Burlington Financial Group, LLC, Richard Burnham, Katherine Burnham, and Sang Yi

Documents in this case

• Complaint · June 2021 · 35 p.
• Stipulation · June 2021 · 29 p.

Case summary

On June 28, 2021, the Bureau filed a lawsuit in the United States District Court for the Northern District of Georgia, and on the following day, the Bureau filed a proposed stipulated final judgment and order against Burlington Financial Group, LLC, and its principals, Richard Burnham, Katherine Burnham, and Sang Yi, which the court entered the same day. Burlington Financial is a Maryland-based company offering debt-relief and credit-repair services. The Bureau alleged that Burlington Financial and its principals used telemarketing to solicit consumers with false promises that Burlington’s services would eliminate their credit-card debts and improve their credit scores. The Bureau alleged that Burlington and its principals charged advance fees for debt-relief and credit-repair services in violation of the Telemarketing Sales Rule (TSR) and engaged in deceptive acts or practices to market and sell Burlington’s services in violation of the TSR and Consumer Financial Protection Act of 2010. The Bureau also alleged that the principals substantially assisted in the company’s violations of the TSR and CFPA. The Bureau filed its complaint jointly with the Attorney General for the State of Georgia. The order bans Burlington and its principals from telemarking with respect to any consumer-financial product or service and from offering, marketing, selling, or providing any financial-advisory, debt-relief, or credit-repair service. The order also requires Burlington and its principals to pay civil money penalties totaling $150,001, $15,000 of which will be remitted upon Burlington’s payment of a penalty in that amount to Georgia, and it imposes a judgment for redress of $30,457,853, to be suspended upon payment of the civil money penalties.

Complaint (June 2021)

PDF of this document (35 pages)

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA

Consumer Financial Protection Bureau;

and State of Georgia ex rel. Christopher M. Carr, Attorney General of the State of Georgia,

Plaintiffs,

v.

Burlington Financial Group, LLC;

Richard W. Burnham; Sang Yi; and Katherine Ray Burnham,

Defendants.

Case No.

COMPLAINT The Consumer Financial Protection Bureau (Bureau) brings this action against Burlington Financial Group, LLC (Burlington), Richard W. Burnham, Sang Yi, and Katherine Ray Burnham (collectively, Defendants) for (1) deceptive and abusive telemarketing acts or practices that violate the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101–6108, and the Telemarketing Sales Rule (TSR), 16 C.F.R. §§ 310.3, 310.4, and (2) deceptive acts or practices that violate the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536. The State of Georgia, by and through its Attorney General, Christopher M. Carr, brings this action against Defendants under Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 1 of 35

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Georgia’s Fair Business Practices Act (FBPA), O.C.G.A. §§10-1-390 through 10- 1-408. The Bureau and the State of Georgia seek permanent injunctive relief, monetary relief by way of civil penalties, restitution to persons adversely affected by the actions complained of herein, and other relief as the Court deems just and equitable, including the disgorgement of ill-gotten monies. INTRODUCTION 1.

Targeting financially vulnerable consumers, Defendants used telemarketing to solicit consumers with false promises that Burlington’s services would eliminate credit-card debts and improve credit scores. Burlington collected millions of dollars in advance fees, claiming that it provided a “debt validation” program that used the debt-verification process set forth in the Fair Debt Collection Practices Act (FDCPA) to invalidate and eliminate debt and improve consumers’ credit record, history, or rating. Burlington’s so-called debt-validation program constituted financial-advisory services under the CFPA and debt-relief services under the TSR, and Burlington routinely violated both laws. Burlington misled consumers about the results its program would achieve, often leaving its customers with increased debts, impaired credit scores, and, in some instances, exposed to creditor lawsuits and bankruptcy.

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JURISDICTION AND VENUE 2.

This Court has subject-matter jurisdiction over this action because it concerns federal consumer-financial law, 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.

3.

This Court has supplemental jurisdiction over the State of Georgia’s claims for violation of the FBPA under 28 U.S.C. § 1367(a) because those claims are so related to the claims brought under federal law that they form part of the same case or controversy, and because those claims arise out of the same transactions or occurrences as the claims brought under 12 U.S.C. §§ 5531 and 5536.

4.

Venue is proper in this district because Defendants are located, reside, or do business in this district, 12 U.S.C. § 5564(f) and 15 U.S.C. § 6103(e), and a substantial part of the events or omissions giving rise to Plaintiffs’ claims occurred in this district, 28 U.S.C. §1391(b)(1), (b)(2), (b)(3), and (d). PARTIES 5.

The Bureau is an independent agency of the United States. 12 U.S.C. § 5491. The Bureau is charged with enforcing “Federal consumer financial laws.” 12 U.S.C. §§ 5563 and 5564. The Bureau has independent litigating authority, 12 U.S.C. §§ 5564(a)-(b), including the authority to enforce the TSR with respect to Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 3 of 35

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the offering or provision of a consumer-financial product or service under the CFPA, 15 U.S.C. § 6105(d).

6.

The State of Georgia is one of fifty sovereign states of the United States. Christopher M. Carr is the duly elected and qualified Attorney General acting for the State of Georgia and is authorized to enforce the FBPA. The State of Georgia, by and through the Attorney General, Christopher M. Carr, is authorized to initiate federal district court proceedings to implement the provisions of the FBPA and to secure such relief as the court deems just and equitable, including, but not limited to injunctive relief, disgorgement, civil penalties, and restitution. O.C.G.A. §§ 10-1-390—10-1-408.

7.

Defendant Burlington is a limited-liability company that was incorporated in Maryland in 2015 and began operating in 2016. Its principal place of business is, or was, located in Towson, Maryland. Through telemarketing and telephone sales, Burlington offered and purported to provide debt-relief and creditrepair services to consumers throughout the United States, including consumers in the State of Georgia.

8.

Burlington is a “covered person” under the CFPA because it offered or provided consumer-financial products or services, specifically “financial advisory services,” including debt-management, debt-settlement, debt-relief, and Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 4 of 35

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credit-repair services, for use by consumers primarily for personal, family, or household purposes. 12 U.S.C. § 5481(5)(A), (6)(A), (15)(A)(viii). 9.

Burlington engaged “consumer transactions” in “trade” or “commerce” in Georgia, and it is therefore subject to the FBPA. O.C.G.A. §§ 10-1- 392(a)(10) and (a)(28) and 10-1-393(a).

10.

Burlington is a “telemarketer” under the TSR, as well as the O.C.G.A. § 10-1-393.5, because, in connection with telemarketing, it initiated and received telephone calls from customers, and Burlington is a “seller” under the TSR because, in connection with a telemarketing transaction, it provided or offered to provide services to its customers in exchange for consideration. 16 C.F.R. § 310.2(dd), (ff). Burlington engaged in “telemarketing” because it made outbound telephone calls to consumers and received inbound telephone calls from consumers—calls that consumers made in response to advertising placed by or on behalf of Burlington—to induce those consumers to purchase its debt-relief and credit-repair services, and at least one of those was an interstate phone call. 16 C.F.R. § 310.2(gg). Burlington provided “debt relief services” under the TSR because it represented that it would alter, renegotiate, settle, or reduce the terms of payment for consumers’ credit-card debts. 16 C.F.R. § 310.2(o). 11.

Defendant Richard Burnham is a resident of Maryland and, at all times relevant to this Complaint, he formulated, directed, controlled, had the Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 5 of 35

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authority to control, or participated in the acts and practices set forth in this Complaint because he was an employee, consultant, officer, or de facto officer of Burlington. Mr. Burnham is a “related person” and a “covered person” under the CFPA. Mr. Burnham is a “related person” because he had managerial responsibility for Burlington, worked as a consultant for Burlington, and materially participated in the conduct and affairs of Burlington. 12 U.S.C. § 5481(25)(C)(i)- (ii). As a “related person,” Mr. Burnham is deemed a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B). In addition, Mr. Burnham knowingly or recklessly provided substantial assistance to Burlington, a covered person, in connection with its violations of the CFPA. 12 U.S.C. § 5536(a)(3). Among other things, Mr. Burnham developed Burlington’s business model, consulted on its marketing and sales practices, and participated in its operation. 12.

Mr. Burnham is a “seller” under the TSR because he arranged for Burlington to provide its services through telemarketing. 16 C.F.R. § 310.2(dd). He also provided substantial assistance or support to Burlington because he knew or consciously avoided knowing that it was engaged in acts or practices that violated §§ 310.3(a) and 310.4 of the TSR. 16 C.F.R. § 310.3(b). 13.

Defendant Sang Yi is a resident of Maryland and, at all times relevant to this Complaint, he formulated, directed, controlled, had the authority to control, or participated in the acts and practices set forth in this Complaint because he was Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 6 of 35

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an owner, officer, or employee of Burlington. Mr. Yi is a “related person” and a “covered person” under the CFPA. Mr. Yi is a “related person” because he was an officer and owner of Burlington and had managerial responsibility for Burlington, and he materially participated in its affairs. 12 U.S.C. § 5481(25)(C)(i)-(ii). As a “related person,” Mr. Yi is deemed a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B). In addition, Mr. Yi knowingly or recklessly provided substantial assistance to Burlington, a covered person, in connection with its violations of the CFPA. 12 U.S.C. § 5536(a)(3). Among other things, Mr. Yi was responsible for Burlington’s marketing and sales practices, handled consumer complaints, and participated in Burlington’s day-to-day operation. 14.

Mr. Yi is a “seller” under the TSR because he arranged for Burlington to provide its services through telemarketing. 16 C.F.R. § 310.2(dd). He also provided substantial assistance or support to Burlington because he knew or consciously avoided knowing that it was engaged in acts or practices that violated §§ 310.3(a) and 310.4 of the TSR. 16 C.F.R. § 310.3(b). 15.

Defendant Katherine Burnham is a resident of Maryland and, at all times relevant to this Complaint, she formulated, directed, controlled, had the authority to control, or participated in the acts and practices set forth in this Complaint because she was an owner, officer, or employee of Burlington. Ms. Burnham is a “related person” and a “covered person” under the CFPA. Ms. Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 7 of 35

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Burnham is a “related person” because she was an officer and owner of Burlington and had managerial responsibility for Burlington, and she materially participated in its affairs. 12 U.S.C. § 5481(25)(C)(i)-(ii). As a “related person,” Ms. Burnham is deemed a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B). In addition, Ms. Burnham knowingly or recklessly provided substantial assistance to Burlington, a covered person, in connection with its violations of the CFPA. 12 U.S.C. § 5536(a)(3). Among other things, Ms. Burnham was responsible for Burlington’s human resources, managed Burlington’s finances, and participated in Burlington’s day-to-day operation.

16.

Ms. Burnham is a “seller” under the TSR because she arranged for Burlington to provide its services through telemarketing. 16 C.F.R. § 310.2(dd). She also provided substantial assistance or support to Burlington because she knew or consciously avoided knowing that it was engaged in acts or practices that violated §§ 310.3(a) and 310.4 of the TSR. 16 C.F.R. § 310.3(b). 17.

Defendants provide “debt adjusting” services for purposes of O.C.G.A. § 18-5-1(1), because they provide or advertise themselves as providing to consumers debt adjustments, budget counseling, and debt management. They also advertise themselves as providing services to credit-card debtors in the management of their debts, and contract with debtors, for a fee, (1) to effect the adjustment, compromise, or the discharge of a credit-card debt, or (2) to receive Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 8 of 35

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from the debtor and disburse money to his or her creditors. They do not conduct audits or maintain insurance coverage required under O.C.G.A. § 18-5-3.1. 18.

Defendants are a “credit repair services organization” under O.C.G.A. § 16-9-59, because they sell, provide, or perform or represent that they sell, provide, or perform, for a fee, services that improve a consumer’s credit record, history, or rating. Defendants are not authorized to make loans or extensions of credit, are not banks or savings and loan institutions, are not 501(c)(3) non-profit organizations, and are not a credit reporting agency. Defendants are not, and do not employ, real estate brokers, persons licensed to practice law in Georgia, or brokerdealers registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission.

FACTUAL ALLEGATIONS 19.

Promising to reduce or eliminate consumers’ credit-card debts and improve consumers’ credit scores, Burlington marketed and sold debt-relief and credit-repair services to consumers nationwide from January 2016 until at least September 2019, and it collected fees from consumers until at least August 2020, with at least 6,000 consumers collectively paying Burlington more than $30 million.

20.

Burlington solicited consumers primarily through in-bound telemarketing that relied on direct mailers sent via a third-party to millions of Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 9 of 35

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consumers nationwide, including mailers targeting the elderly, and it also conducted out-bound telemarketing to consumers for a period. 21.

Burlington’s direct-mailing campaigns utilized mailers addressed to individual consumers with each mailer prominently displaying the image of a check made out to the recipient for the amount the consumer would purportedly save by using its services:

22.

The mailers did not reference Burlington, but instead used made up names such as the “CCRP Refund Processing Center” purportedly located in Washington, D.C., and referred to fictional programs such as a “2019 Credit Card Relief Program.”

23.

Burlington’s mailers further stated that consumers qualified for the advertised program due to high credit-card balances and claimed that the program would reduce the amount of debt owed by the consumer as well as the amount of monthly payments for unsecured debt.

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24.

For each recipient, the mailers state a specific plan number, “Debt Owed” amount, debt “Reduction Amount,” and a “Pre-Approved Debt Savings” amount:

25.

In contrast to the statements on the mailer, Burlington did not know the amount of debt owed by the consumer or whether it could achieve the stated amount of debt savings.

26.

Claiming that the “CCRP” program had limited availability, Burlington’s mailers instructed consumers to immediately call a toll-free number, which connected consumers to the company’s call center. 27.

Through telemarketing sales agents, Burlington told consumers that it could reduce the amount of debt consumers owed and even eliminate debts Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 11 of 35

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completely. Burlington also told consumers that it could “restore” and ostensibly improve their credit scores and remove negative items from their credit reports. 28.

Consumers who enrolled in Burlington’s program received an electronic contract and were required to disclose the details of their debts—creditor names and amounts owed—and agree to a payment schedule for Burlington’s services.

29.

For its services, Burlington charged consumers a percentage, typically 40%, of the debt amount owed, in the form of monthly fees. Burlington charged its customers an average of around $21,000 through monthly payments averaging about $552 per month. Burlington accepted consumer payments from consumers via electronic check. Burlington did not distribute any of this money to consumers’ creditors.

30.

Burlington required consumers to make the first payment within 30 days of enrollment, and it took payments from consumers before it achieved any of the promised results.

31.

Burlington told consumers that its services consisted of a “debt validation” program that relied on the debt-verification process set forth in the FDCPA, which it claimed would invalidate and ultimately eliminate debt. But the FDCPA does not eliminate debts as Burlington claimed. Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 12 of 35

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32.

In addition, many of Burlington’s customers sought help with debts owed to first-party, originating creditors. The FDCPA, however, largely applies only to third-party debt collectors, rather than debts being paid to or collected by first-party creditors who originated the debt.

33.

The services that Burlington typically provided to customers consisted of talking to consumers about their debt, sending form letters and notices to creditors or debt collectors to dispute debts and demand verification of debts, sending form letters claiming that the creditors or debt collectors had not sufficiently responded to the company’s demands, and deeming debts invalid or, at times, acknowledging the validity of debts. At times, the company also provided information or forms for consumers to dispute debts on their own with credit reporting agencies.

34.

Burlington often failed to deliver its promised results. Many consumers saw neither their debt reduced or eliminated nor their credit scores or reports improved.

35.

Burlington had no basis to assert that its services would result in lower or eliminated credit-card debts. Burlington did not track whether its services achieved any of these results for consumers.

36.

Burlington had no basis to assert that its services would (1) result in restored or improved credit scores or (2) remove negative items from consumers’ Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 13 of 35

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credit reports. Burlington did not track whether its services achieved these promised results, and it did not check consumers’ credit scores or reports either before or after the company performed services for consumers. Burlington did not collect information to determine how, or to what extent, its services would impact a consumer’s credit score or report.

37.

In many instances, Burlington failed to deliver results as promised, and consumers were left in a worse position than before they enrolled with Burlington, with higher debts, lower credit scores, lawsuits from creditors, and even bankruptcy.

The Roles of Richard Burnham, Sang Yi, and Katherine Burnham 38.

Mr. Burnham was a co-founder of and key decision maker for Burlington. He provided the initial funding for Burlington, developed its “debtvalidation” program and business model, used his telemarketing and debt-relief experience and equipment to establish the company, and was responsible for or consulted on Burlington’s marketing and sales practices. Mr. Burnham also leased Burlington’s office space, was a signatory on bank accounts, and was responsible for the company’s website, customer database, and the UPS box it used for marketing. He knew or consciously avoided knowing that the representations being made about the program’s success were false or had no reasonable basis and could not be substantiated. Mr. Burnham made more than $2 million from Burlington. Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 14 of 35

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39.

Mr. Yi was a co-founder, owner, and officer of Burlington. As Burlington’s Chief Operating Officer, he was a key decision maker, handled dayto-day operations, and was responsible for the marketing and sales practices of the company, including training and coaching telemarketers, creating or reviewing scripts used by Burlington’s telemarketers, and addressing customer complaints. He knew or consciously avoided knowing that the representations being made about the program’s success were false or had no reasonable basis and could not be substantiated. As COO, Mr. Yi made more than $8 million from Burlington. 40.

Ms. Burnham was an owner and officer of Burlington. As Burlington’s Chief Financial Officer, she was a key decision maker, was responsible for human resources, oversaw customer relations, and managed the company’s finances, including issuing more than 1,000 refund checks to customers. Ms. Burnham also served as the signatory on many of the company’s communications with consumers and creditors. She knew or consciously avoided knowing that the representations being made about the program’s success were false or had no reasonable basis and could not be substantiated. As CFO, Ms. Burnham made more than $1 million from Burlington.

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VIOLATIONS OF THE TSR Asserted by the Bureau

COUNT I Abusive Telemarketing Acts or Practices That Violate the TSR (Debt-Relief Services)

41.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

42.

It is an abusive telemarketing act or practice under the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for any debt-relief service until and unless:

a.

the seller or telemarketer has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by the customer;

b.

the customer has made at least one payment pursuant to that settlement agreement, debt-management plan, or other valid contractual agreement between the customer and the creditor or debt collector; and c.

to the extent that debts enrolled in a service are renegotiated, settled, reduced, or otherwise altered individually, the fee or consideration either (1) bears the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 16 of 35

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amount; or (2) is a percentage of the amount saved as a result of the renegotiation, settlement, reduction, or alteration. 16 C.F.R. § 310.4(a)(5)(i).

43.

Burlington engaged in telemarketing as both a telemarketer and a seller under the TSR. 16 C.F.R. § 310.2(dd), (ff), (gg). It also provided “debt relief services” under the TSR. 16 C.F.R. § 310.2(o). Defendants Richard Burnham, Sang Yi, and Katherine Burnham are also sellers under the TSR because they arranged for Burlington to provide its services through telemarketing. 16 C.F.R. § 310.2(dd).

44.

In numerous instances, in connection with telemarketing debt-relief services, Burlington requested and received payment of a fee or consideration for a debt-relief service before they renegotiated, settled, reduced, or otherwise altered the terms of at least one debt under a settlement agreement, debt-management plan, or other such valid contractual agreement executed by the customer and the customer made at least one payment under that agreement. 16 C.F.R. § 310.4(a)(5)(i).

45.

In numerous instances, Burlington’s fee or consideration was not proportional with respect to the overall debt or a percentage of the amount saved as a result of its services. 16 C.F.R. § 310.4(a)(5)(i). Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 17 of 35

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46.

Defendants, therefore, engaged in abusive telemarketing acts or practices that violated the TSR, 16 C.F.R. § 310.4(a)(5)(i). COUNT II Abusive Telemarketing Acts or Practices That Violate the TSR (Credit-Repair Services)

47.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

48.

It is an abusive telemarketing act or practice under the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating until: a.

the timeframe in which the seller has represented that all the goods or services will be provided to that person has expired; and b.

the seller has provided the person with documentation in the form of a consumer report from a consumer-reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 16 C.F.R. § 310.4(a)(2).

49.

Burlington engaged in telemarketing as both a telemarketer and a seller under the TSR. 16 C.F.R. § 310.2(dd), (ff), (gg). Defendants Richard Burnham, Sang Yi, and Katherine Burnham are also sellers under the TSR because Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 18 of 35

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they arranged for Burlington to provide its services through telemarketing. 16 C.F.R. § 310.2(dd).

50.

Defendants made representations to consumers that Burlington’s services would remove derogatory information from, or improve, consumers’ credit histories, credit reports, or credit ratings. 51.

Burlington routinely requested and received payment of a fee or consideration for its credit-repair services before: (1) the timeframe in which it represented that all of its goods or services would be provided to the consumer expired; and (2) it provided the consumer with documentation in the form of a consumer report from a consumer-reporting agency demonstrating that the promised results were achieved, such report having been issued more than six months after the results were achieved.

52.

Defendants, therefore, engaged in abusive telemarketing acts or practices that violated the TSR, 16 C.F.R. § 310.4(a)(2). COUNT III Deceptive Telemarketing Acts or Practices That Violate the TSR

53.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

54.

It is a deceptive telemarketing act or practice under the TSR for a seller or telemarketer to misrepresent any material aspect of the performance, Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 19 of 35

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efficacy, nature, or central characteristics of its services. 16 C.F.R. § 310.3(a)(2)(iii).

55.

It is also a deceptive marketing practice under the TSR for a seller or telemarketer of a debt-relief service to misrepresent any material aspect of any debt-relief service, including: (1) the percentage of the debt amount that a customer may save through the service, (2) the effect of the service on collection efforts of the customer’s creditors or debt collectors, and (3) the effect of the service on a customer’s creditworthiness. 16 C.F.R. § 310.3(a)(2)(x). And, when making representations, a seller or telemarketer must have a reasonable basis to substantiate its claims. 16 C.F.R. § 310.3(a)(2)(x); Telemarketing Sales Rule, Statement of Basis and Purpose, 75 Fed. Reg. 48,458, 48,500-501 (Aug. 10, 2010). 56.

Burlington engaged in telemarketing as both a telemarketer and a seller under the TSR. 16 C.F.R. § 310.2(dd), (ff), (gg). It also provided “debt relief services” under the TSR. 16 C.F.R. § 310.2(o). Defendants Richard Burnham, Sang Yi, and Katherine Burnham are also sellers under the TSR because they arranged for Burlington to provide its services through telemarketing. 16 C.F.R. § 310.2(dd).

57.

In numerous instances, in connection with telemarketing their services, Burlington misrepresented, directly or indirectly, expressly or by Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 20 of 35

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implication, material aspects of the debt-relief services that it offered, sold, or provided to consumers, including that its services would result in: a.

reduced or eliminated credit card debts;

b.

lower monthly credit card payments;

c.

restored or improved credit scores; and d.

the removal of negative items from consumers’ credit reports. 58.

Likewise, Burlington misrepresented material aspects of its debt-relief service, including (1) the percentage of the debt amount that customers may save through the service, notably 100%, (2) the effect of the service on collection efforts of customers’ creditors or debt collectors, notably that customers’ credit-card debts would be invalidated, eliminated, and could not be collected, and (3) the effect of the service on customers’ creditworthiness, notably that customers’ credit scores were be restored or improved and negative credit lines removed. 59.

But, in numerous instances, Burlington’s actions did not result in the reduction or elimination of consumers’ credit card debts and did not restore or improve consumers’ credit scores or reports. 60.

Accordingly, Burlington’s representations to consumers were false— Burlington rarely if ever achieved the promised results and, in some instances, did not provide the promised services at all.

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61.

Burlington’s representations to consumers were unsubstantiated— Burlington did not track its results and had no way of knowing whether it achieved the promised results.

62.

Burlington’s representations to consumers are material because they are directly related to the services that Burlington offered—debt relief and credit repair—and the outcomes that consumers paid Burlington to achieve. 63.

Defendants, therefore, engaged in deceptive telemarketing acts or practices that violated the TSR, 16 C.F.R. § 310.3(a)(2)(iii) and (x). COUNT IV Assisting and Facilitating Violations of the TSR

64.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

65.

It is a deceptive telemarketing act or practice and a violation of the TSR for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates §§ 310.3(a), (c) or (d), or § 310.4 of the TSR. 16 C.F.R. § 310.4(b). 66.

Burlington engaged in telemarketing as both a telemarketer and a seller under the TSR. 16 C.F.R. § 310.2(dd), (ff), (gg). Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 22 of 35

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67.

In numerous instances, Burlington violated the TSR by taking prohibited advance fees for debt-relief and credit-repair services and by engaging in deception. 16 C.F.R. § 310.3(a)(2)(iii) and (x), 310.4(a)(2), (a)(5)(i). 68.

Defendants Richard Burnham, Sang Yi, and Katherine Burnham provided substantial assistance or support to Burlington because they established, operated, or managed Burlington and controlled its business practices, finances, and marketing and advertising.

69.

Defendants Richard Burnham, Sang Yi, and Katherine Burnham knew or consciously avoided knowing that Burlington took up-front fees from consumers for debt-relief and credit-repair services before it achieved any results and engaged in deception because they controlled when the company took money from consumers, handled or were aware of consumer complaints, and were responsible for or had the ability to control representations that the company made to consumers. Therefore, they were responsible for the company taking advance fees from consumers and making representations to consumers that were false or could not be substantiated.

70.

Defendants Richard Burnham, Sang Yi, and Katherine Burnham, therefore, engaged in deception under the TSR by providing substantial assistance or support to Burlington while they knew or consciously avoided knowing that Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 23 of 35

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Burlington had engaged in an act or practice that violated the TSR. 16 C.F.R. § 310.3(b).

VIOLATIONS OF THE CFPA Asserted by the Bureau

COUNT V TSR Violations Constitute Violations of the CFPA

71.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

72.

Under the CFPA, it is unlawful for any covered person or service provider to commit any act or omission that violates a “Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).

73.

Each of the Defendants is a covered person under, and therefore subject to, the CFPA. 12 U.S.C. § 5481(6)(A), (25)(B), (25)(C)(i)-(ii). 74.

A violation of the TSR that is committed by a person subject to the CFPA shall be treated as a violation of a rule under § 1031 of the CFPA, 12 U.S.C. § 5531, regarding unfair, deceptive, or abusive acts or practices. 15 U.S.C. § 6102(c)(2).

75.

Therefore, a violation of the TSR by a covered person is also a violation of the CFPA.

Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 24 of 35

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76.

Because Defendants are covered persons and have committed acts or omissions that violate the TSR, they also violated the CFPA. 12 U.S.C.

§ 5536(a)(1)(A).

COUNT VI Deceptive Acts or Practices That Violate the CFPA

77.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

78.

Under the CFPA, it is unlawful for any covered person or service provider to engage in a deceptive act or practice in connection with any transaction for or the offering of a consumer-financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

79.

Burlington is a “covered person” under the CFPA and it offered a consumer-financial product or service, specifically debt-relief and credit-repair services, which are “financial advisory services.” 12 U.S.C. § 5481(5)(A), (6)(A), (15)(A)(viii). Because they had managerial responsibility for, or acted as a consultant to, and materially participated in the conduct and affairs of Burlington, Richard Burnham, Sang Yi, and Katherine Burnham are “related persons” to Burlington and thus they are also “covered persons.” 12 U.S.C. § 5481(25)(B), (C)(i)-(ii).

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80.

An act or practice is deceptive if it involves a material misrepresentation or omission that is likely to mislead consumers acting reasonably under the circumstances.

81.

In numerous instances, in connection with the offering or provision of debt-relief and credit-repair services, Defendants represented, directly or indirectly, expressly or by implication, to consumers that Burlington’s services would result in:

a.

reduced or eliminated credit-card debts;

b.

lower monthly credit-card payments;

c.

restored or improved credit scores; and d.

the removal of negative items from consumers’ credit reports. 82.

These representations are material because they are the main services that Burlington offered—debt relief and credit repair—and describe the outcomes that consumers paid Burlington to pursue. Moreover, these representations likely affected consumers’ decisions to enroll in Burlington’s program and pay Burlington for its services.

83.

These representations were false or misleading—Burlington rarely if ever achieved the promised results and, in some instances, did not provide the promised services at all.

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84.

These representations were also unsubstantiated—Burlington did not track its results and had no way of knowing whether it achieved the promised results.

85.

Consumers would be reasonable to rely on Burlington’s express representations about the results its services would achieve. 86.

Defendants, therefore, engaged in deceptive acts or practices that violated the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1). COUNT VII Substantially Assisting Violations of the CFPA

87.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

88.

Under the CFPA it is unlawful for any person to knowingly or recklessly provide substantial assistance to a covered person violating the CFPA by engaging in deception, unfairness, or abusiveness, and the person providing substantial assistance is deemed to be in violation of the CFPA to the same extent as the covered person. 12 U.S.C. §§ 5536(a)(3), 5531. 89.

Burlington is a “covered person” under the CFPA and in numerous instances it violated the CFPA by engaging in deception. 12 U.S.C. §§ 5481(5)(A), (6)(A), (15)(A)(viii), 5531(a), 5536(a)(1). 90.

Defendants Richard Burnham, Sang Yi, and Katherine Burnham knowingly or recklessly provide substantial assistance to Burlington in connection Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 27 of 35

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with Burlington’s violations because they established and operated Burlington, managed the company, made decisions for the company and devised its business practices, were aware of or handled consumer complaints, controlled the representations that the company made to consumers, or were responsible for the company making representations to consumers that were false, misleading, or unsubstantiated.

91.

Therefore, Defendants Richard Burnham, Sang Yi, and Katherine Burnham substantially assisted Burlington’s deceptive acts or practices in violation of the CFPA. 12 U.S.C. § 5536(a)(3).

VIOLATIONS OF THE FBPA Asserted by the State of Georgia

COUNT VIII Deceptive Mailers

92.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

93.

Defendants have engaged in unlawful, unfair, or deceptive acts or practices in the conduct of consumer transactions and consumer acts or practices in trade or commerce, by mailing letters to Georgia residents the purpose of which was to induce those consumers to call Burlington and purchase purported “Credit Card Relief Program” or “CCRP” services, which the mailers advertised would Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 28 of 35

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result in savings on credit-card balances. Those mailers are deceptive because, among other things they:

a.

identify Burlington as “CCRP Refund Processing Center” or “CCRP Processing,” which are nonexistent entities or centers; b.

use a Washington, D.C. return address, giving the impression that Burlington is located in Washington, D.C., when it was headquartered in and operated out of Maryland; c.

state that the CCRP plan “reduces the amount that [the consumer] owe[s] as well as can reduce the amount of [the consumer’s] monthly payments on [his or her] unsecured debt,” but Defendants do not track those amounts in their records and thus cannot substantiate that those statements are true;

d.

specify an amount of “unsecured debt owed” by the consumer that is entirely fabricated;

e.

specify a “Reduction Amount” that is entirely fabricated; and f.

specify a “Pre-Approved Debt Savings” amount that is entirely fabricated.

94.

This conduct violates:

a.

O.C.G.A. § 10-1-393(a), which prohibits unfair and deceptive acts and practices;

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b.

O.C.G.A. § 10-1-393(b)(1), which prohibits passing off services as those of another;

c.

O.C.G.A. § 10-1-393(b)(2), which prohibits causing actual confusion or actual misunderstanding as to the source of one’s services; d.

O.C.G.A. § 10-1-393(b)(2), which prohibits causing actual confusion or actual misunderstanding as to affiliation, connection, or association with another;

e.

O.C.G.A. § 10-1-393(b)(4), which prohibits using deceptive representations or designations of geographic origin in connection with services;

f.

O.C.G.A. § 10-1-393(b)(5), which prohibits representing that services have characteristics, uses, and/or benefits that they do not have; and g.

O.C.G.A. § 10-1-393(b)(9), which prohibits advertising services with the intent not to provide them as advertised. COUNT IX Advertising or Selling Debt Adjusting Services

95.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

96.

Defendants have engaged in unlawful, unfair, or deceptive business acts or practices in the conduct of consumer transactions and consumer acts or Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 30 of 35

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practices in trade or commerce, by advertising or selling “debt adjusting” services, as defined by OC.G.A. § 18-5-1(1), to Georgia residents and requiring a charge, fee, contribution, or combination thereof in an amount in excess of 7.5% of the amount that consumers paid to Defendants monthly for distribution to their creditors. Defendants are prohibited by O.C.G.A. § 18-5-2 from doing so. 97.

This conduct violates O.C.G.A. § 10-1-393(a), which prohibits unfair and deceptive acts or practices.

COUNT X Advertising, Selling, Providing, or Performing Credit Repair Services

98.

The allegations in paragraphs 1 to 40 are incorporated here by reference.

99.

Defendants have engaged in unlawful, unfair, or deceptive business acts or practices in the conduct of consumer transactions and consumer acts or practices in trade or commerce, by:

a.

selling providing, or performing, or representing that they can or will sell, provide, or perform, in return for the payment of money or other valuable consideration, services that will improve a buyer’s credit record, history, or rating, when Defendants are prohibited by O.C.G.A. § 16-9-59(a)(2)(A) from doing so;

b.

failing to provide the disclosures required by 15 U.S.C. § 1679c(a) before the consumer executes a contract with Burlington, and Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 31 of 35

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failing to include the bold-face cancellation rights disclosure required by 15 U.S.C. § 1679d(b)(4) in Burlington’s contracts with consumers; c.

requesting or receiving payment of a fee or consideration for Burlington’s services before the time frame in which Defendants have represented that those services will be provided has expired, as required by 15 U.S.C. § 1679b(b);

d.

representing that Burlington’s “credit restoration team” “invalidates [the consumer’s] accounts by, disputing [the consumer’s] accounts down to a 0 balance, having them written off, charged off, and then deleted totally from [the consumer’s] credit reports which will restore [the consumer’s] credit score back to its original state[,]” when they have not tracked consumer credit score information in their records and thus cannot substantiate that the statement is true; and e.

representing that, although the consumer’s credit score will drop initially due to accounts entering collection status, “[o]nce the accounts enter the credit restoration stage [the consumer’s] score will be restored[,]” when (i) they have not tracked consumer credit score information in their records and thus cannot substantiate that the statement is true, and (ii) this statement does not disclose the potentially Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 32 of 35

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irreparable negative impact to the consumer’s credit score if his or her debt is not invalidated.

100. This conduct violates O.C.G.A. § 10-1-393(a), which prohibits unfair and deceptive acts or practices.

COUNT XI Fraudulent or Deceptive Telemarketing and Use of a Computer or Computer Network

101. The allegations in paragraphs 1 to 40 are incorporated here by reference.

102. Defendants utilize officers, representatives, agents, servants, or employees who engage in activity involving telemarketing and/or using a computer or computer network, as enumerated in O.C.G.A. § 10-1-393.5(b). 103. Defendants have unlawfully, while engaging in activity involving or using telemarketing or a computer or computer network, conducted the acts and practices described in Counts I-XI.

104. This conduct is a device, scheme, or artifice to defraud a person, and thus violates O.C.G.A. § 10-1-393.5(b)(1). This conduct also is an act, practice, or course of business that operates or would operate as a fraud or deceit upon a person, and thus violates O.C.G.A. § 10-1-393.5(b)(2).

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DEMAND FOR RELIEF The Bureau, as permitted by 12 U.S.C. § 5565, and the State of Georgia, under Georgia Code Sections 10-1-397 and 10-1-397.1, and as authorized by this Court’s equitable powers, requests that the Court: a.

impose appropriate injunctive relief against Defendants for their violations of the TSR, the CFPA, and the FBPA; b.

grant additional injunctive relief as the Court deems just and proper, including the rescission of contracts; c.

award monetary relief against Defendants, including the refund of monies paid, restitution, disgorgement of ill-gotten gains, or compensation for unjust enrichment;

d.

impose civil money penalties against Defendants; and e.

award the costs of bringing this action, as well as such other and additional relief as the Court determines to be just and proper.

Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 34 of 35

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Dated: June 25, 2021

Respectfully submitted,

CARA PETERSEN Acting Enforcement Director JEFFREY PAUL EHRLICH Deputy Enforcement Director KARA K. MILLER

Assistant Litigation Deputy

/s/ Carmen Christopher CARMEN L. CHRISTOPHER

(CA Bar No. 231508)

Senior Litigation Counsel

Telephone: (202) 754-0329

[email protected] NELLE ROHLICH

(WI Bar No. 1047522)

Senior Litigation Counsel

Telephone: (202) 435-7280 [email protected] Consumer Financial Protection Bureau

1700 G Street, NW

Washington D.C. 20552

CHRISTOPHER M. CARR

Attorney General ANNE S. INFINGER

Deputy Attorney General

Consumer Protection

/s/ Melissa M. Devine

MELISSA M. DEVINE

(GA Bar No. 403670)

Assistant Attorney General

Telephone: (404) 458-3765

[email protected]

Case 1:21-cv-02595-JPB Document 1 Filed 06/28/21 Page 35 of 35

Stipulation (June 2021)

PDF of this document (29 pages)

Page 37

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA Consumer Financial Protection Bureau;

and State of Georgia ex rel. Christopher M. Carr, Attorney General of the State of Georgia, Plaintiffs, v.

Burlington Financial Group, LLC;

Richard W. Burnham; Sang Yi; and Katherine Ray Burnham, Defendants.

Case No.&9-3% STIPULATED FINAL JUDGMENT AND ORDER The Consumer Financial Protection Bureau (Bureau) and the State of Georgia ex rel. Christopher M. Carr, Attorney General of the State of Georgia (State of Georgia) (collectively Plaintiffs), commenced this civil action on June 28, 2021, to obtain injunctive and monetary relief and civil penalties from Burlington Financial Group, LLC (Burlington), Katherine Burnham, Richard Burnham, and Sang Yi (Defendants). The Complaint alleges violations of (1) the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101–6108, and the Telemarketing Sales Rule (TSR), 16 C.F.R. pt. 310; (2) the Consumer Financial Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 1 of 29

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Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1); and (3) the Fair Business Practices Act (FBPA), O.C.G.A. §§ 10-1-390 et seq., in connection with the marketing, sale, and provision of debt-relief and credit-repair services. Plaintiffs and Defendants consent 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 between these parties arising from the conduct alleged in the Complaint.

FINDINGS 1.

This Court has subject-matter jurisdiction over this action because it is brought under “[f]ederal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.

2.

This Court has supplemental jurisdiction over the State of Georgia’s state-law claims because they are so related to the federal claims that they form part of the same case or controversy. 28 U.S.C. § 1367(a). 3.

This Court has personal jurisdiction over Defendants because they have done business in this district. 12 U.S.C. § 5564(f). 4.

Venue is proper in this district because Defendants have done business in this district and consent to jurisdiction in this district. 12 U.S.C. Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 2 of 29

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§ 5564(f); 28 U.S.C. § 1391(b).

5.

Defendants neither admit nor deny the allegations in the Complaint, except as specified in this Order. Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. 6.

Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action. Each party will bear its own costs and expenses, including, without limitation, attorneys’ fees. 7.

Entry of this Order is in the public interest. DEFINITIONS 8.

The following definitions apply to this Order: a.

“Affected Consumers” means any person who paid an advance fee in alleged violation of 16 C.F.R. § 310.4(a)(2) or (a)(5)(i), or who paid fees in excess of 7.5 percent of the amount paid for distribution to creditors in alleged violation of O.C.G.A. § 18-5-2, to Defendants or their officers, agents, servants, employees, attorneys, or any other persons in active Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 3 of 29

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concert or participation with them, from January 1, 2016, until the Effective Date.

b.

“Assisting Others” means helping, aiding, or providing support to others, including:

i. consulting or advising in any form whatsoever; ii. providing support services;

iii. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including telephone-sales scripts, solicitations, or the text of any Internet website, email, or other electronic communication or advertisement; iv. providing names of, or assisting in the generation of, potential customers;

v. performing marketing, billing, or payment services of any kind;

vi. participating in or providing services related to the offering, sale, or servicing of a product or the collection of payments for a product;

vii. acting or serving as an owner, officer, director, manager, Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 4 of 29

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principal, partner, or limited partner of any entity; and viii. investing, loaning, or providing money or anything of financial value.

c.

“Consumer Financial Product or Service” has the same meaning set forth in the Consumer Financial Protection Act of 2010, 12 U.S.C. § 5481(5), including with respect to providing Financial-Advisory Services.

d.

“Credit-Repair Service” means any program or service represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating as described in 16 C.F.R. § 310.4(a)(2). e.

“Debt-Adjusting Service” means all services that qualify as “debt adjusting” services as defined under the Georgia Debt Adjustment Act, O.C.G.A. § 18-5-1(1). f.

“Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a person and one or more unsecured creditors or debt collectors, including a reduction in the balance, interest rate, or Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 5 of 29

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fees owed by a person as set forth in 16 C.F.R. § 310.2(o). g.

“Defendants” means the Corporate Defendant and the Individual Defendants, individually, collectively, or in any combination.

i. “Corporate Defendant” means Burlington Financial Group, LLC, its employees, and its successors and assigns.

ii. “Individual Defendants” means Katherine Burnham, Richard Burnham, and Sang Yi, collectively, or in any combination, and each of them by any other name by which they might be known.

h.

“Effective Date” means the date on which this Order is entered by the Court.

i.

“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau or his or her delegate.

j.

“Financial-Advisory Service” means services provided to consumers on individual financial matters or relating to proprietary financial products or services, including (1) Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 6 of 29

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 providing credit counseling to any consumer, and (2) providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure as set forth in 12 U.S.C. § 5481(15)(A)(viii).

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 Defendants based on substantially the same facts as described in the Complaint. l.

“Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call as set forth in 16 C.F.R. § 310.2(gg).

ORDER CONDUCT PROVISIONS I.

Ban on Telemarketing, Financial-Advisory Services, Debt-Relief Services, Debt-Adjusting Services, and Credit-Repair Services

IT IS ORDERED that:

9.

Defendants, whether acting directly or indirectly, are permanently Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 7 of 29

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restrained and enjoined from engaging in or Assisting Others with: a. Telemarketing with respect to any Consumer Financial Product or Service;

b. offering, marketing, selling, or providing any Financial-Advisory Service;

c. offering, marketing, selling, or providing any Debt-Relief Service or Debt-Adjusting Service; and d. offering, marketing, selling, or providing any Credit-Repair Service.

10.

Defendants are further permanently restrained and enjoined from receiving any remuneration or other consideration from, holding any ownership interest in, or working in any capacity for any Person that is engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Financial-Advisory Service, Debt-Relief Service, Debt-Adjusting Service, or Credit-Repair Service, or Telemarketing with respect to any Consumer Financial Product or Service, except to the extent that Person is a company or other entity that is publicly traded on the New York Stock Exchange or on the Nasdaq. 11.

Defendants are further permanently restrained and enjoined (a) from offering, marketing, selling, or providing any services of any sort covered by the Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 8 of 29

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FBPA or the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. § 6101 et seq. and accompanying Telemarketing Sales Rule, 16 C.F.R. § 310.1 et seq., in the State of Georgia or to any person who is known or should be known to be a Georgia resident, and (b) from receiving any remuneration or other consideration from, holding any ownership interest in, or working in any capacity for any person that is offering, marketing, selling, or providing any services of any sort covered by the FBPA or the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. § 6101 et seq. and accompanying Telemarketing Sales Rule, 16 C.F.R. § 310.1 et seq., in the State of Georgia or to any person who is known or should be known to be a Georgia resident except to the extent that person is a company or other entity that is publicly traded on the New York Stock Exchange or on the Nasdaq. Notwithstanding the above, a Defendant may receive remuneration or other consideration from, hold an ownership interest in, or work for a person that is offering, marketing, selling, or providing any consumer services in the State of Georgia if the Department of Law consents in writing to a written request from the Defendant for permission to do so. II.

Prohibitions Regarding Consumer Financial Products or Services IT IS FURTHER ORDERED that:

12.

Defendants and their officers, agents, servants, employees, and Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 9 of 29

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attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, in connection with offering, marketing, selling, or providing any Consumer Financial Product or Service are permanently enjoined and restrained from misrepresenting any material aspect of the product or service, whether express or implied, including but not limited to:

a. the benefits that a consumer will receive from the product or service; and b. the total costs or any other material term, restriction, limitation or condition of the product or service.

III.

Prohibitions on Use of Customer Information IT IS FURTHER ORDERED that:

13.

Defendants and their officers, agents, servants, employees, and attorneys, and all persons who are in active concert or participation with them, who have 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, Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 10 of 29

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bank account, or other financial account), that Defendants obtained through Burlington before the Effective Date; or b. attempt to collect, sell, assign, or otherwise transfer any right to collect payment from any consumer who entered into a contract with Burlington related to Debt-Relief, Debt-Adjusting, or Credit- Repair Services.

However, customer information may be disclosed if requested by a government agency or required by law, regulation, or court order. MONETARY PROVISIONS IV.

Order to Pay Redress IT IS FURTHER ORDERED that:

14.

A judgment for equitable monetary relief is entered in favor of the Plaintiffs and against Defendants, jointly and severally, in the amount of $30,457,853 for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 15 of this Section, Paragraphs 19 and 20 of Section V, Paragraph 24 of Section VI, and subject to Section VII of this Order. 15.

With regard to any redress ordered under this Section, if Defendants receive, directly or indirectly, any reimbursement or indemnification from any Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 11 of 29

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source, including but not limited to payment made under any insurance policy, or if he, she, or it secures 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 10 days of receiving the funds or monetary benefit, 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 judgment referenced in Paragraph 14 of this Section 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 14. 16.

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 refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.

17.

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 will deposit any remaining funds in the U.S. Treasury as Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 12 of 29

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disgorgement. Defendant will have no right to challenge any actions that the Bureau or its representatives may take under this Section. 18.

Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. V.

Order to Pay Civil Money Penalties to the Bureau IT IS FURTHER ORDERED that:

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 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 in the amount of $150,001, apportioned as follows: a. Defendant Burlington Financial Group, LLC, must pay $15,000; b. Defendant Katherine Burnham must pay $45,000; c. Defendant Richard Burnham must pay $1; and d. Defendant Sang Yi must pay $90,000.

Under 12 U.S.C. § 5565(c)(4), the amount Burlington must pay will be remitted by $15,000 if Burlington pays that amount as a civil penalty to the State of Georgia in accordance with Paragraph 24 of this Order and within 10 days of the Effective Date.

20.

Within 10 days of the Effective Date, each Defendant must pay the Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 13 of 29

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civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. 21.

The civil money penalty paid to the Bureau 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, no Defendant may: 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.

23.

Defendants agree that the civil penalty imposed by the Order represents a civil penalty owed to the United States Government, the civil penalty is not compensation for actual pecuniary loss, and thus, it is not subject to discharge under the Bankruptcy Code, 11 U.S.C. § 523(a)(7). Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 14 of 29

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VI.

Order to Pay Civil Penalties to the State of Georgia IT IS FURTHER ORDERED that:

24.

Defendants, jointly and severally, must pay the State of Georgia a civil penalty of $8,100,000; however, payment of this civil penalty will be suspended upon the payment of $15,000 to the State of Georgia and the satisfaction of the obligations in Paragraphs 19 and 20 of Section V and subject to Section VII of this Order.

VII.

Effect of Misrepresentation or Omission Regarding Financial Condition IT IS FURTHER ORDERED that:

25.

The suspension of the monetary judgments as to each Defendant entered in Sections IV and VI of this Order is expressly premised on the truthfulness, accuracy, and completeness of that Defendant’s financial statements and supporting documents submitted to the Plaintiffs, which the submitting Defendant asserts are truthful, accurate, and complete, including: a. the Financial Disclosure Form of Burlington Financial Group, LLC, including the attachments, dated January 3 and 4, 2021; b. the Financial Disclosure Form of Katherine Burnham, including the attachments, dated January 7, 2021, and the affidavit dated April 30, 2021;

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c. the Financial Disclosure Form of Richard Burnham, including the attachments, dated November 20, 2020; and d. the Financial Disclosure Form of Sang Yi, including the attachments, dated January 7, 2021, and the affidavit dated April 30, 2021.

26.

If, upon motion by the Bureau or the State of Georgia, the Court determines that any Defendant failed to disclose any material asset or that any of the financial statements contains any material misrepresentation or omission, including materially misstating the value of any asset, as to that Defendant the Court shall terminate the suspension of the monetary judgments entered in Sections IV and VI of this Order and, without further adjudication, shall reinstate the judgments as entered in those Sections and the full judgment for redress of $30,457,853 as well as the full judgment for civil penalty of $8,100,000 to the State of Georgia shall be immediately due and payable, less any amounts paid to the Bureau under Section IV or V of this Order. 27.

If the Court terminates the suspension of the monetary judgment under this Section, Plaintiffs 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.

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28.

If the Court terminates the suspension of the monetary judgment under this Section, in all other respects, this Order shall remain in full force and effect unless otherwise ordered by the Court, and 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 either Plaintiff may initiate to enforce this Order.

VIII.

Additional Monetary Provisions IT IS FURTHER ORDERED that:

29.

In the event of any default on Defendants’ obligations to make payments 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. 30.

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 any Defendant.

31.

The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau or the State of Georgia to enforce this Order or the Bureau’s or the State of Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 17 of 29

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Georgia’s rights to any payment or monetary judgment under this Order, such as a non-dischargability complaint in any bankruptcy case. 32.

The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau or the State of Georgia 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 in the event that any Defendant files a bankruptcy case, even in such Defendant’s capacity as debtor-inpossession.

33.

Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau and the Georgia Department of Law taxpayeridentification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 34.

Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendants must notify the Bureau and the Georgia Department of Law in writing of the final judgment, order, or settlement. 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, no Defendant may argue Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 18 of 29

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that the Defendant is entitled to, nor may any Defendant 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 any 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, the 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.

35.

Upon written request of a representative of the Bureau or the Georgia Department of Law, any consumer reporting agency must furnish to the Bureau or the Georgia Department of Law consumer reports concerning Defendants under § 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.

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COMPLIANCE PROVISIONS IX.

Reporting Requirements IT IS FURTHER ORDERED that:

36.

Each Defendant must notify the Bureau and the Georgia Department of Law of any development that may affect such Defendant’s compliance obligations arising under this Order, including the emergence of a successor company to the Corporate Defendant; the creation or dissolution of a company that engages in any act or practice subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against the Defendant; or a change in the Defendant’s name or address. Defendants must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner.

37.

Within 7 days of the Effective Date, each Defendant must: a.

designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau and the Georgia Department of Law 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 Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 20 of 29

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names, telephone numbers, and physical, postal, email, and Internet addresses; and Defendant must describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales; c.

identify Defendant’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and d.

describe in detail Defendant’s involvement in any business for which they perform services in any capacity or which they wholly or partially own, including Defendant’s title, role, responsibilities, participation, authority, control, and ownership. 38.

Defendants must report any change in the information required to be submitted under Paragraph 37 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 39.

Within 90 days of the Effective Date, and again one year after the Effective Date, each Defendant must submit to the Bureau and the Georgia Department of Law 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 this Order and describes in detail the manner and form in which Defendant Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 21 of 29

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has complied with each such paragraph and subparagraph of this Order; and b.

attaches a copy of each Order Acknowledgment obtained under Section X (if applicable), unless previously submitted to the Bureau.

X.

Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:

40.

Within 7 days of the Effective Date, each Defendant must submit to the Enforcement Director and the Georgia Department of Law an acknowledgment of receipt of this Order, sworn under penalty of perjury. 41.

Within 30 days of the Effective Date, the Corporate Defendant and each Individual Defendant, for any business for which the Defendant is the majority owner or which the Defendant directly or indirectly controls, must deliver a copy of this Order to each of its board members and 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. 42.

For 5 years from the Effective Date, Defendants (including any business of which a Defendant is the majority owner or which a Defendant directly or indirectly controls) must deliver a copy of this Order to any business entity Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 22 of 29

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resulting from any change in structure referred to in Section IX, any future owners, board members, and officers, as well as any 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. 43.

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 et seq., within 30 days of delivery, from all persons receiving a copy of this Order under this Section. 44.

Within 90 days of the Effective Date, Defendants must provide the Bureau and the Georgia Department of Law with a list of all persons and their titles to whom this Order was delivered through that date under Paragraphs 41 and 42 (if applicable) and a copy of all signed and dated statements acknowledging the receipt of this Order under Paragraph 43 (if applicable). XI.

Recordkeeping IT IS FURTHER ORDERED that:

45.

Each Defendant (including any business of which a Defendant is the majority owner or which a Defendant directly or indirectly controls) must create all documents and business records necessary to demonstrate such Defendant’s full compliance with each provision of the Order, including all submissions to the Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 23 of 29

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Bureau or the Georgia Department of Law. Each Defendant must retain these documents for at least 5 years after creation and make them available to the Bureau or the Georgia Department of Law upon request. 46.

Each Defendant (including any business of which a Defendant is the majority owner or which a Defendant directly or indirectly controls) must retain for 5 years from the Effective Date, the following business records: a.

all documents and records necessary to demonstrate such Defendant’s full compliance with each provision of this Order, including all submissions to the Bureau or the Georgia Department of Law;

b.

copies of all sales scripts; training materials; advertisements; websites; and other marketing materials relating to the subject of this Order, including any such materials used by a third party on a Defendant’s behalf;

c.

for each individual Affected Consumer: the consumer’s name; address; phone number; email address; amount of the lump sum the consumer received; amount of any fees or additional costs the consumer incurred; the amount of any payments the consumer Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 24 of 29

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made; a copy of any promotional or welcome materials provided; and a copy of any contracts the consumer signed; d.

for all contracts related to Affected Consumers, accounting records showing the gross and net revenues generated; and e.

all complaints and refund requests (whether received directly or indirectly, such as through a third party) by Affected Consumers, and any responses to those complaints or requests. 47.

Defendants must make the documents identified in Paragraph 46 available to the Bureau upon request or the Georgia Department of Law. XII.

Notices IT IS FURTHER ORDERED that:

48.

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 “CFPB v. Burlington Financial Group, et al., Case No._______” and send them by overnight courier or first-class mail to Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 25 of 29

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the below addresses 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 49.

In addition, unless otherwise directed in writing by the Georgia Department of Law, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line “State of Georgia v. Burlington Financial Group LLC, CIL 452102”, to the State of Georgia by overnight courier or first-class mail to the below address: Georgia Department of Law Consumer Protection Division 2 Martin Luther King, Jr. Drive, SE Suite 356 Atlanta, Georgia 30334 XIII.

Cooperation with the Bureau and the State of Georgia IT IS FURTHER ORDERED that:

50.

Defendants must cooperate fully to help the Bureau and the Georgia Department of Law determine the identity and location of, as well as the amount of alleged injury sustained by, each Affected Consumer. Defendants must provide Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 26 of 29

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such information in any agent’s possession or control within 14 days of receiving a written request from the Bureau.

51.

Defendants must cooperate fully with the Bureau and the Georgia Department of Law in this matter and in any investigation or lawsuit related to or associated with the conduct alleged in the Complaint. Without the service of compulsory process, Defendants must provide truthful and complete information, evidence, and testimony. Defendants must appear and cause Defendants’ agents, representatives, or employees to appear for interviews, discovery, hearings, trials, and any other proceedings associated with the conduct alleged in the Complaint that the Bureau or the Georgia Department of Law may reasonably request upon 14 days written notice, or other reasonable notice, at such places and times as the Bureau or the Georgia Department of Law may designate, without the service of compulsory process.

XIV.

Compliance Monitoring IT IS FURTHER ORDERED that:

52.

Within 14 days of receipt of a written request from the Bureau or the Georgia Department of Law, the Defendant receiving the request must submit additional requested Compliance Reports or other requested information relating to the Defendant’s compliance with this Order, which must be sworn under penalty of Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 27 of 29

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perjury; provide sworn testimony; or produce documents. 53.

For purposes of this Section, the Bureau or the Georgia Department of Law may communicate directly with any Defendant, unless the Defendant retains counsel related to these communications.

54.

Defendants must permit the Bureau’s or the State of Georgia’s representatives to interview any agent, representative, 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 alleged in the Complaint; or (c) compliance with this Order. The person interviewed may have counsel present.

55.

Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6, or the Georgia Department of Law’s lawful use of compulsory process under O.C.G.A. § 10-1-403. XV.

Retention of Jurisdiction and Enforcement of Judgment IT IS FURTHER ORDERED that:

56.

The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.

57.

Defendants consent to the enforcement of this Order in United States District Court for the Northern District of Georgia. Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 28 of 29

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XVI.

Service IT IS FURTHER ORDERED that:

58.

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:

_________________________________ UNITED STATES DISTRICT JUDGE DATED: _________________ 6/29/21 Case 1:21-cv-02595-JPB Document 3 Filed 06/29/21 Page 29 of 29