Freedom Debt Relief, LLC and Andrew Housser
Documents in this case
- Amended complaint · · 20 p.
- Stipulation · · 21 p.
Case summary
The Bureau’s lawsuit alleged that Freedom Debt Relief violated the Telemarketing Sales Rule by charging advance fees and failing to inform consumers of their rights to funds they deposited with the company. The Bureau also alleged that Freedom Debt Relief violated the Consumer Financial Protection Act of 2010 by charging consumers without settling their debts as promised, charging consumers after having them negotiate their own settlements with creditors, and misleading consumers about the company’s fees and its ability to negotiate directly with all of a consumer’s creditors.
Today’s settlement enjoins Freedom Debt Relief from engaging in this conduct in the future. The company has also agreed to a consent order with the Federal Deposit Insurance Corp (FDIC). The Bureau will remit $493,500 of the $5 million civil penalty it assessed in light of the penalty that the company was ordered to pay the FDIC. This settlement is subject to approval by the court.
Amended complaint ()
PDF of this document (20 pages)
Page 2
First Amended Complaint Case No. 17-cv-6484-EDL
MAXWELL S. PELTZ, CA Bar No. 183662 Email: [email protected] Phone: 415-633-1328 PATRICIA HENSLER, FL Bar No.102303 Phone: 202-435-7829
Email: [email protected] LAWRENCE D. BROWN, TX Bar No. 24040586 Phone: 202-435-7116 Email: [email protected] HAI BINH NGUYEN, CA Bar No. 313503 Phone: 202-435-7251 Email: [email protected] Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Fax: 415-844-9788
Attorneys for Plaintiff Consumer Financial Protection Bureau
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
Consumer Financial Protection Bureau, Plaintiff, v.
Freedom Debt Relief, LLC and Andrew Housser, Defendants.
Case No. 3:17-cv-6484
FIRST AMENDED COMPLAINT
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The Consumer Financial Protection Bureau (“Bureau”) files this First Amended Complaint against Freedom Debt Relief, LLC (“Freedom”) and Andrew Housser (collectively, “Defendants”) and alleges as follows: Introduction 1.
The Bureau brings this action under the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. §§ 6102(c), 6105(d) (2012); the Telemarketing Sales Rule (“TSR”), 16 C.F.R. pt. 310 (1995) (revised 2010); and §§ 1031, 1036(a), 1054, and 1055 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565 (2012), in connection with the marketing and sale of debt-settlement or debtrelief services.
Jurisdiction 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.
Venue 3.
Venue is proper in this district because Freedom and Housser are located, reside, and do business here. 12 U.S.C. § 5564(f). Intradistrict Assignment 4.
Under the Local Rules of Practice in Civil Proceedings before the United States District Court for the Northern District of California, this action arises in the county of San Mateo because a substantial part of the events or omissions giving rise to the claims occurred there. See Civil L.R. 3-2(c). This action should therefore be assigned to the San Francisco Division or the Oakland Division of this Court. See Civil L.R. 3-2(d).
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Parties 5.
The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). It has independent litigating authority and may secure appropriate relief for violations of the CFPA, 12 U.S.C. § 5564(a)-(b), and the TSR, 15 U.S.C. §§ 6102(c), 6105(d).
6.
Freedom, a Delaware corporation, maintains its principal place of business at 1875 S. Grant St., Suite 400, San Mateo, CA 94402. Freedom offers and provides “financial advisory services,” including debt-settlement services, to consumers owing unsecured debts to creditors. Those activities are “consumer financial services or products” under the CFPA. 12 U.S.C. § 5481(5)(A), (15)(A)(viii)(II). Freedom is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6). Additionally, in connection with a campaign to use telephones to make interstate phone calls to consumers and to use advertisements to solicit calls from consumers to induce them to purchase its services, wherein Freedom offers 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, Freedom initiates and receives telephone calls from consumers. Thus, Freedom is a “telemarketer” offering a “debt relief service” under the TSR. 16 C.F.R. § 310.2(o), (ff).
7.
Andrew Housser is the co-founder and co-CEO of Freedom. At all times material to this Complaint, Housser has exercised substantial control over and involvement in the establishment of Freedom’s business policies and practices described in the Complaint. At all times material to this Complaint, Housser has exercised managerial responsibility for Freedom and has materially participated in the conduct of its affairs. Housser is therefore a “related person.” 12 U.S.C. § 5481(25)(C)(i)-(ii). Because Housser is a “related person,” he is deemed a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B). Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 3 of 20
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Factual Background 8.
Freedom is a consumer-debt-settlement company. Established in 2002, Freedom claims that it has successfully negotiated and settled consumer debts in excess of $7 billion for over 450,000 consumers who have enrolled in its debt-settlement program.
9.
Freedom required consumers enrolled in its debt-settlement program to deposit funds into dedicated accounts with an FDIC-insured bank. Freedom claimed that once there were sufficient funds in those accounts to make settlement offers to consumers’ creditors, Freedom would negotiate with the creditors to persuade them to accept less than the amounts actually owed. 10.
Freedom instructed its customers who had been making payments to their creditors to withhold any further payments and to change their billing addresses with their creditors to Freedom’s Arizona address, 4940 South Wendler Drive, Tempe, AZ 85828.
11.
Freedom would approve consumers for enrollment in its debtsettlement program even if they were not delinquent on any debts at the time of enrollment. Freedom did not independently verify hardship claims or require consumers to provide supporting documentation for hardship claims as part of its underwriting efforts.
12.
When a debt enrolled in its debt-settlement program was settled or a creditor ceased attempts to collect the debt (in the absence of a settlement), Freedom would charge consumers fees that typically ranged between 18% and 25% of the enrolled debt amount.
Freedom’s Enrollment of Consumers and Lack of Disclosure 13.
Freedom’s employees received phone calls from prospective customers and initiated phone calls to prospective customers across the United States to persuade them to enroll in its debt-settlement program. Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 4 of 20
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14.
Before consumers enrolled in Freedom’s program, Freedom pulled credit reports of prospective customers. Freedom used the credit reports to confirm in its telephone discussions with prospective customers the identities of their creditors, the amounts owed to each creditor, the underlying nature of the debt owed to each creditor, and the payment status for each debt. 15.
Freedom’s underwriting department prepared a “Schedule of Creditors and Debt” listing each consumer’s creditors and the amounts owed to those creditors. The Schedule of Creditors and Debt was submitted to prospective customers for review and execution, and it became “Exhibit A” of the Debt Resolution Agreement that consumers entered into with Freedom for debt-settlement services.
16.
While Freedom’s Debt Resolution Agreement explained that consumers could withdraw from the program and terminate the agreement, it did not notify consumers that if they withdrew from the program, they would receive all funds in their accounts, minus any fees that Freedom had already earned.
Freedom’s Knowledge That Certain Creditors Would Not Negotiate 17.
Freedom has long known that certain creditors have policies against negotiating with debt-settlement companies such as Freedom. 18.
For example, in late 2011, KPIX-TV (“CBS 5”), a local San Francisco television station, aired a story about two Freedom customers who complained about Freedom’s inability to settle debts they owed to Chase. Chase confirmed to CBS 5 that it “does not work with debt-settlement companies.” So as early as 2011, Freedom had notice and knew or should have known that Chase would not negotiate as a matter of corporate policy.
19.
Freedom has actively sought to reverse creditors’ policies against negotiating with debt-settlement companies. For years, it has maintained a team Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 5 of 20
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dedicated to meeting with creditors that have frequently refused to negotiate with Freedom to persuade them to change their policies. On occasion, Housser accompanied this “creditor development team” on its meetings. And for years, Housser has received regular updates (typically every two weeks) from the “creditor development team” and has met frequently with the team to learn about its efforts to persuade creditors to negotiate with Freedom. 20.
In 2015, Freedom requested an in-person meeting with American Express. Freedom representatives met with American Express representatives in the summer of 2015 in an effort to have American Express reverse its policy against negotiating with debt-settlement companies. Freedom did not succeed, and American Express’s policy remained unchanged. 21.
In 2016, Freedom requested an in-person meeting with Chase. Freedom representatives met with Chase representatives in the summer of 2016 in an effort to have Chase reverse its policy against negotiating with debtsettlement companies. Freedom did not succeed, and Chase’s policy remained unchanged.
22.
Freedom has held multiple in-person meetings with Discover since 2015—including in October 2015, April 2016, and March 2017—in an effort to have Discover reverse its policy against negotiating with debt-settlement companies. Freedom’s efforts have been unsuccessful; Discover’s policy has remained unchanged.
Freedom’s False Claims That All Creditors Would Negotiate 23.
Despite knowing that certain creditors would not negotiate with it, Freedom told consumers that it could negotiate all of their debts. 24.
In company scripts, Freedom instructed employees in pre-enrollment telephone calls to mention its “professional Negotiations Division of 200 negotiators” and to tell consumers that Freedom would “negotiate directly with Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 6 of 20
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[their] creditors to settle [their] debt for less than” what was owed. In marketing materials, Freedom touted its “negotiating power.” Freedom did not tell consumers that there might be certain creditors with which it would be unable to “negotiate directly.”
25.
Since at least 2012, Section 2 of Freedom’s Debt Resolution Agreement consistently represented to consumers that Freedom would be “negotiating settlements.” Section 2 further represented that “each Creditor listed on Exhibit A will work with us to negotiate a settlement of your Debts.” Exhibit A of the Debt Resolution Agreement, the “Schedule of Creditors and Debt,” listed all debts that a consumer enrolled in Freedom’s program and the creditors associated with those debts.
26.
Freedom made this representation even when the creditors listed on the Schedule of Creditors and Debt included Chase, American Express, Discover, Macy’s, Synchrony Bank, or other creditors either known to Freedom to have policies against working with debt-settlement companies or with track records of repeatedly refusing to negotiate with Freedom. 27.
Since at least 2013, when creditors refused to negotiate with Freedom, Freedom would tell some consumers to negotiate with their creditors directly and would give these consumers instructions on how to negotiate a settlement on their own. Typically, it was only after consumers had been enrolled in Freedom’s program for months or years that Freedom revealed that one or more of the consumers’ creditors refused to negotiate with Freedom and told consumers that they would need to negotiate directly with those creditors. When consumers acting on their own were able to negotiate a settlement with a creditor, Freedom still charged consumers its fee, usually in the thousands of dollars per enrolled debt—even when Freedom had not directly negotiated with the creditor (or, in some cases, even communicated with the creditor). Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 7 of 20
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Freedom’s Instruction to Consumers to Deceive Creditors 28.
As part of the instructions given to consumers for negotiating settlements on their own, Freedom told consumers to expressly mislead their creditors when asked directly about their enrollment in a debt-settlement program. Freedom’s instructions to consumers stated: “If they ask you if you are enrolled into our program, let them know that as it pertains to this account, you are looking to resolve it on your own.” Freedom directed consumers to make this representation to a creditor when the consumers were in fact enrolled in Freedom’s program to settle that creditor account. 29.
Freedom instructed consumers to represent to creditors that the source of settlement funds was from family, friends, tax refunds, or the sale of a vehicle. But this was not true; in fact, the funds came either from Freedom’s affiliated loan program or from the funds consumers deposited in the dedicated account set up upon their enrollment in Freedom’s debt-settlement program. 30.
Freedom did not disclose to consumers during the enrollment process that Freedom might instruct them to mislead their creditors in the event those creditors refused to negotiate with Freedom. Freedom’s Deception of Consumers about Chargeable Events 31.
Since at least 2012, Section 1 of Freedom’s Debt Resolution Agreement stated, “We will not charge any fee for our services until we successfully resolve a debt for you and you have made a payment toward the settlement of that debt.” This is consistent with Freedom’s pre-enrollment telephone scripts, where Freedom instructed its employees to tell consumers that “NO FEES ARE ACCEPTED UNTIL WE SETTLE A DEBT and then only for the debt that was settled!”
32.
Contrary to this assertion, Freedom charged consumers its fee even when Freedom had not successfully settled consumers’ debts. Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 8 of 20
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33.
For example, Freedom charged its fee when it had not directly negotiated with the creditors—or even communicated with the creditors— because the consumers had negotiated a binding settlement on their own. 34.
Similarly, Freedom charged its fee when a creditor, in the absence of a binding settlement, stopped collecting from a consumer, sometimes following a charge-off. In such circumstances, the consumer had not executed a settlement agreement and had made no settlement payment to the creditor or any debt collector before Freedom charged its fee. These consumers nevertheless could still be subject to collection efforts, and their credit reports could continue to reflect an unpaid or delinquent debt in the trade line for that creditor. 35.
Freedom did not disclose to consumers that it would charge consumers its fee in such scenarios. And consumers did not agree to pay fees in such scenarios when they enrolled in Freedom’s program. 36.
Freedom’s representations— regarding its ability to negotiate with creditors, creditors’ willingness to negotiate with Freedom, and the circumstances in which it would charge fees— were likely to mislead consumers acting reasonably when enrolling in Freedom’s debt-settlement program and when deciding whether to remain enrolled.
37.
During the period that consumers were enrolled in Freedom’s program—typically months or years—Freedom required consumers to deposit funds into dedicated accounts and instructed consumers that if they had been making payments to their creditors, they should withhold any further payments and instead make payments into the dedicated accounts. This included consumers who had not previously been delinquent on their accounts. Such extended delinquencies negatively impacted consumers’ credit, resulted in consumers being charged late fees, penalties, and additional interest, and Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 9 of 20
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subjected consumers to ongoing collection activity and threatened and actual legal action by creditors.
38.
Consumers who were charged fees after having to negotiate a settlement on their own or after Freedom allowed a charge-off instead of negotiating a settlement typically had been enrolled in Freedom’s program for months or years, during which they were subject to the consequences of extended delinquencies.
Housser’s Substantial Involvement in Freedom’s Practices 39.
Housser has had the authority and responsibility to approve Freedom’s policies and practices.
40.
Housser has had the authority and responsibility to approve the content of the Debt Resolution Agreements.
41.
Housser’s name and signature have appeared on all Debt Resolution Agreements with consumers.
42.
Housser has known that the statement included in all Debt Resolution Agreements that creditors would work with Freedom to negotiate settlements was not always true with respect to certain creditors. Housser has known that certain creditors had policies against negotiating with debtsettlement companies. Housser has known that Freedom was often unable to negotiate with creditors who had such policies. 43.
Housser has known that the statement included in all Debt Resolution Agreements that consumers would only be charged if Freedom negotiated a settlement and consumers made payments toward those settlements was not true. Housser has known that Freedom would charge consumers in other undisclosed scenarios.
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44.
Housser has approved Freedom’s practice of coaching consumers when creditors would not negotiate with Freedom and has approved charging consumers if they later settled their debts with creditors. 45.
Housser has had knowledge of and control over Freedom’s feecharging practices, including its charging of fees in the absence of a binding settlement or any consumer payment on a settlement. Count I Defendants’ Violations of the CFPA (Deceiving Consumers Regarding Creditors’ Willingness to Negotiate with Freedom) 46.
The Bureau re-alleges and incorporates by reference paragraphs 1-45. 47.
In connection with marketing its services, Freedom touted its “negotiating power” and has represented to consumers that its negotiators would “negotiate directly” with their creditors. In many instances, there was a significant chance that Freedom would be unable to negotiate directly with certain creditors having policies against negotiating with debt-settlement companies. Freedom has known of these creditors’ policies and of the significant chance that it would be unable to negotiate directly with those creditors, and Freedom has not notified consumers of these facts. 48.
Freedom has represented to consumers in its customized Debt Resolution Agreements that it believed all creditors, including creditors with which Freedom was often unable to negotiate, would work with Freedom to negotiate a settlement of debts.
49.
Freedom’s statements have created the false net impression that Freedom itself would be able to negotiate directly with all creditors, including those that had policies against negotiating with debt-settlement companies. 50.
Freedom’s statements were false or misleading, were material to consumers’ decisions to enroll in Freedom’s debt-settlement program, and Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 11 of 20
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constituted deceptive acts and practices, in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). 51.
Housser has had significant responsibility for establishing Freedom’s policies and practices, and he has had substantial control over Freedom’s operations, including the content of its Debt Resolution Agreements. 52.
Housser directly contributed to the development, review, and approval of materials containing the aforementioned deceptive statements. 53.
Housser’s name and signature appeared on materials containing the aforementioned deceptive statements.
54.
Housser has committed or engaged in deceptive acts or practices in connection with the offering of a consumer-financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
55.
Housser knowingly or recklessly has provided substantial assistance to Freedom, a covered person engaged in deceptive acts and practices, in violation of the CFPA, 12 U.S.C. § 5536(a)(3). Count II Defendants’ Violations of the CFPA (Deceiving Consumers Regarding Charges) 56.
The Bureau re-alleges and incorporates by reference paragraphs 1-45. 57.
Freedom has represented to consumers that it would not charge any fee for its services until it settled a debt and consumers have made a settlement payment to the creditor. In fact, Freedom has charged consumers its fee in cases where it did not settle the consumer’s debt and the consumer did not make a settlement payment.
58.
Freedom’s statements concerning the circumstances when consumers would be charged fees were false or misleading, were material to consumers’ decisions to enroll in Freedom’s debt-settlement program, and constituted Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 12 of 20
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deceptive acts and practices, in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). 59.
Housser has had significant responsibility for establishing Freedom’s policies and practices, and he has had substantial control over Freedom’s operations, including the content of its Debt Resolution Agreements. 60.
Housser directly contributed to the development, review, and approval of materials containing the aforementioned deceptive statements. 61.
Housser’s name and signature appeared on materials containing the aforementioned deceptive statements.
62.
Housser has committed or engaged in deceptive acts or practices in connection with the offering of a consumer-financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
63.
Housser has knowingly or recklessly provided substantial assistance to Freedom, a covered person engaged in deceptive acts and practices, in violation of the CFPA, 12 U.S.C. § 5536(a)(3). Count III Defendants’ Violations of the CFPA (Abusively Requiring Consumers to Negotiate on their Own) 64.
The Bureau re-alleges and incorporates by reference paragraphs 1-45. 65.
When Freedom has been unable to negotiate with creditors, Freedom has told some consumers to negotiate with their creditors directly and has given them instructions on how to negotiate settlements on their own. 66.
Freedom’s instructions to these consumers included directions to mislead their creditors by concealing the fact of their enrollment in Freedom’s debt-settlement program and misrepresenting the source of the funds available for settlement.
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67.
Freedom did not disclose to consumers before they enrolled in its program that they might be required to negotiate with creditors on their own, including by deceiving their creditors, in order to settle their debts. Freedom also did not disclose to consumers before they enrolled in its program that Freedom charged consumers its fee, usually in the thousands of dollars per enrolled debt, even when consumers themselves—not Freedom—negotiated the debt settlements.
68.
Freedom repeatedly has represented to consumers that Freedom would be able to negotiate with their creditors—including the specific creditors referenced in consumers’ customized Debt Resolution Agreements—and did not ensure that consumers understood that certain creditors might not negotiate with Freedom. Accordingly, many of these consumers did not understand that a material condition of Freedom’s debt-settlement program would be having to negotiate with creditors themselves. Typically, Freedom only revealed to consumers that one or more of their creditors would not negotiate with Freedom and told consumers that they would need to negotiate directly with those creditors after consumers had been enrolled in Freedom’s program for months or years—having borne the costs and consequences of extended delinquencies and forgone other debt-settlement alternatives.
69.
Freedom took unreasonable advantage of consumers’ lack of understanding by, with full knowledge of its own misrepresentations and failure to correct them, enrolling consumers in its debt-settlement program who reasonably might have chosen not to enroll if they understood that they might have to negotiate with creditors themselves and be instructed by Freedom to mislead those creditors during negotiations.
70.
Freedom’s practice of enrolling consumers in its debt-settlement program under these circumstances took unreasonable advantage of the Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 14 of 20
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consumers’ lack of understanding of the material risks, costs, or conditions of enrolling in Freedom’s debt-settlement program, and it is abusive in violation of §§ 1031(d)(2)(A) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(d)(2)(A), 5536(a)(1)(B).
71.
Housser has had significant responsibility for establishing Freedom’s policies and practices, and he has had substantial control over Freedom’s operations, including the content of its Debt Resolution Agreements and the guidance offered to consumers regarding negotiating with their creditors. 72.
Housser directly contributed to the development, review, and approval of Freedom’s Debt Resolution Agreements and the guidance they offer to consumers.
73.
Housser’s name and signature appeared on the Debt Resolution Agreements.
74.
Housser has committed or engaged in abusive acts or practices in connection with the offering of a consumer-financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
75.
Housser has knowingly or recklessly provided substantial assistance to Freedom, a covered person engaged in abusive acts and practices, in violation of the CFPA, 12 U.S.C. § 5536(a)(3).
Count IV Defendants’ Violations of the TSR and the CFPA (Failure to Clearly and Conspicuously Disclose Consumers’ Rights to Funds) 76.
The Bureau re-alleges and incorporates by reference paragraphs 1-45. 77.
It is a violation of the TSR for any seller or telemarketer in connection with the sale of any debt-relief service requiring customers to place funds in an account at an insured financial institution to fail to disclose truthfully, in a clear and conspicuous manner before customers consent to pay for those services, that Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 15 of 20
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customers own the funds held in the accounts, that customers may withdraw from the debt-relief service at any time without penalty, and that, if customers withdraw, they must receive all funds in the accounts other than funds earned by the debt-relief service. 16 C.F.R. § 310.3(a)(1)(viii)(D). 78.
Freedom has requested or required its customers to place funds in an account at an insured financial institution. 79.
Freedom did not clearly and conspicuously disclose that if a customer withdrew, the customer must receive all funds in the account, other than funds earned by Freedom.
80.
The Bureau is authorized to enforce the Telemarketing Act with respect to the offering or provision of a consumer financial product or service subject to the CFPA. 15 U.S.C. § 6105(d).
81.
Freedom’s failure to disclose in a clear and conspicuous manner that consumers would receive all funds in the account was a deceptive act or practice in telemarketing, in violation of the TSR. 16 C.F.R. § 310.3(a)(1)(viii)(D). 82.
In addition, Freedom’s violation of the TSR is treated as a violation of a rule under § 1031 of the CFPA. 15 U.S.C. § 6102(c). Freedom therefore has also violated the CFPA. 12 U.S.C. § 5536(a)(1)(A). 83.
Housser directly contributed to the development, review, and approval of Freedom’s Debt Resolution Agreements, and Housser’s name and signature appeared on the Debt Resolution Agreements. 84.
Housser knew or consciously avoided knowing that Freedom failed to clearly and conspicuously disclose that consumers must receive all funds in the account other than fees earned by Freedom upon withdrawal, in violation of the TSR.
85.
Housser has violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b). Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 16 of 20
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86.
Housser’s violation of the TSR is treated as a violation of a rule under § 1031 of the CFPA. 15 U.S.C. § 6102(c). Housser has therefore violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A). 87.
Housser has knowingly or recklessly provided substantial assistance to Freedom’s violation of the TSR. Housser has therefore violated § 1036(a)(3) of the CFPA. 12 U.S.C. § 5536(a)(3).
Count V Defendants’ Violations of the TSR and the CFPA (Charging Fees in the Absence of a Settlement) 88.
The Bureau re-alleges and incorporates by reference paragraphs 1-45. 89.
It is a violation of the TSR for any seller or telemarketer in connection with the sale of any debt-relief service to request or receive payment of any fee or consideration for any debt-relief service until and unless: (1) 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; (2) 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 (3) where the debts are renegotiated, settled, reduced, or otherwise altered individually, the fee or consideration must be proportional to the debts that have been so settled, or else charged at a flat percentage of the amount saved as a result of such settlements. 16 C.F.R. § 310.4(a)(5)(i).
90.
Freedom has requested and received fees from consumers in connection with enrolled debts even though Freedom had not renegotiated, settled, reduced, or otherwise altered the terms of these debts pursuant to a settlement agreement, debt-management plan, or other such valid contractual Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 17 of 20
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agreement executed by the consumers and even though the consumers had not made any payments pursuant to a settlement agreement, debt-management plan, or other valid contractual agreement between the consumers and the creditor or debt collector.
91.
Where consumers’ debts were purportedly renegotiated, settled, reduced, or otherwise altered individually, Freedom has also requested and received fees from consumers in connection with enrolled debts that were not proportional due to the absence of a binding settlement and that were also not charged at a flat percentage of the amount saved as a result of such settlements. 92.
The Bureau is authorized to enforce the Telemarketing Act with respect to the offering or provision of a consumer financial product or service subject to the CFPA. 15 U.S.C. § 6105(d).
93.
Freedom’s requesting or receiving payment of fees from consumers under the circumstances described in paragraph 90 was an abusive act or practice in telemarketing, in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i). 94.
In addition, Freedom’s violation of the TSR is treated as a violation of a rule under § 1031 of the CFPA. 15 U.S.C. § 6102(c). Freedom therefore has also violated the CFPA. 12 U.S.C. § 5536(a)(1)(A). 95.
Housser has had significant responsibility for establishing Freedom’s policies and practices, and he has had substantial control over Freedom’s operations, including its fee-charging practices. 96.
Housser knew or consciously avoided knowing that Freedom requested or received payment of fees from consumers under the circumstances described in paragraph 90.
97.
Housser has violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b). Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 18 of 20
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98.
Housser’s violation of the TSR is treated as a violation of a rule under § 1031 of the CFPA. 15 U.S.C. § 6102(c). Housser has therefore violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A). 99.
Housser has knowingly or recklessly provided substantial assistance to Freedom’s violation of the TSR. Housser has therefore violated § 1036(a)(3) of the CFPA. 12 U.S.C. § 5536(a)(3).
Demand for Relief The Bureau requests that the Court:
a.
permanently enjoin Defendants from committing future violations of the Telemarketing Act, 15 U.S.C. §§ 6102(c), 6105(d); the TSR, 16 C.F.R. pt. 310; and §§ 1031, 1036(a) of the CFPA, 12 U.S.C. §§ 5531, 5536(a), and any other provision of “Federal consumer financial law,” as defined by 12 U.S.C. § 5481(14);
b.
grant additional injunctive relief as the Court may deem just and proper;
c.
order Defendants to pay redress to consumers harmed by its unlawful conduct;
d.
order Defendants to disgorge all ill-gotten gains; e.
impose on Defendants civil money penalties; f.
award costs against Defendants; and g.
award additional relief as the Court may determine to be just and proper.
Dated: June 1, 2018 Respectfully Submitted, Kristen A. Donoghue (DC Bar No. 456707) Enforcement Director Jeffrey Paul Ehrlich (FL Bar No. 51561) Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 19 of 20
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Deputy Enforcement Director Kara Miller (VA Bar No. 47821) Assistant Litigation Deputy s/ Maxwell S. Peltz Maxwell S. Peltz (CA Bar No. 183662) Patricia H. Hensler (FL Bar No. 102303) Lawrence D. Brown (TX Bar No. 24040586) Hai Binh Nguyen (CA Bar No. 313503) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Telephone (Peltz): 415-633-1328 Telephone (Hensler): 202-435-7829 Telephone (Brown): 202-435-7116 Telephone (Nguyen): 202-435-7251 Fax: 415-844-9788 Email: [email protected] Email: [email protected] Email: [email protected] Email: [email protected]
Attorneys for Consumer Financial Protection Bureau Case 3:17-cv-06484-EDL Document 55 Filed 06/01/18 Page 20 of 20
Stipulation ()
PDF of this document (21 pages)
Page 22
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
Consumer Financial Protection Bureau, Plaintiff,
v.
Freedom Debt Relief, LLC and Andrew Housser, Defendants.
Case No. 3:17-cv-06484-EDL
[PROPOSED] STIPULATED FINAL JUDGMENT AND ORDER The Consumer Financial Protection Bureau (Bureau) commenced this action on November 8, 2017, to obtain injunctive and monetary relief and civil penalties from Freedom Debt Relief, LLC and Andrew Housser. The Bureau’s First Amended Complaint alleges violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6102(c), 6105(d); the Telemarketing Sales Rule (TSR), 16 C.F.R. pt. 310; and the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536(a), in connection with the marketing, sale, and provision of Debt-Relief Services.
The Bureau and Defendants agree to the entry of this Stipulated Final Judgment and Order (Order), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the First Amended Complaint.
THEREFORE, it is ORDERED:
FINDINGS & CONCLUSIONS 1.
This Court has jurisdiction over the parties and the subject matter of this action pursuant to 12 U.S.C. § 5565(a)(1) and 28 U.S.C. §§ 1331 and 1345. _____________ Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 1 of 21
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2.
Venue in the Northern District of California is proper under 28 U.S.C. § 1391(b) and (c) and 12 U.S.C. § 5564(f). 3.
Defendant Freedom Debt Relief, LLC (Freedom) is a provider of Debt-Relief Services. Defendant Andrew Housser is Freedom’s co-founder and co- CEO.
4.
Defendants neither admit nor deny any allegations in the First Amended Complaint, except as specifically stated in this Order. For the purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. 5.
Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees. 6.
Entry of this Order is in the public interest. DEFINITIONS The following definitions apply to this Order: 7.
“Affected Consumers” means any person who paid the Company Defendant a Qualifying Fee.
8.
“Clearly and Conspicuously” shall have the same meaning as in 16 C.F.R. § 310.3.
9.
“Clearly and Prominently” means:
a. in textual communications (e.g., printed publications or words displayed on the screen of an electronic device), the disclosure must be of a type point or pixel size, location, and format sufficiently noticeable for an ordinary consumer to read and Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 2 of 21
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comprehend it across all screen sizes, in print that contrasts with the background on which it appears;
b. in communications disseminated orally or through audible means (e.g., radio or streaming audio), the disclosure must be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it;
c. in communications disseminated through video means (e.g., television or streaming video), the disclosure must be in writing in a form consistent with subsection (a), and must appear on the screen for a duration sufficient for an ordinary consumer to read and comprehend it;
d. in communications made through interactive media such as the internet, online services, and software, the disclosure must be unavoidable (which is not the case if the consumer must take any action—such as clicking on a hyperlink or hovering over an icon— to see it) and presented in a form consistent with subsection (a), and remain on the screen for a duration sufficient for a consumer to read and comprehend it; and when scrolling is necessary to view the disclosure, text or visual cues must be present to encourage consumers to scroll to view the disclosure, and the disclosure must be unavoidable—that is, consumers must not be able to proceed further with a transaction (e.g., click forward) without scrolling through the disclosure;
e. in communications that contain both audio and visual portions, the disclosure must be presented simultaneously in both the audio and visual portions of the communication; and Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 3 of 21
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f. in all instances, the disclosure must be presented before the consumer incurs any financial obligation, in an understandable language and syntax, and with nothing contrary to, inconsistent with, or in mitigation of the disclosures used in any communication with the consumer.
10.
“Coach” or “Coaching” means any instruction, guidance, or advice to consumers provided by the Company Defendant in connection with consumers’ direct negotiations with Creditors.
11.
“Company Defendant” means Freedom Debt Relief, LLC and its successors and assigns.
12.
“Consumer Settlement” means any settlement negotiated by a consumer directly with his or her Creditor, with or without Coaching from the Company Defendant.
13.
“Consumer-Settlement Fee” means the fee that the Company Defendant charges consumers for a Consumer Settlement. 14.
“Creditor” means the original or current creditor as well as such original or current creditor’s agent or attorney, including any collection agent, collection attorney, or third-party collector, as well as any other entity holding a consumer’s Enrolled Debt, such as a debt buyer, and that entity’s agent, attorney, collection agent, collection attorney, or third-party collector. 15.
“Debt-Relief Service” shall have the same meaning as in 16 C.F.R. § 310(o).
16.
“Debt Resolution Agreement” means the Company Defendant’s contract with a consumer for the provision of Debt-Relief Services. 17.
“Defendants” means the Company Defendant and the Individual Defendant, individually, collectively, or in any combination. Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 4 of 21
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18.
“Effective Date” means the date on which this Order is entered by the Court.
19.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his or her delegate.
20.
“Enrolled Debt” means a consumer debt that the Company Defendant agreed to negotiate for a fee under a Debt Resolution Agreement and that the consumer has not withdrawn from the Company Defendant’s services. 21.
“Enrollment” means when a consumer enters into a Debt Resolution Agreement.
22.
“FDIC Consent Order” means the Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty issued by the Federal Deposit Insurance Corporation in In re Freedom Financial Asset Management, LLC and Cross River Bank, Teaneck, New Jersey, Nos. FDIC-17-0126b, FDIC-17-0125b, FDIC-17-0124k (issued March 28, 2018).
23.
“First Amended Complaint” means the First Amended Complaint in this action.
24.
“Individual Defendant” means Andrew Housser. 25.
“Non-Settlement Outcome” means an outcome involving an Enrolled Debt that does not include a settlement with the Creditor but that the Company Defendant considers to be a resolution. 26.
“Qualifying Fee” means:
a. a Consumer-Settlement Fee paid between July 21, 2011, and the Effective Date, inclusive—provided that such fee will not be refunded under the FDIC Consent Order, and has not otherwise been refunded by Freedom; or Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 5 of 21
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b. a Non-Settlement Outcome fee paid between October 27, 2010, and the Effective Date, inclusive—provided that such fee will not be refunded under the FDIC Consent Order, and has not otherwise been refunded by Freedom.
27.
“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 the Company Defendant based on substantially the same facts alleged in the Bureau’s First Amended Complaint. 28.
“Settlement Account” means the dedicated account into which the Company Defendant instructs a consumer to deposit funds for the purpose of paying debt settlements.
ORDER Conduct Provisions I Prohibition on Deceptive Practices IT IS ORDERED that:
29.
The Company Defendant and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, in connection with the advertising, marketing, promotion, offering for sale, sale, or provision of Debt-Relief Services, may not misrepresent, or assist others in misrepresenting, expressly or impliedly:
a. whether any present Creditor will negotiate debt settlements directly with the Company Defendant;
b. the Company Defendant’s present ability to negotiate or settle an Enrolled Debt; or Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 6 of 21
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c. the circumstances in which the Company Defendant will charge fees.
II Prohibition on Charging Fees for Non-Settlement Outcomes IT IS FURTHER ORDERED that:
30.
The Company Defendant and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, may not request or receive a fee, or assist others in requesting or receiving a fee, in consideration for or in connection with a Non-Settlement Outcome. III Required Disclosures Relating to Consumer Involvement in Settlements IT IS FURTHER ORDERED that:
31.
The Company Defendant must Clearly and Prominently disclose to consumers before Enrollment:
a. that in some instances, the Company Defendant may request that the consumer negotiate directly with the Creditor; and b. that if the Company Defendant requests that the consumer negotiate directly with the Creditor, the consumer may decline to negotiate with the Creditor and either request that the Company Defendant continue attempts to negotiate a settlement of the Enrolled Debt with the Creditor or withdraw the Enrolled Debt without charge or penalty at any time before it is settled. Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 7 of 21
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IV Required Disclosures Relating to Settlement Accounts IT IS FURTHER ORDERED that:
32.
The Company Defendant must, before Enrollment, Clearly and Conspicuously disclose to each consumer that if the consumer withdraws from the Company Defendant’s debt-relief program, the consumer is entitled to receive all funds in the Settlement Account other than funds earned by the Company Defendant in compliance with 16 C.F.R. § 310.4(a)(5)(i)(A) through (C). Nothing in this Section shall modify or replace the disclosure requirements of 16 C.F.R. § 310.3(a)(1).
Monetary Provisions V Order to Pay Restitution IT IS FURTHER ORDERED that:
33.
A judgment is entered in favor of the Bureau and against the Company Defendant in the amount of $20,000,000. 34.
Within 30 days of the Effective Date, the Company Defendant must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $20,000,000 for the purpose of providing restitution to Affected Consumers and in full satisfaction of the judgment as ordered in Paragraph 33 of this Section. 35.
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 restitution for injured consumers and for any attendant expenses for the administration of such restitution.
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36.
If the Bureau determines, in its sole discretion, that restitution to consumers is wholly or partially impracticable, or if funds remain after restitution is completed, the Bureau shall deposit the remaining funds in the U.S. Treasury as disgorgement. The Company Defendant will have no right to challenge any actions that the Bureau or its representatives may take under this paragraph. 37.
Payment of restitution to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. VI Redress and Compliance Plan IT IS FURTHER ORDERED that:
38.
Within 60 days of the Effective Date, the Company Defendant must submit to the Enforcement Director for review and non-objection a comprehensive written Redress and Compliance Plan (a) for identifying Affected Consumers and the amount of any Qualifying Fee paid by each consistent with this Order; and (b) for ensuring that the Company Defendant’s provision of Debt-Relief Services complies with the terms of this Order. The Redress and Compliance Plan must contain timeframes and deadlines for completion of each step necessary for meeting the requirements described below. The Enforcement Director will have the discretion to make a determination of non-objection to the Redress and Compliance Plan or direct the Company Defendant to revise it. If the Enforcement Director directs the Company Defendant to revise the Redress and Compliance Plan, the Company Defendant must make the revisions and resubmit the Redress and Compliance Plan to the Enforcement Director within 15 days. After receiving notification that the Enforcement Director has made a determination of nonobjection to the Redress and Compliance Plan, the Company Defendant must implement and adhere to the steps, recommendations, requirements, deadlines, and Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 9 of 21
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timeframes outlined in the Redress and Compliance Plan. Redress Component 39.
The redress component of the Redress and Compliance Plan (Redress Component) must state in detail how the Company Defendant will identify all Affected Consumers and the associated types and amounts of Qualifying Fees paid, including all means and methods.
40.
The Redress Component must set forth the contents of a report to be prepared by the Company Defendant for use by the Bureau to administer restitution to Affected Consumers (Restitution Report). The Restitution Report must identify, in a format acceptable to the Enforcement Director, all Affected Consumers (including names, addresses, telephone numbers, email addresses, account number(s), and any other unique identification assigned in the Company Defendant’s systems); the amount, type, and date of payment of each Qualifying Fee and the associated Creditor(s); and any other information deemed necessary to effectuate restitution.
41.
The Redress Component must contain a deadline for submission of the Restitution Report, which shall not be later than 60 days from the Company Defendant’s receipt of notice of the Enforcement Director’s non-objection to the Redress and Compliance Plan. The Enforcement Director will have the discretion to make a determination of non-objection to the Restitution Report or direct the Company Defendant to revise it. If the Enforcement Director directs the Company Defendant to revise the Restitution Report, the Company Defendant must make the revisions and resubmit the Restitution Report to the Enforcement Director within 30 days.
42.
The Redress Component must include procedures for the Company Defendant to receive, log, investigate, and promptly respond to inquiries by Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 10 of 21
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consumers who believe they are entitled to restitution under this Order and for adding any such consumers to the list of Affected Consumers, where appropriate. The Redress Component must require that such procedures continue for a period of one year following the Enforcement Director’s non-objection to the Restitution Report and must specify how the results of such investigations are to be forwarded to and verified by the Bureau or its designee. 43.
Restitution under this Order shall not duplicate restitution provided under the FDIC Consent Order.
Compliance Component 44.
The compliance component of the Redress and Compliance Plan (Compliance Component) must include, at a minimum: a. detailed steps for addressing each action required by this Order; b. delivery to the Bureau of current versions of the Debt Resolution Agreement, marketing materials (including call scripts), and Coaching materials (including scripts and email templates); and c. specific timeframes and deadlines for implementation of the steps described above.
45.
Within 30 days of receiving notice of non-objection to the Redress and Compliance Plan, and again one year after receiving notice of non-objection to the Redress and Compliance Plan, the Company 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 the Company Defendant has complied with each such paragraph and subparagraph this Order;
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b. describes in detail the manner and form in which the Company Defendant has complied with the Redress and Compliance Plan; and c. attaches a copy of each Order Acknowledgment obtained under Section X, unless previously submitted to the Bureau. VII Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
46.
Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the First Amended Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(3), the Company Defendant must pay a civil money penalty of $5,000,000 to the Bureau, of which $493,500 shall be remitted in light of the civil money penalty paid under the FDIC Consent Order. 47.
Within 10 days of the Effective Date, the Company Defendant must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. 48.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by § 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
49.
The Company Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, the Company Defendant may not: a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. seek or accept, directly or indirectly, reimbursement or Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 12 of 21
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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.
VIII Additional Monetary Provisions IT IS FURTHER ORDERED that:
50.
In the event of any default on the Company 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. 51.
The Company Defendant must 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 the Company Defendant. 52.
The facts alleged in the First Amended 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.
53.
The facts alleged in the First Amended Complaint establish all elements necessary to sustain an action by the Bureau under Section 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 the Company Defendant, even in the Company Defendant’s capacity as debtor-in-possession. 54.
Under 31 U.S.C. § 7701, the Company Defendant, unless it already has done so, must furnish to the Bureau its taxpayer identifying number, which Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 13 of 21
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may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
55.
Within 30 days of the entry of a final judgment, Order, or settlement in a Related Consumer Action, the Company Defendant 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 the Company 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. 56.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, the Company Defendant may not argue that the Company Defendant is entitled to, nor may the Company 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. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against the Company 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 Company 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. Additional Compliance Provisions IX Reporting Requirements IT IS FURTHER ORDERED that:
57.
Within 7 days of the Effective Date, the Company Defendant must: Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 14 of 21
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a. designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with the Company Defendant;
b. identify all businesses that offer products or services to consumers for which the Company Defendant is the majority owner, or that the Company Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and c. describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales.
58.
The Company Defendant must report any change in the information required to be submitted under Paragraph 57 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 59.
The Company Defendant must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against the Company Defendant; or a change in the Company Defendant’s name or address. The Company Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner.
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X Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
60.
Within 7 days of the Effective Date, the Company Defendant must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
61.
Within 30 days of the Effective Date, the Company Defendant must deliver a copy of this Order to each of its executive officers, as well as to any managers, employees, or other agents and representatives who have responsibilities related to the subject matter of the Order.
62.
For 5 years from the Effective Date, the Company Defendant must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section IX, any future executive officers, as well as to any managers, employees, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities.
63.
Should the Company Defendant seek to transfer or assign all or part of its operations that are subject to this Order, the Company Defendant must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order with respect to any operations that may be transferred or assigned.
64.
The Company 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, from all persons receiving a copy of this Order under this Section.
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XI Recordkeeping IT IS FURTHER ORDERED that:
65.
The Company Defendant must create, for at least 5 years from the Effective Date, the following business records: a. all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau; and b. all documents and records pertaining to the Redress and Compliance Plan described in Section VI above. The Company Defendant must retain these documents for at least 5 years after creation and make them available to the Bureau upon the Bureau’s request. 66.
The Company Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer: a. copies of all sales scripts; training materials; advertisements; websites; and other marketing materials relating to the subject of this Order; and including any such materials provided by the Company Defendant to a third party for use on behalf of the Company Defendant; and b. documents sufficient to demonstrate the experience of consumers on each materially different version of each website owned, operated or controlled by the Company Defendant, directly or indirectly through another entity, on which the Company Defendant advertises, promotes, markets, offers for sale, sells, or provides Debt-Relief Services.
67.
The Company Defendant must make these materials available to the Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 17 of 21
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Bureau upon the Bureau’s request.
68.
Nothing in this Section shall modify or replace the recordkeeping requirements of 16 C.F.R. § 310.5(a).
XII Notices IT IS FURTHER ORDERED that:
69.
Unless otherwise directed in writing by the Bureau, the Company Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Freedom Debt Relief, LLC, Case No. 3:17-cv-06484,” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]:
Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 XIII Cooperation with the Bureau IT IS FURTHER ORDERED that:
70.
The Company Defendant must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct alleged in the First Amended Complaint. The Company Defendant must provide truthful and complete non-privileged information, evidence, and testimony. The Company Defendant must cause its officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that the Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 18 of 21
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Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process.
XIV Compliance Monitoring IT IS FURTHER ORDERED that, to monitor the Company Defendant’s compliance with this Order:
71.
Within 14 days of receipt of a written request from the Bureau, the Company Defendant must submit additional compliance reports or other requested non-privileged information, related to requirements of this Order, which must be sworn under penalty of perjury; provide sworn testimony related to requirements of this Order and the Company Defendant’s compliance with those requirements; or produce non-privileged documents related to requirements of this Order and the Company Defendant’s compliance with those requirements. 72.
The Company Defendant must permit Bureau representatives to interview about the requirements of this Order and the Company Defendant’s compliance with those requirements any employee or other person affiliated with the Company Defendant who has agreed to such an interview. The person interviewed may have counsel present.
73.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6. XV Dismissal of Individual Defendant IT IS FURTHER ORDERED that:
74.
Upon the request of Plaintiff Consumer Financial Protection Bureau, and good cause appearing, the action is dismissed with prejudice as to Individual Case 3:17-cv-06484-EDL Document 91 Filed 07/09/19 Page 19 of 21
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Defendant Andrew Housser.
XVI Release 75.
The Bureau releases and discharges the Defendants from all potential liability for law violations that the Bureau has or might have asserted based on the practices alleged in the First Amended 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 First Amended Complaint in future enforcement actions against the Defendants and their affiliates, 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 this Order, or to seek penalties for any violations of this Order.
XVII Retention of Jurisdiction IT IS FURTHER ORDERED that:
76.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
XVIII Reasonable Extensions of Time IT IS FURTHER ORDERED that:
77.
The Company Defendant and Bureau may agree in writing to reasonable extensions of deadlines set forth in Sections IX through XIV without further notice to the Court.
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0 ANAND un FP WY NY KF
DO NO NO WN HN HN HN HN KN HR HR HR He Ke Fe FF Fe eS eR oN DO MN BP WN KF COD UO WDWBNANI DB na BPW NY KF CO
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IT IS SO ORDERED.
DATED this 9th day of July, 2019.
on. Elizabeth D. Laporte
United States Magistrate Judge
Stipulated Final Judgment and Order Case No. 3:17-cv-06484-EDL