragraph 39.
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4l.
X. Recordkeeping
Defendant BounceBack and Defendant Gale Krieg, for any business for which he
is the majority owner or which he directly or indirectly controls, must create, for at least 5 years
from the Effective Date, all documents and records necessary to demonstrate full compliance
with each provision of this Order, including all submissions to the Bureau. Defendants must
retain these documents for at least 5 years after creation and make them available to the Bureau
upon the Bureau’s request.
42.
Defendant BounceBack must maintain, for at least 5 years from the Effective
Date for all documents now in use, or 5 years from the date of creation for subsequently created
documents:
copies of all template letters to consumers or DAs, call scripts, training materials, websites, marketing materials, and template communications with consumers or DAs, including any such materials used by a third party on Defendant BounceBack’s behalf;
for each individual Affected Consumer, and for any other consumer who enrolls or participates in any BounceBack product or service, the consumer’s name, address, phone number, and email address, amount paid, including any associated fees, description of the product or service purchased, the date on which the product or service was purchased, and a copy of any promotional or welcome materials provided or any collection letters sent;
for any BounceBack product or service, accounting records showing the
gross and net revenues generated by the product or service; and
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d. all consumer complaints (whether received directly or indirectly, such as through a third party), and any responses to those complaints or requests.
Defendant BounceBack must make these materials available to the Bureau upon the
Bureau’s request.
XI. Notices
43. Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CF'PB v. BounceBack, Inc., Case No. 5:20-cv-06179-BP,” 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
Consumer Financial Protection Bureau
ATTENTION: Office of Enforcement
1700 G Street, N.W.
Washington D.C. 20552
XII. Cooperation with the Bureau
44. Defendants must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendants must provide such information in their or their agents’ possession or control within 14 days of receiving a written request from the Bureau.
45. Defendants must cooperate fully with the Bureau in this matter and in any investigation or litigation related to or associated with the conduct described in the Complaint. Defendants must provide to the Bureau truthful and complete information, evidence, and testimony. Gale Krieg must appear, and Defendant BounceBack must cause its officers,
employees, representatives, or agents to appear, for interviews, discovery, hearings, trials, and
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any other proceedings that the Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process.
XIII. Compliance Monitoring
46. Within 14 days of receipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents.
47. For purposes of this Section, the Bureau may communicate directly with Defendants, unless Defendants retain counsel related to these communications.
48. Defendants must permit Bureau representatives to interview any employee or other person affiliated with Defendants who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated with the conduct described the Complaint; or (c) compliance with this Order. The person interviewed may have counsel present.
49. Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6.
XIV. Continuation of Order
50. Should Defendants seek to transfer or assign all or part of their operations that are subject to this Order, Defendants must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order.
XV. Wind Down of BounceBack Pre-trial Bad Check Diversion Programs
51. As of the Effective Date, in no event shall Defendants retain for their benefit any
funds remitted by individuals responding to a BounceBack-issued letter of eligibility for a Pre-
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Trial Bad Check Diversion Program, and Defendants shall not send any letter of eligibility for a Pre-Trial Bad Check Diversion Program to any individual after the Effective Date.
52. With respect to any individual who has received from BounceBack a letter of eligibility for a Pre-Trial Bad Check Diversion Program on or before the Effective Date, Defendants may finish administering the Pre-Trial Bad Check Diversion Program with respect to those individuals only, according to the specific terms of the Pre-Trial Bad Check Diversion Program then in place with the District Attorney. In completing the Pre-Trial Bad Check Diversion Program for those individuals, BounceBack shall retain no portion of any funds remitted by such individuals intended to compensate BounceBack for administering the program, and all such remittances shall be returned to those individuals with an explanation that the funds returned are no longer required as a condition of participating in the Pre-Trial Bad Check Diversion Program. BounceBack will remit the remaining portion of funds received through administration of the Pre-Trial Bad Check Diversion Program to the District Attorney and the affected merchant, as required by the specific terms of the Pre-Trial Bad Check Diversion Program then in place with the District Attorney.
53. Defendants may, after the Effective Date, continue to communicate as necessary with the District Attorney (or individuals in his or her office) in connection with winding down BounceBack’s administration of any Pre-Trial Bad Check Diversion Program.
XVI. Retention of Jurisdiction
54. The Court will retain jurisdiction of this matter for the purpose of enforcing this
Order.
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XVII. Service
55. This Order may be served upon Defendants by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the Court, or any
representative or agent of the Bureau.
IT IS SO ORDERED.
/s/ Beth Phillips BETH PHILLIPS, CHIEF JUDGE Date: November 1, 2021 UNITED STATES DISTRICT COURT
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