D and D Marketing, Inc., d/b/a T3Leads, Grigor Demirchyan, and Marina Demirchyan
Documents in this case
- Consent order · 21 p.
- Complaint · · 13 p.
Case summary
CFPB took separate actions against T3Leads and
individuals that resold sensitive personal data to lenders and debt collectors,
allegedly exposing millions of consumers to harassment and deceit.
Consent order
PDF of this document (21 pages)
Page 2
STIPULATED FINAL JUDGMENT AND ORDER
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION
Case No. 2:15-cv-9692-PSG(Ex)
STIPULATED FINAL JUDGMENT AND ORDER
The plaintiff (Bureau) commenced a civil action (Case No. 2:15-cv-9692- PSG(Ex)) on December 15, 2015, against D and D Marketing, Inc. d/b/a T3Leads (T3), Marina Demirchyan, and Grigor Demirchyan. (T3, Marina Demirchyan, and Grigor Demirchyan together referred to hereinafter as the Defendants and, with the Bureau, as the Parties). The Bureau alleges in its First Amended Complaint that T3 Consumer Financial Protection Bureau,
Plaintiff,
v.
D and D Marketing, Inc. d/b/a T3Leads, et al.
Defendants.
E-FILED 3/28/19 JS-6 Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 1 of 21 Page ID #:2415
Page 3
STIPULATED FINAL JUDGMENT AND ORDER engaged in unfair and abusive practices in connection with its receipt of consumer information (called “Leads”) from lead generators that market loans and T3’s conveyance of those Leads to lenders and other Lead recipients, and that the individual defendants violated § 1036(a)(3) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5536(a)(3), by substantially assisting T3’s unlawful conduct. The Bureau sought to obtain injunctive relief, disgorgement, and other relief against the Defendants.
The Parties agree to the entry of this Stipulated Final Judgment and Order (Order).
THEREFORE, it is ORDERED:
Findings and Conclusions 1.
This Court has jurisdiction over the Parties and the subject matter of this action.
2.
The Parties agree to entry of this Order, without further adjudication of any issue of fact or law.
3.
The Defendants neither admit nor deny any allegations in the Complaints, except as specifically stated in this Order. For purposes of this Order, the Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of the Cases.
Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 2 of 21 Page ID #:2416
Page 4
STIPULATED FINAL JUDGMENT AND ORDER 4.
The Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of the Cases, to the date of this Order. 5.
Each Party shall bear its own costs and expenses, including, without limitation, attorneys’ fees.
6.
Entry of this Order is in the public interest. Definitions 7.
“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 section 1002(5) of the CFPA, 12 U.S.C. § 5481(5). 8.
“Corporate Defendant” means defendant D and D Marketing, Inc. d/b/a T3Leads and its successors and assigns. 9.
“Data Broker” means a Person that collects consumers’ personal information and conveys or shares that information with others. 10.
“Defendants” means the Corporate Defendant and the Individual Defendants.
11.
“Effective Date” means the date this Order is entered. Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 3 of 21 Page ID #:2417
Page 5
STIPULATED FINAL JUDGMENT AND ORDER 12.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Bureau of Consumer Financial Protection, or his or her delegate.
13.
“Individual Defendants” means defendants Grigor Demirchyan and Marina Demirchyan.
14.
“Lead” is a consumer’s personal information received, transmitted, or otherwise used in connection with a Consumer Financial Product or Service. 15.
“Lead Aggregators” are Persons that obtain Leads and convey that information to other Persons. “Lead Aggregation” is the practice of acting as a Lead Aggregator.
16.
“Lead Generators” are Persons that obtain Leads and transmit the Leads to Lead Aggregators or to other Persons. “Lead Generation” is the practice of acting as a Lead Generator.
17.
“Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.
18.
“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 any or all Defendants based on substantially the same facts as described in one or both of the Complaints. Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 4 of 21 Page ID #:2418
Page 6
STIPULATED FINAL JUDGMENT AND ORDER 19.
“Service Provider” is synonymous in meaning and equal in scope to the definition of the term, as of the Effective Date, in section 1002(26) of the CFPA, 12 U.S.C. § 5481(26).
20.
“Subject Loans” means consumer loans where the APR (Annual Percentage Rate) exceeds 36%, but does not include (a) loans extended solely to finance the purchase of a vehicle or other consumer good in which the good secures the loan; (b) home mortgages and other loans secured by real property or a dwelling if recorded or perfected; (c) credit cards; (d) student loans; (e) nonrecourse pawn loans; and (f) overdraft services and lines of credit. 21.
“T3” means D and D Marketing, Inc. d/b/a T3Leads and its successors and assigns.
ORDER Conduct Relief I.
Permanent Ban on Lead Generation, Lead Aggregation, or Data Brokering IT IS ORDERED that:
22.
Each Defendant, whether acting directly or indirectly such as through any agent, servant, or employee, or through any entity in which a financial interest is held or obtained, including joint ventures, may not, as of the Effective Date: a.
act as a Lead Generator, Lead Aggregator, or Data Broker in Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 5 of 21 Page ID #:2419
Page 7
STIPULATED FINAL JUDGMENT AND ORDER connection with the offering or provision of Subject Loans; b.
act as a Service Provider, employee, or independent contractor to a Lead Generator, Lead Aggregator, Data Broker, or other Person in connection with the offering or provision of Subject Loans;
c.
engage in the offering or provision of Subject Loans; or d.
receive any remuneration or other consideration from, hold any ownership interest in, provide services to, or work in any capacity for any Person engaged in or assisting the offering or provision of Subject Loans.
II.
Customer Information IT IS FURTHER ORDERED that:
23.
Defendants, and their officers, agents, servants, employees, attorneys, or any 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 disclose, use, or benefit from customer information, including the name, address, telephone number, email address, social security number, 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 any Defendant obtained Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 6 of 21 Page ID #:2420
Page 8
STIPULATED FINAL JUDGMENT AND ORDER before the Effective Date in connection with T3’s receipt of Leads or T3’s conveyance of those Leads to lenders and other Lead recipients. This paragraph does not prohibit disclosure of customer information if requested by a government agency or required by law, regulation, or court order. Monetary Provisions III.
Order to Pay Monetary Damages IT IS FURTHER ORDERED that:
24.
Under §1055(a)(2) of the CFPA, 12 U.S.C. § 5565(a)(2), by reason of the violations of law alleged in the Complaints, judgment for damages in the amount of US$1,000,000 is entered against the Defendants, jointly and severally. The Defendants must pay this amount within 30 days of the Effective Date and by wire transfer to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions.
25.
Any funds received by the Bureau as damages under this Order 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 and for any attendant expenses for the administration of any such redress.
Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 7 of 21 Page ID #:2421
Page 9
STIPULATED FINAL JUDGMENT AND ORDER 26.
If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds paid under this Order as damages remain after redress is completed, the Bureau will treat such funds as disgorgement and deposit them into the U.S. Treasury. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this Section III.
27.
Payment of redress to any injured consumer under this Order may not be conditioned on that consumer’s waiving any right. IV.
Order to Pay Civil Money Penalties IT IS FURTHER ORDERED that:
28.
Under §1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint in Case No. 2:15-cv-9692-PSG(Ex), and taking into account the factors in 12 U.S.C. § 5565(c)(3), T3 must pay a civil money penalty of US$3,000,000 to the Bureau. The Bureau may exercise immediately any post-judgment remedies available to it to collect this civil money penalty from T3.
29.
Under §1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint in Case No. 2:15-cv-9692-PSG(Ex), and taking into account the factors in 12 U.S.C. § 5565(c)(3), Marina Demirchyan and Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 8 of 21 Page ID #:2422
Page 10
STIPULATED FINAL JUDGMENT AND ORDER Grigor Demirchyan must each pay a civil money penalty of US$1 to the Bureau. These nominal civil money penalties are based on Marina Demirchyan’s and Grigor Demirchyan’s limited ability to pay as attested to in financial statements and supporting documents Marina Demirchyan and Grigor Demirchyan submitted to the Bureau on February 18, 2019 and March 11, 2019. 30.
Any 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).
31.
Each Defendant must treat any 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. 32.
Each Individual Defendant agrees that the civil penalty imposed against such Individual Defendant by the Order represents a civil penalty owed to Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 9 of 21 Page ID #:2423
Page 11
STIPULATED FINAL JUDGMENT AND ORDER the United States Government, is not compensation for actual pecuniary loss, and, thus, as to such Individual Defendant, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).
V.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
33.
In the event of any default on any Defendant’s 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. 34.
Each Defendant relinquishes all dominion, control, and title to funds paid under this Order to the fullest extent permitted by law, and no part of the funds may be returned to any Defendant.
35.
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 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. 36.
The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under Section 523(a)(2)(A) of the Bankruptcy Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 10 of 21 Page ID #:2424
Page 12
STIPULATED FINAL JUDGMENT AND ORDER 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 any Defendant’s capacity as debtor-in-possession.
37.
Under 31 U.S.C. § 7701, each Defendant, unless it already has done so, must furnish to the Bureau such Defendant’s taxpayer identifying number, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
38.
Under Section 604(a)(I) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), any consumer reporting agency may furnish a consumer report concerning any Defendant to the Bureau, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 39.
Within 30 days of the entry of a final judgment, Order, or settlement in a Related Consumer Action, each Defendant in the Related Consumer Action 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 Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, no Defendant may argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any monetary remedies imposed in the Related Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 11 of 21 Page ID #:2425
Page 13
STIPULATED FINAL JUDGMENT AND ORDER Consumer Action because of the civil money penalty paid in this action. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against a 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, that 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.
40.
T3 may liquidate its non-cash assets in a manner reasonably designed to maximize recovery to creditors, and all proceeds of such liquidation shall be distributed according to applicable federal and state laws. Compliance Provisions VI.
Reporting Requirements IT IS FURTHER ORDERED that:
41.
Within 7 days of the Effective Date, the Individual Defendants shall (i) conduct a diligent search and identify and provide to T3 complete contact information for all recipients of T3’s Leads in calendar years 2017 and 2018; and Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 12 of 21 Page ID #:2426
Page 14
STIPULATED FINAL JUDGMENT AND ORDER (ii) certify to the Bureau under oath that the Individual Defendants have complied with subpart (i) of this paragraph.
42.
T3 shall exercise its contractual and other rights to demand from recipients of its Leads in calendar years 2017 and 2018, using the best information reasonably available to it to identify such Lead recipients, the following information in CSV spreadsheet format: (a) identification of each consumer who received a loan derived from a T3-generated Lead when loan documentation showed that the consumer resided in Alabama, Arizona, Arkansas, Colorado, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, or South Dakota, with such identification to include the consumer’s name; residential information as of the consumer’s receipt of the loan proceeds; last known address, telephone numbers, and email addresses; and all unique consumer-identification numbers used by the lender, including social security numbers; (b) for each loan identified in response to part (a) of this paragraph, the original lender, current owner of the loan, and all loan-servicing Persons; (c) for each consumer and loan identified in response to part (a) of this paragraph, the principal amount of the loan, the amount received by the consumer as a loan, and any fees, including origination fees, charged to each consumer, listed separately and categorized by the type of fee; and (d) all consumer-payment information for each loan including the amount Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 13 of 21 Page ID #:2427
Page 15
STIPULATED FINAL JUDGMENT AND ORDER and date of each payment and how such payment was accounted for and applied by the lender. T3 shall make its demands within 21 days of the Effective Date, shall demand immediate production to T3, and shall provide responsive information to the Bureau in electronic form within 10 days of T3’s receipt of such information. 43.
Each Defendant must notify the Bureau of any development that may affect such Defendant’s compliance with obligations arising under this Order, including such Defendant’s operation of, ownership of, direct or indirect control of, or employment with an entity that offers or is a Service Provider to an entity that offers any Consumer Financial Product or Service; the filing of any bankruptcy or insolvency proceeding by or against such Defendant; or a change in such Defendant’s name or address. Each Defendant must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development.
44.
Within 7 days of the Effective Date, each Defendant must: a.
designate and provide to the Bureau at least one telephone number and an email, physical, and postal address as points of contact that the Bureau may use to communicate with such Defendant;
b.
identify in writing to the Bureau by name, telephone number, and physical, postal, email, and Internet addresses, all Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 14 of 21 Page ID #:2428
Page 16
STIPULATED FINAL JUDGMENT AND ORDER businesses of which such Defendant is the majority owner or that such Defendant engages in or directly or indirectly controls that engage in activities relating to Subject Loans; and c.
describe in writing to the Bureau the activities of each business identified in response to paragraph 44.b, including the products and services offered and the means of advertising, marketing, and selling.
45.
Within 7 days of the Effective Date, each Individual Defendant must: a.
identify its telephone numbers and all email, Internet, physical, and postal addresses, including all residences; b.
describe in detail that Individual Defendant’s involvement in every business for which it performs services in any capacity or that it wholly or partially owns, including its title, role, responsibilities, participation, authority, control, and ownership. 46.
Should any Defendant seek to transfer or assign all or part of its ownership of any business of which it is the majority owner or that it directly or indirectly controls that engages in or has ever engaged in activities relating to Subject Loans, such Defendant must, as a condition of transfer or assignment, obtain the written agreement of the transferee or assignee to comply with all Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 15 of 21 Page ID #:2429
Page 17
STIPULATED FINAL JUDGMENT AND ORDER applicable provisions of this Order, including but not limited to paragraphs 22 and 23 and the Compliance Provisions beginning at paragraph 41. 47.
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 such Defendant has complied with each such paragraph and subparagraph this Order; and b.
Attaches a copy of each Order Acknowledgment obtained under Section VII, unless previously submitted to the Bureau. VII.
Order Distribution and Acknowledgement IT IS FURTHER ORDERED that:
48.
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.
49.
Within 30 days of the Effective Date, each Defendant, for any business of which it is the majority owner or that it directly or indirectly controls Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 16 of 21 Page ID #:2430
Page 18
STIPULATED FINAL JUDGMENT AND ORDER that engages in activities relating to any Consumer Financial Product or Service must deliver a copy of this Order to any Persons with responsibilities related to the injunctive relief described in this Order.
50.
For 5 years from the Effective Date, each Defendant, for any business of which it is the majority owner or that it directly or indirectly controls that engages in in activities relating to any Consumer Financial Product or Service, must deliver a copy of this Order to any business entity resulting from any change in business-entity structure, any future board members and executive officers, as well as to any Persons who will have responsibilities related to the injunctive relief described in this Order before they assume their responsibilities. 51.
Each Defendant must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery of the Order, from all Persons receiving a copy of this Order from such Defendant.
VIII.
Recordkeeping IT IS FURTHER ORDERED that:
52.
Each Defendant must create, for at least 10 years from the Effective Date, for any business of which it is the majority owner or that it directly or Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 17 of 21 Page ID #:2431
Page 19
STIPULATED FINAL JUDGMENT AND ORDER indirectly controls that engages in activities relating to any Consumer Financial Product or Service, all documents, records, and data necessary to demonstrate full compliance with each provision of this Order.
53.
Each Defendant must retain these documents for at least 10 years after creation and make them available to the Bureau upon the Bureau’s request. IX.
Notices IT IS FURTHER ORDERED that:
54.
Unless otherwise directed in writing by the Bureau, each Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “Consumer Financial Protection Bureau v. D and D Marketing, Inc., et al., File No. 2013-0574-02” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]: Consumer Financial Protection Bureau ATTENTION: Office of Enforcement, Assistant Director for Enforcement 1700 G Street, N.W.
Washington, DC 20552.
Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 18 of 21 Page ID #:2432
Page 20
STIPULATED FINAL JUDGMENT AND ORDER X.
Compliance Monitoring IT IS FURTHER ORDERED that:
55.
For purposes of monitoring each Defendant’s compliance with this Order, within 14 days of receipt of a written request from the Bureau, each Defendant must submit additional compliance reports or other requested nonprivileged information, which must be sworn under penalty of perjury; provide sworn testimony related to the requirements of this Order; or produce documents related to the requirements of this Order and Defendant’s compliance with those requirements.
56.
The Bureau may communicate directly with each Defendant, unless such Defendant retains counsel related to those communications. 57.
T3 must permit Bureau representatives to interview any employee or other Person affiliated with T3 who has agreed to such an interview. The Person interviewed may have counsel present.
58.
Nothing in this Order limits the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process. Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 19 of 21 Page ID #:2433
Page 21
STIPULATED FINAL JUDGMENT AND ORDER XI.
Release IT IS FURTHER ORDERED that:
59.
The Bureau releases and discharges each Defendant from all potential liability for law violations alleged in the Complaint, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. The Bureau may use the practices alleged in the Complaint in future enforcement actions against any Defendant or other Person, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and ensure compliance with the Order, or to seek penalties for any violations of the Order XII.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
60.
The Court will retain jurisdiction of this matter for purposes of Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 20 of 21 Page ID #:2434
Page 22
STIPULATED FINAL JUDGMENT AND ORDER construction, modification, and enforcement of this Order. It is SO ORDERED.
DATED this _______ day of _________________, 2019.
_________________________________
United States District Judge
28th March Case 2:15-cv-09692-PSG-E Document 243 Filed 03/28/19 Page 21 of 21 Page ID #:2435
Complaint ()
PDF of this document (13 pages)
Page 23
ANTHONY ALEXIS, DC Bar #384545 Email: [email protected] JEFFREY PAUL EHRLICH, FL Bar #51561 Email: [email protected] JOHN C. WELLS, DC Bar #491292 Email: [email protected] KARA K. MILLER, VA Bar #47821 Email: [email protected] Telephone: (202) 435-7825 MEGHAN SHERMAN CATER, NY Bar #4473120 Email: [email protected] Telephone: (202) 435-9165 LEANNE E. HARTMANN, CA Bar #264787 Email: [email protected] Telephone: (415) 844-9787 Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Facsimile: (202) 435-7329 Attorneys for Plaintiff UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION Case No. 2:15-cv-9692 COMPLAINT FOR VIOLATIONS OF THE CONSUMER FINANCIAL PROTECTION ACT OF 2010 Consumer Financial Protection Bureau, Plaintiff, v.
D and D Marketing, Inc., d/b/a T3Leads, Grigor Demirchyan, and Marina Demirchyan, Defendants.
Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 1 of 13 Page ID #:1
Page 24
The Consumer Financial Protection Bureau (Bureau) brings this action against D and D Marketing, Inc., d/b/a T3Leads (T3); Grigor Demirchyan; and Marina Demirchyan under the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, and alleges as follows. Introduction 1.
Defendant T3 is a lead aggregator that purchases consumer information (called leads) from lead generators that market payday and installment loans. T3 then sells the leads to lenders and other lead purchasers. T3 has failed to vet or monitor its lead generators and lead purchasers, which exposed consumers to the risk of having their information purchased by illegal actors. And T3 has allowed its lead generators to attract consumers with misleading statements and has taken unreasonable advantage of consumers’ lack of understanding of the material risks, costs, or conditions of the loan products for which they apply. This conduct was unfair and abusive, in violation of the CFPA, 12 U.S.C. §§ 5531, 5536(a). Jurisdiction and Venue 2.
This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 2 of 13 Page ID #:2
Page 25
3.
Venue is proper because Defendants transact business in this district and reside in this district. 28 U.S.C. § 1391(b), (c); 12 U.S.C. § 5564(f). Parties 4.
The Bureau is an independent agency of the United States charged with regulating the offering and providing of consumer-financial products and services under “Federal consumer financial laws.” 12 U.S.C. § 5491(a). The Bureau is authorized to initiate civil actions in federal district court, by its own attorneys, to address violations of “Federal consumer financial law.” 12 U.S.C. § 5564(a)-(b).
5.
D and D Marketing, Inc., d/b/a T3Leads, is a California S-Corporation with its principal place of business at 4000 West Alameda Avenue, Suite 200, Burbank, California, 91436. At all material times, T3 transacted business in this district and nationwide, selling consumer-loan applications as leads to payday and installment lenders. The lenders to which T3 sells leads are “covered persons” under the CFPA—they extend credit and service payday or installment loans for use by consumers for personal, family, or household purposes. 12 U.S.C. § 5481(15)(A)(i). T3 is therefore a “service provider” under the CFPA. 12 U.S.C. § 5481(26)(A).
6.
Grigor Demirchyan is President, CEO, CFO, and T3’s sole Director, provides accounting services for T3, and claims to have been an owner of T3 since Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 3 of 13 Page ID #:3
Page 26
its founding. Grigor Demirchyan resides in this district and, in connection with the matters alleged, transacted business here.
7.
Marina Demirchyan is Vice President of T3 and provides accounting services for T3. Marina Demirchyan resides in this district and, in connection with the matters alleged, transacted business here.
Factual Background 8.
T3 has a network of lead generators from which it buys leads and a separate network of purchasers to which it sells leads. Lead generators do not know the identities of the lead purchasers in T3’s network or details about the terms of the credit products offered to consumers, and the lead purchasers do not know the identities of the lead generators or the methods they use to attract consumers.
9.
Lead generators operate websites that advertise loans and through which consumers submit loan applications. Lead generators sell the applications to T3, and T3 sells the applications to lead purchasers. 10.
The purchasers are online payday and installment lenders, as well as data managers, data brokers, and remarketing companies. Data managers are intermediaries for lenders that outsource their lead-purchasing activities, and data brokers are lead aggregators that have their own networks of lead purchasers to which they sell leads after they purchase them from T3. T3 does not know the end Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 4 of 13 Page ID #:4
Page 27
purchasers of the leads it sells to data managers or data brokers. Remarketing companies buy consumer information to send marketing materials to consumers for products other than the loans for which consumers applied. 11.
To filter leads to lead purchasers, T3 uses a “ping tree,” which sets the order in which lead purchasers have the option to purchase a given lead from T3. The position of each purchaser in the ping tree is determined primarily by the price the purchaser is willing to pay for a lead; the higher the price, the better the purchaser’s position in the ping tree.
12.
A consumer who submits a loan application on a lead generator’s webpage is immediately redirected from that page to a lender’s webpage. This automated process takes just seconds, and the consumer is not informed that the loan application has been sold to T3 or sold by T3 to a lead purchaser. 13.
Before T3 “on-boards” a prospective lead generator into its network, the company performs an introductory review of the lead generator’s website to check for misleading or inaccurate statements to consumers. But lead generators can change their websites without any notice to T3, and T3 does not monitor those websites after lead generators are on-boarded.
14.
T3 regularly purchases leads from lead generators whose websites include misrepresentations that are likely to mislead consumers into believing that lenders in T3’s network have been evaluated and meet certain standards. Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 5 of 13 Page ID #:5
Page 28
15.
Lead generators have incorrectly represented that they were themselves lenders. Lead generators also falsely suggested that they would help consumers find the best rates or lowest fees or that they would review consumers’ applications to match them with appropriate lenders. 16.
T3’s lead generators typically do not provide loans directly to consumers, do not select the lenders that will see a consumer’s application, and have no involvement in or knowledge of the terms of the loan a consumer receives after T3 sells the lead. Lead generators do nothing more than forward applications to T3.
17.
T3 does not know the loan terms that consumers will be offered by its lead purchasers, and T3 makes no attempt to match consumers with the best loan for their needs, as consumers are led to believe by lead generators. 18.
T3 does not require data managers or data brokers to disclose the ultimate purchasers of T3’s leads. T3 therefore does not know the identity of all lenders that obtain consumer applications through its lead-purchaser network. 19.
T3 does not vet or monitor the lead purchasers in its network for compliance with applicable laws.
20.
In 2013, T3 requested information regarding whether its purchasers complied with the laws of the states where they made loans. Many of its purchasers failed to respond to this request, but T3 continued to do business with them. Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 6 of 13 Page ID #:6
Page 29
21.
Lead purchasers provide regular feedback to T3 regarding the quality of its leads, including the number of leads that convert to loans and reasons why leads did not convert. T3 uses this information to refine its lead processing to optimize lead conversion.
22.
Many of T3’s lenders are entities organized by Indian tribes, known as tribal lenders, or organized under the laws of foreign jurisdictions, known as offshore lenders. These lenders typically claim immunity from state regulation, do not comply with the laws of the states where the consumers to which they make loans are located, and do not concede that they are subject to jurisdiction in a forum convenient to the consumer.
23.
Tribal lenders and offshore lenders typically charge higher interest rates than lenders adhering to state laws. Because they charge higher interest rates, these lenders generally are willing to pay more for leads and thus rank at the top of the T3 ping tree.
24.
Many of the tribal lenders among T3’s purchasers offer contracts providing for the application of tribal law to the contract and providing an exclusive tribal dispute-resolution process.
25.
Certain entities operating or purporting to operate in the payday or installment-loan industry have engaged in a variety of fraudulent schemes involving leads purchased from lead aggregators. T3 knew or should have known Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 7 of 13 Page ID #:7
Page 30
of such fraudulent actors in the payday or installment-loan industry and the risk of illegal actors purchasing its leads.
Count I Unfair Acts and Practices in Violation of the CFPA Against All Defendants 26.
Plaintiff realleges and incorporates by reference paragraphs 1-25 of this Complaint.
27.
An act or practice is unfair if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. § 5531(c)(1).
28.
T3’s lead generators make statements to consumers regarding the lenders that will receive the consumers’ information and the loans those lenders will offer.
29.
T3 knows or should know of the lead generators’ statements and that they are often false and misleading.
30.
T3 does not vet or monitor its lead purchasers for illegal activity. 31.
T3 does not require data managers or data brokers to disclose the end purchasers of leads.
Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 8 of 13 Page ID #:8
Page 31
32.
Consumers are not notified that T3 is involved with processing their loan applications and cannot reasonably investigate or assess the reliability of the lenders to which their applications are ultimately sold. 33.
T3’s conduct is likely to cause substantial injury to consumers. 34.
The potential benefit of obtaining a loan is not outweighed by the likelihood of injury from T3’s failure to vet and monitor its lead purchasers. 35.
T3’s conduct constitutes an unfair act or practice under 12 U.S.C. §§ 5531(c)(1), 5536(a)(1)(B).
36.
Grigor Demirchyan knowingly or recklessly provides substantial assistance to T3, a service provider engaged in unfair acts and practices, in violation of the CFPA, 12 U.S.C. § 5536(a)(3). 37.
Marina Demirchyan knowingly or recklessly provides substantial assistance to T3, a service provider engaged in unfair acts and practices, in violation of the CFPA, 12 U.S.C. § 5536(a)(3). Count II Abusive Acts and Practices in Violation of CFPA Against All Defendants 38.
Plaintiff realleges and incorporates by reference paragraphs 1-25 of this Complaint.
Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 9 of 13 Page ID #:9
Page 32
39.
An act or practice is abusive if it “takes unreasonable advantage of . . . a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service.” 12 U.S.C. § 5531(d)(2)(A). 40.
Contrary to representations by lead generators, consumers are likely to be steered, through T3’s ping tree, to lenders offering less-favorable terms than may otherwise be available to them. In particular, consumers are likely to be steered to lenders that charge higher interest rates than lenders that comply with state laws, that do not adhere to state usury limits, or that claim immunity from state regulation and jurisdiction. Consumers also are likely to be steered to lenders that offer contracts providing for the application of tribal law to the contract and providing an exclusive tribal dispute-resolution process. 41.
The possibility of being matched by T3 with a lender that offers lessfavorable terms than may otherwise be available is not disclosed to consumers by lead generators. Only after consumers are filtered through the T3 ping tree and redirected from a lead generator’s page to a lender’s e-signature page can consumers find the offered terms and links to lengthy disclosures where lenders reveal material terms such as their tribal affiliation and claimed immunity. 42.
The inaccurate statements by T3’s lead generators decrease the likelihood that consumers will read the lengthy disclosures on a lender’s webpage. Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 10 of 13 Page ID #:10
Page 33
43.
The cost of a loan relative to what other lenders might offer, the law governing a loan contract, including whether the lender complies with laws of the consumer’s state, and the available forum for raising disputes with the lender or in which the consumer might be sued by the lender are material risks, costs, or conditions.
44.
T3 knows or should know of lead generators’ representations to consumers. T3 knows or should know that its process results in many, if not most, leads being steered to lenders that make loans to consumers that do not comport with express or implied representations made on lead-generator websites. 45.
T3’s conduct takes advantage of consumers’ lack of understanding of the material risks, costs, or conditions of the products for which they apply and constitutes an abusive act or practice under 12 U.S.C. §§ 5531(d)(2)(A), 5536(a)(1)(B).
46.
Grigor Demirchyan knowingly or recklessly provides substantial assistance to T3, a service provider that engaged in abusive acts and practices, in violation of 12 U.S.C. § 5536(a)(3).
47.
Marina Demirchyan knowingly or recklessly provides substantial assistance to T3, a service provider that engaged in abusive acts and practices, in violation of 12 U.S.C. § 5536(a)(3).
Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 11 of 13 Page ID #:11
Page 34
Prayer for Relief Wherefore, the Plaintiff requests that the Court: 1.
award injunctive relief as may be necessary to prevent consumer injury during the pendency of this action and to preserve the possibility of effective final relief; 2.
permanently enjoin Defendants from committing future violations of the CFPA or any provision of “Federal consumer financial law,” as defined by 12 U.S.C. § 5481(14);
3.
grant additional injunctive relief as may be just and proper; 4.
award damages or other monetary relief against Defendants; 5.
order Defendants to pay redress to harmed consumers; 6.
order disgorgement of ill-gotten revenues from Defendants; 7.
impose civil money penalties against Defendants; 8.
order Defendants to pay Plaintiff’s costs and fees incurred in connection with prosecuting this action; and 9.
award additional relief as the Court may determine to be just and proper.
Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 12 of 13 Page ID #:12
Page 35
Dated: December 17, 2015 Respectfully submitted, Anthony Alexis (DC Bar #384545) Enforcement Director Jeffrey Paul Ehrlich (FL Bar #51561) Deputy Enforcement Director John C. Wells (DC Bar # 491292) Assistant Litigation Deputy /s/ Leanne E. Hartmann Leanne E. Hartmann (CA Bar #264787) Email: [email protected] Telephone: (415) 844-9787 Kara K. Miller (VA Bar #47821) Email: [email protected] Telephone: (202) 435-7825 Meghan Sherman Cater (NY Bar #4473120) Email: [email protected] Telephone: (202) 435-9165 Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Facsimile: (202) 435-7329 Attorneys for the Consumer Financial Protection Bureau Case 2:15-cv-09692 Document 1 Filed 12/17/15 Page 13 of 13 Page ID #:13