GST Factoring, Inc., Champion Marketing Solutions, LLC, Rick Graff, Gregory Trimarche, Scott Freda, Amanda Johanson, David Mize, Jacob Slaughter, and Daniel Ruggiero

Agency: Consumer Financial Protection Bureau
Date: July 13, 2020
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/gst-factoring-inc-et-al/
Pages: 124
PDFs: 8 documents (links below)

Documents in this case

Stipulation · 18 p.
Complaint · July 2020 · 16 p.
Stipulation · July 2020 · 17 p.
Stipulation · July 2020 · 17 p.
Stipulation · July 2020 · 16 p.
Stipulation · July 2020 · 17 p.
Order · Jan. 2021 · 10 p.
Order · Jan. 2021 · 12 p.

Case summary

On July 13, 2020, the Bureau filed a complaint in the federal district court for the Central District of California against GST Factoring, Inc., which runs a student-loan debt-relief business in Texas, and two of its owners, Rick Graff and Gregory Trimarche, as well as Champion Marketing Solutions, LLC, a Texas customer service and marketing company, and its owner, Scott Freda. The Bureau also filed suit against four attorneys, California attorneys Amanda Johanson and Jacob Slaughter, Arizona attorney David Mize, and attorney Daniel Ruggiero, who is barred in a number of states but resides in Florida. The Bureau alleges that the companies, their owners, and the attorneys were part of a nationwide student-loan debt-relief operation that charged thousands of consumers, saddled with private student-loan debt, approximately $11.8 million in illegal upfront fees in violation of the Telemarketing Sales Rule (TSR). Among other things, the Bureau sought $11.8 million in redress for harmed consumers.

Concurrent with the complaint, the Bureau and four of the defendants filed proposed stipulated final judgments and orders to resolve the claims against them, which the court entered on August 17, 2020. The orders collectively impose an approximate $11.8 million monetary judgment against the settling defendants for consumer redress, full payment of which will be suspended upon the settling defendants’ paying a portion of the redress based on their demonstrated inability to pay the full amount of judgment in each order. Each settling defendant will also pay a $1 civil money penalty to the Bureau. Trimarche is permanently banned from engaging in debt-relief services and from telemarketing consumer financial products or services. Mize, Slaughter, and Ruggiero are subject to permanent debt-relief bans.

On December 3, 2020, the court entered a default judgment and order against GST Factoring, Inc. and Rick Graff. The order imposes a $11,618,522 monetary judgment against the defaulted defendants for consumer redress and imposes a $15,000,000 penalty against each of them. The order also permanently bans the defaulted defendants from engaging in debt-relief services and telemarketing consumer financial products or services. On December 15, 2020, the court entered a stipulated final judgment and order against Champion Marketing Solutions, LLC and Scott Freda. The order imposes a $11,618,522 monetary judgment against the settling defendants, full payment of which will be suspended upon their paying $5,000 based on their demonstrated inability to pay. Each settling defendant will also pay a $1 civil money penalty to the Bureau. They are also permanently banned from engaging in debt-relief services and from telemarketing consumer financial products or services. On December 15, 2020, the court entered a default judgment and order against Amanda Johanson. The order permanently bans her from engaging in debt-relief services and imposes a $4,992,606 monetary judgment against her for consumer redress and a $5,000,000 penalty.

Stipulation

PDF of this document (18 pages)

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JEFFREY BLUMBERG E-mail: [email protected] Phone: (202) 435-9687 REBECCA COLEMAN E-mail: [email protected] Phone: (202) 435-7541 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722 LEANNE HARTMANN, CA Bar # 264787 - Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9787 Email: [email protected] Attorneys for Plaintiff Bureau of Consumer Financial Protection UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Bureau of Consumer Financial Protection, Plaintiff, v.

GST Factoring, Inc.; Champion Marketing Solutions, LLC; Rick Graff; Gregory Trimarche; Scott Freda; Amanda Johanson; David Mize; Jacob Slaughter; and Daniel Ruggiero; Defendants.

Case No. 8:20-cv-01239 -DOC STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANTS CHAMPION MARKETING SOLUTIONS, LLC AND SCOTT FREDA [69] The Bureau of Consumer Financial Protection (the Bureau), commenced this civil action on July 13, 2020 to obtain injunctive and monetary relief and civil penalties. The JS-6 Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 1 of 18 Page ID #:812

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Complaint alleges violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310, in connection with the sale of a Telemarketed Debt-Relief Service.

The Bureau and Defendants Champion Marketing Solutions, LLC and Scott Freda (Defendants) agree to entry of this Stipulated Final Judgment and Order (Order), to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint. I.

FINDINGS 1.

This Court has jurisdiction over the parties and the subject matter of this action and venue is proper in this jurisdiction under 28 U.S.C. § 1391(b) and (c), and 12 U.S.C. § 5564(f).

Defendants neither admit nor deny the allegations in the Complaint, except as specifically stated herein. Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action. 3.

The Complaint alleges claims upon which relief may be granted. 4.

The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5564 and 5565.

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, attorney’s fees.

Entry of this Order is in the public interest.

II.

DEFINITIONS 7.

The following definitions apply to this Order:

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a. “Affected Consumer” means a consumer who paid fees pursuant to an Engagement Agreement.

b. “Assisting Others” includes, but is not limited to: i.

formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including, but not limited to, any telephone sales script, direct mail solicitation, or the text of any Internet website, email, or other electronic communication;

ii. formulating or providing, or arranging for the formulation or provision of, any marketing support material or service, including web or Internet Protocol addresses or domain name registration for any Internet websites, affiliate marketing services, or media placement services;

iii. consulting in any form whatsoever;

iv. providing names of, or contributing to the generation of, potential customers;

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

vi. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity; and vii. investing or loaning money.

c. “Consumer Financial Product or Service” is synonymous in meaning and equal in scope to the definition of the term in Section 1002(5) of the CFPA, 12 U.S.C. § 5481(5), and, subject to applicable restrictions contained in the CFPA, includes, but is not limited to: Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 3 of 18 Page ID #:814

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i. Extending credit and servicing loans, including acquiring, purchasing, selling, brokering, or other extensions of credit (other than solely extending commercial credit to a person who originates consumer credit transactions);

ii. Providing financial advisory services to consumers on individual financial matters or relating to proprietary financial products or services, including providing credit counseling to any consumer or providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure;

iii. Collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers, used or expected to be used in connection with any decision regarding the offering or provision of a Consumer Financial Product or Service; or iv. Collecting debt related to any Consumer Financial Product or Service.

d. “Corporate Defendant” means Champion Marketing Solutions, LLC, and its successors and assigns.

e. “Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt or obligation, including but not limited to a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector. f. “Defendants” means the Corporate Defendant and the Individual Defendant, individually, collectively, or in any combination. g. “Effective Date” means the date on which this Order is entered by the Court.

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

i. “Engagement Agreement” means an agreement to provide a Debt-Relief Service relating to private student-loan debt, the receivables from which were assigned to GST Factoring, Inc. through a factoring agreement. j. “Individual Defendant” means Scott Freda and by any other name by which he might be known.

k. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

l. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendants based on substantially the same facts as described in the Complaint. m. “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate phone call.

CONDUCT PROVISIONS III.

BAN ON DEBT-RELIEF SERVICES IT IS ORDERED that:

Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from:

a. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service;

b. Assisting Others in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service; or Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 5 of 18 Page ID #:816

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c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any Person that is engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service. Nothing in this Order shall be read as an exception to this Paragraph. IV.

BAN ON TELEMARKETING IT IS FURTHER ORDERED that:

Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from:

a. Telemarketing any Consumer Financial Product or Service; b. Assisting Others in Telemarketing any Consumer Financial Product or Service; or c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any Person that is engaged in Telemarketing any Consumer Financial Product or Service.

Nothing in this Order shall be read as an exception to this Paragraph. V.

INJUNCTION CONCERNING COLLECTING PAYMENTS FROM AFFECTED CONSUMERS IT IS FURTHER ORDERED that:

10.

As of the Effective Date, Defendants, and their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from charging fees to Affected Consumers or collecting, attempting to collect, or selling, assigning, or otherwise transferring any right to collect payment from any Affected Consumer. Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 6 of 18 Page ID #:817

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VI.

PROHIBITED USE OF CONSUMER INFORMATION IT IS FURTHER ORDERED that:

11.

Defendants, and their officers, agents, servants, employees, and attorneys who receive actual notice of this Order, whether acting directly or indirectly, may not disclose, use, or benefit from consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a consumer’s account (including a credit card, bank account, or other financial account) of any person that Defendants obtained prior to the Effective Date in connection with the advertising, marketing, promotion, offering for sale, sale, or providing of any Debt-Relief Service. However, consumer information may be disclosed if requested by a government agency or required by law, regulation, or court order.

MONETARY PROVISIONS VII.

ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

12.

A judgment for monetary relief is entered in favor of the Bureau and against Defendants, jointly and severally, in the amount of $11,618,522 for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraphs 13 of this Section and Paragraphs 27 through 31 and 33 of Section X and subject to Section VIII of this Order. 13.

Within 10 days of the Effective Date, Defendants 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, $5,000 in partial satisfaction of the judgment as ordered in Paragraph 12 of this Section.

14.

With regard to any redress that Defendants pay pursuant to Paragraph 13, if Defendants receive, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendants secure a tax deduction or tax credit with regard to any federal, state, or local Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 7 of 18 Page ID #:818

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tax, Defendants must: (a) immediately notify the Enforcement Director in writing, and (b) within 10 days of receiving the funds or monetary benefit, Defendants must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraph 12 will be reduced by the amount of the Additional Payment and the Additional Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 12.

15.

Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or to the Bureau’s agent according to applicable statutes and regulations to be used for redress for injured consumers, including, but not limited to, refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.

16.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau will deposit any remaining funds in the United States Treasury as disgorgement. Defendants will have no right to challenge the Bureau’s choice of remedies under this Section, and will have no right to contest any actions that the Bureau or its representatives may take under this paragraph. 17.

Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. VIII. EFFECT OF MISREPRESENTATION OR OMISSION REGARDING FINANCIAL CONDITION IT IS FURTHER ORDERED that:

18.

The suspension of the monetary judgment entered in Section VII of this Order is expressly premised on the truthfulness, accuracy, and completeness of Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 8 of 18 Page ID #:819

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Defendants’ financial statements and supporting documents submitted to the Bureau, which Defendants assert are truthful, accurate, and complete, and which include: a. Financial Statement of Individual Defendant, including the attachments, signed on December 3, 2020 and submitted to the Bureau on or about December 3, 2020.

b. Financial Statement of Corporate Defendant, including the attachments, signed on December 3, 2020 and submitted to the Bureau on or about December 3, 2020.

c. Supplemental financial information regarding Individual Defendant provided to the Bureau on June 22, 2020, November 6, 2020, November 12, 2020, and November 19, 2020.

d. 2018 and 2019 federal tax returns for Individual Defendant, submitted to the Bureau on or about November 6, 2020.

e. 2017, 2018, and 2019 federal tax returns for Corporate Defendant, submitted to the Bureau on or about November 12, 2020. 19.

If upon motion by the Bureau, the Court determines that Defendants have failed to disclose any material asset or that any of their financial statements contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the monetary judgment entered in Section VII and without further adjudication, shall reinstate the judgment entered in Section VII of this Order and the full judgment of $11,618,522 shall be immediately due and payable, less any amounts paid to the Bureau under Section VII of this Order. 20.

If the Court terminates the suspension of the monetary judgment under this Section, the Bureau will be entitled to interest on the judgment, computed from the date of entry of this Order, at the rate prescribed by 28 U.S.C. § 1961, as amended, on any outstanding amounts not paid.

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21.

Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order. IX.

ORDER TO PAY CIVIL MONEY PENALTIES IT IS FURTHER ORDERED that:

22.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), each Defendant must pay a civil money penalty of $1 to the Bureau. This amount is based on Defendants’ limited ability to pay as attested to in their financial statements listed in Section VIII above.

23.

Within 10 days of the Effective Date, each 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.

24.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

25.

Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants may not:

a. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. Seek or accept, directly or indirectly, 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.

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26.

Individual Defendant agrees that the civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and thus, as to Individual Defendant, it is not subject to discharge under the Bankruptcy Code, 11 U.S.C. § 523(a)(7).

ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that:

27.

In the event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding payments not paid from the date of default to the date of payment, and will immediately become due and payable.

28.

Defendants relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.

29.

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, including in a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case. 30.

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 Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each Defendant, even in such Defendant’s capacity as debtor-in-possession. 31.

Under 31 U.S.C. § 7701, Defendants, unless they have already done so, must furnish to the Bureau their taxpayer identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 32.

Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 11 of 18 Page ID #:822

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amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled to, nor may Defendants benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendants based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendants must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the United States 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. 33.

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

REPORTING REQUIREMENTS IT IS FURTHER ORDERED that:

34.

Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including, but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 12 of 18 Page ID #:823

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address. Defendants 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. 35.

Within 7 days of the Effective Date, each Defendant must: a. Designate at least one telephone number and email, physical and postal address as points of contact, which the Bureau may use to communicate with such Defendant;

b. Identify all businesses for which such Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email and Internet addresses; c. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales; d. Identify Individual Defendant’s telephone numbers and email, Internet, physical and postal addresses, including all residences; and e. Describe in detail Individual Defendant’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including his title, role, responsibilities, participation, authority, control, and ownership.

36.

Defendants must report any change in the information required to be submitted under Paragraph 35 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 37.

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 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 of this Order; and Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 13 of 18 Page ID #:824

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b. Attaches a copy of each Order Acknowledgment obtained under Section XII, unless previously submitted to the Bureau.

After the one-year period, Defendants must submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau.

XII.

ORDER DISTRIBUTION AND ACKNOWLEDGEMENT IT IS FURTHER ORDERED that:

38.

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.

39.

Within 30 days of the Effective Date, Corporate Defendant, and Individual Defendant, for any business for which he is majority owner or which he directly or indirectly controls, must deliver a copy of this Order to each of its board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order.

40.

For 5 years from the Effective Date, Corporate Defendant, and Individual Defendant, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section XI, any future board members and executive officers, before they assume their responsibilities. 41.

Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with all 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. 42.

Within 90 days of the Effective Date, Defendants must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 14 of 18 Page ID #:825

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date under Paragraphs 39 and 40 and a copy of all signed and dated statements acknowledgments of receipt of this Order under Paragraph 41. XIII. RECORDKEEPING IT IS FURTHER ORDERED that:

43.

Defendants, including for any business for which Individual Defendant, individually or collectively with Corporate Defendant, is a majority owner or which he directly or indirectly controls, must create, for at least 10 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau. Defendants must retain these documents for at least 10 years after creation and make them available to the Bureau upon the Bureau’s request.

44.

Corporate Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer: a. Financial records, including, but not limited to, tax returns and accounting records showing gross and net revenues, all costs incurred in generating revenues, and the resulting net profit or loss; b. Any and all documentation required to complete the Bureau’s individual and corporate financial disclosure forms;

c. For any Affected Consumer, records showing the person’s name, email and postal address, telephone number, dates and dollar amounts of payments made, and the quantity and description of goods and services purchased; and d. All consumer complaints and refund requests (whether received directly or indirectly, such as through a third party), and any response to those complaints or requests.

45.

Individual Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer, financial records, including, but not Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 15 of 18 Page ID #:826

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limited to, individual and corporate tax returns, credit reports, any and all documentation required to complete the Bureau’s individual and corporate financial disclosure forms, and accounting records showing gross and net revenues, all costs incurred in generating revenues, and the resulting net profit or loss. 46.

Defendants must make the documents identified in Paragraphs 44 and 45 available to the Bureau upon the Bureau’s request. XIV. NOTICES IT IS FURTHER ORDERED that:

47.

Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. GST Factoring, Inc., et.al., Case No. 8:20-cv-01239” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to Enforcement [email protected]: Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.

Washington, DC 20552 48.

The Enforcement Director may, in his or her discretion, modify any nonmaterial requirements of this Order (e.g., reasonable extensions of time and changes to reporting requirements) if he or she determines good cause justifies the modification. Any such modification by the Enforcement Director must be in writing. XV.

COOPERATION WITH THE BUREAU IT IS FURTHER ORDERED that:

49.

Defendants must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendants must provide such information in their or their agents’ possession or control within 14 days of receiving a written request from the Bureau. Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 16 of 18 Page ID #:827

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50.

Defendants must cooperate fully with the Bureau in this matter and in any investigation or litigation related to or associated with the conduct described in the Complaint, including, but not limited to, providing information, documents, and testimony. Defendants must provide truthful and complete information, evidence, and testimony. Individual Defendant must appear and Corporate Defendant must cause its officers, employees or agents to appear, for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process.

XVI. COMPLIANCE MONITORING IT IS FURTHER ORDERED that, to monitor Defendants’ compliance with this Order, including the financial representations upon which the monetary judgment was partially suspended:

51.

Within 14 days of receipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents. 52.

For purposes of this Section, the Bureau may communicate directly with Defendants, unless Defendants retain counsel related to these communications. 53.

Defendants must permit Bureau representatives to interview any employee or other person affiliated with Defendants who has agreed to such an interview. The person interviewed may have counsel present.

54.

Nothing in this Order will limit the Bureau’s lawful use of compulsory process, including pursuant to 12 C.F.R. § 1080.6. XVII.

RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

55.

The Court will retain jurisdiction of this matter for the purposes of construction, modification, and enforcement of this Order. Case 8:20-cv-01239-DOC-ADS Document 72 Filed 12/15/20 Page 17 of 18 Page ID #:828

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XVIII. SERVICE IT IS FURTHER ORDERED that:

56. This Order may be served upon Defendants by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the

Court, or any representative or agent of the Bureau. IT IS SO ORDERED.

Dated: this "day of December _, 2020. Neiuit D Cpt

United States District Judge

Complaint (July 2020)

PDF of this document (16 pages)

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COMPLAINT

JEFFREY BLUMBERG Email: [email protected] Phone: 202-435-9687 REBECCA COLEMAN Email: [email protected] Phone: (202) 435-7541 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722

LEANNE HARTMANN, CA Bar # 264787 - Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Email: [email protected] Phone: (415) 844-9787 Fax: (415) 844-9788

Attorneys for Plaintiff Bureau of Consumer Financial Protection

IN THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA

Bureau of Consumer Financial Protection,

Plaintiff,

GST Factoring, Inc.; Champion Marketing Solutions, LLC; Rick Graff; Gregory Trimarche; Scott Freda; Amanda Johanson; David Mize; Jacob Slaughter; and Daniel Ruggiero;

Defendants.

Case No.

COMPLAINT FOR INJUNCTIVE RELIEF, RESTITUTION, CIVIL MONEY PENALTIES AND DISGORGEMENT

INTRODUCTION 1. The Bureau of Consumer Financial Protection (Bureau) brings this action against GST Factoring, Inc., Champion Marketing Solutions, LLC, Rick Graff, Gregory Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 1 of 16 Page ID #:1

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Trimarche, Scott Freda, Amanda Johanson, David Mize, Jacob Slaughter, and Daniel Ruggiero (Defendants) alleging that Defendants are engaging in abusive telemarketing practices in violation of the Telemarketing and Consumer Fraud and Abuse Prevention Act (Telemarketing Act), 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310. 2.

Defendants are engaging in widespread violations of the TSR in their student-loan debt-relief operation (the Debt-Relief Operation), harming consumers nationwide by charging unlawful advance fees. The Bureau brings this action to stop Defendants’ unlawful conduct, obtain relief for harmed consumers, and impose civil money penalties on Defendants for their unlawful actions.

JURISDICTION AND VENUE 3.

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 is proper in this district pursuant to 12 U.S.C. § 5564(f) because Defendants are located, reside, or do business in this district.

PARTIES 5.

The Bureau is an independent agency of the United States. 12 U.S.C. § 5491(a). The Bureau is charged with enforcing federal consumer financial laws. 12 U.S.C. §§ 5563 and 5564. The Bureau has independent litigating authority, 12 U.S.C. §§ 5564(a) and (b), including the authority to enforce the TSR with respect to the offering or provision of a consumer financial product or service subject to the Consumer Financial Protection Act (CFPA), 15 U.S.C. §§ 6102(c), 6105(d). 6.

Defendant GST Factoring, Inc. (GST) is a Delaware corporation doing business at 8551 Boat Club Rd., Suite 121, Fort Worth, Texas 76179. GST manages the Debt-Relief Operation. It has found and worked with lead generators to market the Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 2 of 16 Page ID #:2

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business, including through telemarketing; recruited Johanson, Mize, Slaughter, and Ruggiero (collectively, the Attorneys) to provide the debt-relief services to consumers; and, through a factoring agreement with the Attorneys, taken all the fees paid by consumers and distributed them to the participants in the Debt-Relief Operation. 7.

Defendant Champion Marketing Solutions, LLC (CMS) is a Texas limited liability company doing business at 6302 Creekwood Ct., Sachse, Texas 75048. CMS acts as the customer-service arm of the Debt-Relief Operation. It has coordinated with and trained the lead generators, including by providing scripts; helped create and retain consumer records and make the monthly financial debits from consumers’ accounts or troubleshoot issues with those debits; and acted as the liaison between consumers and the Attorneys.

Defendant Rick Graff is a 33% shareholder of GST with substantial managerial responsibility for and control over its business practices in connection with the Debt-Relief Operation. Graff, who has significant experience in the debt-settlement industry, has handled, among other things, the marketing of the Debt-Relief Operation, including recruiting, training, and coordinating with the lead generators. He has also handled the finances of the Debt-Relief Operation, including the collection of consumer fees.

Defendant Gregory Trimarche is a 33% shareholder of GST with substantial managerial responsibility for and control over its business practices in connection with the Debt-Relief Operation. Trimarche, an attorney, has handled, among other things, drafting agreements, including the attorney-engagement agreement used to enroll consumers, and negotiating and drafting agreements among the parties to the Debt-Relief Operation, such as the factoring agreement and agreements with lead generators. He has also handled recruiting the Attorneys, providing guidance to them, and monitoring their relationship with the lead generators.

10.

Defendant Scott Freda is the owner of CMS with substantial managerial responsibility for and control over its business practices in connection with the Debt- Relief Operation. Freda manages CMS’s operations by, among other things, resolving Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 3 of 16 Page ID #:3

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payment issues, coordinating with lead generators, developing content for the telephone scripts used by CMS employees with consumers, and tracking cancellations. 11.

Defendant Amanda Johanson is an attorney based in Aliso Viejo, California, who has conducted business as Johanson Law Group, Amanda Johanson & Associates, and K&J Law Group. Johanson has offered and provided financial advisory services to assist consumers with debt settlement, including debt-relief services marketed through telemarketing arrangements. Johanson is currently on inactive status with the state bar and suspended from the practice of law.

12.

Defendant David Mize is an attorney based in Phoenix, Arizona who does business as David Mize Law, PLLC. Mize has offered and provided financial advisory services to assist consumers with debt settlement, including debt-relief services marketed through telemarketing arrangements.

13.

Defendant Jacob Slaughter is an attorney based in Costa Mesa, California who has done business as Slaughter LLP. Slaughter has offered and provided financial advisory services to assist consumers with debt settlement, including debt-relief services marketed through telemarketing arrangements.

14.

Defendant Daniel Ruggiero is an attorney based in Delray Beach, Florida who does business as The Law Offices of Daniel Ruggiero and Pinnacle Law Group. Ruggiero has offered and provided financial advisory services to assist consumers with debt settlement, including debt-relief services marketed through telemarketing arrangements.

FACTUAL ALLEGATIONS 15.

GST and CMS started the Debt-Relief Operation in 2015 under the leadership of Graff, Trimarche, and Freda. The Debt-Relief Operation uses telemarketing to sell debt-relief services provided by the Attorneys to consumers with private studentloan debt. The services are sold as legal services, even though most of the fees paid by consumers go to GST, CMS, and their lead generators, and in nearly all instances, the Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 4 of 16 Page ID #:4

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service provided is debt-settlement negotiation, something that does not require legal training.

16.

Lead generators, hired and directed by GST and trained by CMS, market the services of the Debt-Relief Operation through telemarketing. The lead generators send consumers mail solicitations marketing debt-relief services for federal student loans with a telephone number that connects to the lead generators’ telephones. If consumers call that telephone number and indicate that they have private student loans, the lead generators encourage those consumers to sign up with an Attorney to obtain debt-relief services.

17.

In the sales pitch, the lead generators follow a script that was drafted and vetted by GST, CMS, or one of the Attorneys. One such script, for example, instructs the lead generators to encourage consumers to “get … UNDER THE PROTECTION of the Law Firm,” claiming that the consumer would have “a licensed attorney [who would] zealously attack your debtholder to the full extent of the law” and use “any and all legal tools available to attack your debt.” The lead generators encourage consumers to stop paying their student-loan debt, claiming that being behind in payments will make lenders more likely to agree to a settlement.

18.

As part of the sales pitch, the lead generators also tell consumers that they are supposed to keep a log of their communications with the lenders as part of the program, so that, according to one script, the lenders’ “aggression and standard collection practices can begin to work against them.” The lead generators suggest that the Attorneys will use that information to establish that lenders are engaged in violations of the Fair Debt Collection Practices Act (FDCPA) or the Telephone Consumer Protection Act (TCPA), which can be used to reduce or eliminate the consumers’ student-loan debts. 19.

If a consumer signs up, he or she electronically signs an attorneyengagement agreement while on the phone with the lead generator. The parties to the engagement agreement are the consumer and one of the Attorneys, either Johanson, Mize, or Slaughter. The engagement agreement contains no mention of the Debt-Relief Operation, or the other participants in the Debt-Relief Operation. Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 5 of 16 Page ID #:5

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20.

The attorney-engagement agreement provides that the scope of services is to reduce or eliminate the consumer’s student-loan debt “primarily through negotiation.” The agreement also provides for a fee, typically 40% of the outstanding debt, to be paid by monthly installments, along with a processing fee that costs an additional $10 per month.

21.

The monthly payment plan typically lasts between 24 and 84 months. A payment schedule attached to the engagement agreement provides the precise date the payments begin, which is either upon enrollment or soon thereafter. 22.

After a consumer agrees to sign up, the consumer is either transferred by phone to CMS or receives a follow-up “Welcome Call” from CMS within a day or two of signing up. In that call, a CMS employee reviews the engagement agreement, sets up the consumer’s automatic payment withdrawals, collects the necessary documents, and informs the Attorney who is assigned to that consumer that the consumer has signed up and the file is ready for review.

23.

The assigned Attorney, either Johanson, Mize, or Slaughter, would then review and approve the consumer’s engagement agreement and payment plan. 24.

Johanson, who was the first attorney recruited by GST to provide debt-relief services, was associated with the business from about July 2015 through March 2018. From July 2015 through some time in 2018, more than 1,000 consumers from across the United States signed engagement agreements with Johanson through the process described above.

25.

But Johanson did little to no work pursuant to these engagement agreements. After several client complaints, the California Bar initiated an investigation into Johanson’s conduct and instituted disciplinary charges against her. Then, after Johanson stipulated to inactive status, the proceedings against her were abated. She is also suspended from the practice of law for failure to pay the required fees. 26.

GST recruited Ruggiero to take over work on Johanson’s client files, and in February 2018, he began providing debt-relief services to about 160 consumers who had engagement agreements with Johanson but had received little or no assistance from her. Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 6 of 16 Page ID #:6

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27.

At the time or soon after he took on these consumers, Ruggiero knew, or was at least on notice, that the Johanson consumers were enrolled in the Debt-Relief Operation through lead generators that had made those sales through telemarketing. Moreover, with over ten years of experience in debt relief, Ruggiero was aware that lead generators marketing debt-relief services to consumers rely on telemarketing. Indeed, Ruggiero has set up a similar debt-relief company where lead generators used telemarketing to recruit consumers.

28.

Ruggiero also knew that GST was receiving fees before consumers’ debts were settled because he was receiving payments from GST for consumers whose debts had not been settled. He was also aware of complaints against Johanson by consumers who said they had been paying and had not yet had their debts settled. 29.

Mize began taking clients in November 2015 through the process described above. Since that time, about 950 consumers from throughout the United States have signed engagement agreements with him.

30.

Slaughter began taking clients in April 2017 through the process described above. Since that time, about 600 consumers from throughout the United States have signed engagement agreements with him.

31.

On or about December 17, 2019, Slaughter transferred his law firm, including his obligations to provide debt-relief services for consumers in connection with the Debt-Relief Operation, to Ruggiero. Ruggiero knew at the time he agreed to take over Slaughter’s firm that the consumers for whom the firm was providing services were solicited by the Debt-Relief Operation. When Ruggiero took over providing debt-relief services for these consumers, he was on notice that the Debt-Relief Operation had used telemarketing to solicit those consumers and that they were being charged fees before their debts were settled.

32.

The Debt-Relief Operation’s sales pitch makes it seem as if consumers are simply hiring an attorney to help them who will use “any and all legal tools available to attack [their] debt.” But, in reality, to the extent they provide debt-relief services to consumers, the Attorneys provide almost exclusively negotiation and settlement services. Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 7 of 16 Page ID #:7

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The Attorneys referred all, or nearly all, litigation matters relating to the debt-relief services to other lawyers outside the Debt-Relief Operation, including debt collection lawsuits filed against consumers who stopped making payments on their private student loans on the advice of the lead generators, CMS, or the Attorneys themselves. 33.

In addition, although the lead generators told consumers to keep logs about communications from their lenders that the Attorneys could rely on to prove violations of the FDCPA or the TCPA, they were rarely used. In a few instances, the Attorneys referred the consumers to other lawyers to bring TCPA claims, but in nearly all instances, no legal action was taken based on these logs.

34.

Also, while the attorney-engagement agreements make it seem as if the fees are being paid only to the Attorney, all the fees paid by consumers actually go to GST. The terms of each attorney-engagement agreement provide that the fees, which are payable to the Attorney who signs the agreement, may be transferred to another party. All of the Attorneys in the Debt-Relief Operation transfer the receivables from the engagement agreements to GST.

35.

GST distributes portions of those fees to each participant in the Debt-Relief Operation. On a monthly basis, GST gives each Attorney approximately 10-20% of the payments from the consumers assigned to them, CMS approximately 10% of all the payments received, and the lead generators approximately 30-40% of the payments from the consumers they referred to the Debt-Relief Operation. GST retains approximately 40% of the monthly consumer payments.

36.

Graff, Trimarche, and Freda each participated in or had the authority to control the request or receipt of the fees under the attorney-engagement agreements, and the telemarketing of the debt-relief services by the Debt-Relief Operation. Graff worked with the lead generators and facilitated all of the monthly payments. Trimarche drafted and negotiated the agreements with the lead generators, drafted the attorney-engagement agreements that set forth the fees, and drafted the factoring agreement with the Attorneys that provided for the transfer of the fees to GST. Freda worked with the lead generators Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 8 of 16 Page ID #:8

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to resolve payment and database issues, and updated them on CMS’s work. He also drafted scripts for welcome calls and helped track consumer cancellations. 37.

Graff, Trimarche, Freda, and the Attorneys knew or were recklessly indifferent to the fact that consumers were being charged and were paying fees for debtrelief services prior to debt settlement and that the Debt-Relief Operation was marketing those debt-relief services through telemarketing. 38.

Under the engagement agreements described above, GST, on behalf of the Debt-Relief Operation, had received about $11.8 million in fees from approximately 2,600 consumers as of May 2020.

39.

After paying the other Defendants and the lead generators, as of November 2019, GST had retained more than $4.5 million in fees. Of this amount, Graff took more than $1.6 million and Trimarche took more than $1.5 million. 40.

As of May 2020, CMS’s distribution of fees from the Debt-Relief Operation amounted to approximately $1 million.

41.

As of May 2020, Johanson’s distribution of fees from the Debt-Relief Operation amounted to approximately $520,000. 42.

As of May 2020, Ruggiero’s distribution of fees from the Debt-Relief Operation amounted to approximately $125,000. 43.

As of May 2020, Mize’s distribution of fees from the Debt-Relief Operation amounted to approximately $573,000.

44.

As of May 2020, Slaughter’s distribution of fees from the Debt-Relief Operation amounted to approximately $240,000. DEFENDANTS’ VIOLATIONS OF THE TSR 45.

The Bureau is authorized to enforce the Telemarketing Act and the TSR with respect to the offering or provision of a consumer financial product or service subject to the CFPA. 15 U.S.C. § 6105(d). Among other things, a consumer financial product or service is defined by the CFPA to include “providing financial advisory services…including…providing services to assist a consumer with debt management or Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 9 of 16 Page ID #:9

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debt settlement [or] modifying the terms of any extension of credit….” 12 U.S.C. § 5481(15)(viii)(II).

46.

The TSR defines “debt relief service” as “any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a person and one or more unsecured creditors or debt collectors, including, but not limited to, a reduction in the balance, interest rate, or fees owed by a person to an unsecured creditor or debt collector.” 16 C.F.R. § 310.2(o).

47.

The TSR defines a “seller” as “any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the customer in exchange for consideration.” 16 C.F.R. § 310.2(dd). 48.

The TSR defines “telemarketer” as “any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer.” 16 C.F.R. § 310.2(ff).

49.

The TSR defines “telemarketing” in relevant part as “a plan, program, or campaign which is conducted to induce the purchase of goods or services . . . by use of one or more telephones and which involves more than one interstate telephone call.” 16 C.F.R. § 310.2(gg).

50.

The lead generators hired by GST and trained by CMS to market the student-loan debt-relief services offered by the Debt-Relief Operation have engaged in telemarketing under the TSR by implementing a plan, program or campaign conducted to induce the purchase of those services by using one or more telephones and which involved more than one interstate call. CMS has participated in this plan, program or campaign by using one or more telephones and more than one interstate call to complete this process.

51.

The services offered and provided by the Attorneys on behalf of the Debt- Relief Operation, marketed by the lead generators hired by GST, and finalized over the telephone by CMS, are debt-relief services under the TSR because they are services represented, directly or by implication, to renegotiate, settle, or alter the terms of payment Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 10 of 16 Page ID #:10

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or other terms of consumers’ private student loans. They are also consumer financial services subject to the CFPA because they are services to assist a consumer with debt management or debt settlement or modifying the terms of an extension of credit. 52.

GST is a seller under the TSR because it has arranged for the Attorneys, in connection with telemarketing transactions by its lead generators and CMS, to provide debt-relief services in exchange for consideration.

53.

CMS is a seller under the TSR because it has arranged for the Attorneys, in connection with the telemarketing transactions by it and the lead generators, to provide debt-relief services in exchange for consideration. CMS is also a telemarketer under the TSR because by providing customer service to consumers of the Debt-Relief Operation and completing the enrollment process the lead generators began over the phone, it has initiated or received phone calls to or from consumers in connection with telemarketing. 54.

Johanson, Mize, and Slaughter are sellers under the TSR because, pursuant to the engagement agreements, they have offered and provided debt-relief services in exchange for consideration in connection with the telemarketing transactions undertaken by the lead generators and CMS.

COUNT I Request and Receipt of Advance Fees for Debt-Relief Services in Violation of the TSR (GST, CMS, Rick Graff, Gregory Trimarche, Scott Freda, Amanda Johanson, David Mize, and Jacob Slaughter) 55.

The Bureau re-alleges and incorporates by reference Paragraphs 3 to 26, and 29 to 54.

56.

It is an abusive telemarketing act or practice in violation of the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for debtrelief services unless and until: (A) the seller or telemarketer has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt-management plan, or other such valid contractual agreement executed by the customer; and (B) the customer has made at least one payment pursuant to that Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 11 of 16 Page ID #:11

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settlement agreement, debt management plan, or other valid contractual agreement between the customer and the creditor or debt collector. 16 C.F.R. § 310.4(a)(5)(i)(A)- (B).

57.

Johanson, Mize, Slaughter, GST and CMS are telemarketers or sellers that have provided, offered to provide, or arranged for others to provide debt-relief services. 58.

In the course of providing, offering to provide, or arranging for others to provide debt-relief services, Johanson, Mize, and Slaughter have requested and received the payment of fees from consumers with whom they had engagement agreements for debt-relief services before renegotiating, settling, reducing, or otherwise altering the terms of at least one of each such consumer’s debts, and before such consumer had made at least one payment on such altered debts, in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).

59.

In the course of providing, offering to provide, or arranging for others to provide debt-relief services, GST and CMS have requested and received the payment of fees from consumers with whom an Attorney had an engagement agreement for debtrelief services before the Attorney renegotiated, settled, reduced, or otherwise altered the terms of at least one of each such consumer’s debts, and before such consumer had made at least one payment on such altered debts, in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).

60.

Graff, Trimarche, and Freda participated in or had the authority to control the requesting or receiving of fees from consumers prior to debt settlement, and the telemarketing of the debt-relief services by the Debt-Relief Operation. Graff, Trimarche, and Freda knew or were recklessly indifferent to the fact that fees were requested and received from consumers prior to debt settlement, and that the debt-relief services were telemarketed by the Debt-Relief Operation.

61.

Therefore, GST, CMS, Graff, Trimarche, Freda, Johanson, Mize, and Slaughter have engaged in abusive telemarketing acts or practices in violation of 16 C.F.R. § 310.4(a)(5).

Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 12 of 16 Page ID #:12

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COUNT II Providing Substantial Assistance or Support to Johanson, Mize, and Slaughter in Their Violations of the TSR (GST, CMS, Rick Graff, Gregory Trimarche, Scott Freda)

62.

The Bureau re-alleges and incorporates by reference Paragraphs 3 to 26, and 29 to 54.

63.

The TSR prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that constitutes abusive conduct under the TSR. 16 C.F.R. § 310.3(b). 64.

Johanson, Mize, and Slaughter, in the course of providing, offering to provide, or arranging for others provide debt-relief services, have requested and received the payment of fees from consumers before the terms of at least one of each such consumer’s debts was renegotiated, settled, reduced, or otherwise altered, and before such consumer had made at least one payment on such altered debts. Thus, Johanson, Mize, and Slaughter have engaged in acts or practices that violated the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).

65.

GST, Graff, and Trimarche have provided substantial assistance or support to Johanson, Mize, and Slaughter by, among other things, developing the Debt-Relief Operation, facilitating the telemarketing, and facilitating the collection and distribution of advance fees paid by consumers.

66.

CMS and Freda have provided substantial assistance or support to Johanson, Mize, and Slaughter by, among other things, participating in the telemarketing of the debt-relief services, providing customer-service support for the Attorneys, and facilitating payments by consumers by setting up payment arrangements and troubleshooting payment issues.

67.

GST, CMS, Graff, Trimarche, and Freda knew, or consciously avoided knowing, that the debt-relief services provided by Johanson, Mize, and Slaughter were in connection with telemarketing.

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68.

GST, CMS, Graff, Trimarche, and Freda knew, or consciously avoided knowing, that Johanson, Mize, and Slaughter requested or received fees from consumers before the terms of those consumers’ debts were renegotiated, settled, reduced, or otherwise altered, and before those consumers had made at least one payment on such altered debts.

69.

Therefore, GST, CMS, Graff, Trimarche, and Freda have violated 16 C.F.R. § 310.3(b).

COUNT III Providing Substantial Assistance or Support to GST and CMS in Their Violations of the TSR (Daniel Ruggiero)

70.

The Bureau re-alleges and incorporates by reference Paragraphs 3 to 54. 71.

The TSR prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that constitutes deceptive or abusive conduct under the TSR. 16 C.F.R. § 310.3(b). 72.

GST and CMS are telemarketers or sellers that on behalf of the Debt-Relief Operation have provided, offered to provide, or arranged for others to provide debt-relief services.

73.

In the course of providing, offering to provide, or arranging for others to provide debt-relief services pursuant to the engagement agreements telemarketed by lead generators hired by GST and telemarketed by CMS, GST and CMS have requested and received the payment of fees from consumers before the terms of at least one of each such consumer’s debts was renegotiated, settled, reduced, or otherwise altered, and before such consumer had made at least one payment on such altered debts. Thus, GST and CMS have engaged in acts or practices that violated the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).

74.

Ruggiero has provided substantial assistance or support to GST and CMS by providing debt-relief services for consumers who signed engagement agreements with Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 14 of 16 Page ID #:14

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Johanson and Slaughter, but who were subsequently transferred to Ruggiero, thereby enabling GST and CMS to continue to receive advance fees from those consumers. 75.

Ruggiero knew, or consciously avoided knowing, that the debt-relief services arranged for by GST and CMS were in connection with telemarketing. 76.

Ruggiero knew, or consciously avoided knowing, that the fees obtained by GST and CMS were requested or received from consumers before the terms of those consumers’ debts were renegotiated, settled, reduced, or otherwise altered, and before those consumers had made at least one payment on such altered debts. 77.

Therefore, Ruggiero has violated 16 C.F.R. § 310.3(b). DEMAND FOR RELIEF WHEREFORE, the Bureau requests, under 12 U.S.C. § 5565, that the Court: a.

Impose appropriate injunctive relief against Defendants for their violations of the TSR;

grant additional injunctive relief as the Court may deem to be just and proper;

award monetary relief against Defendants including but not limited to rescission or reformation of contracts, the refund of monies paid, restitution, disgorgement or compensation for unjust enrichment, and payment of damages; d.

award the Bureau civil money penalties;

award the Bureau the costs of bringing this action; and f.

award such other and additional relief as the Court may determine to be just and proper.

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Dated: July 13, 2020 Respectfully submitted,

THOMAS G. WARD Enforcement Director

DAVID RUBENSTEIN Deputy Enforcement Director

CYNTHIA LESSER Assistant Deputy Enforcement Director

/s/ Leanne E. Hartmann Leanne E. Hartmann Jeffrey Blumberg (pro hac pending) Rebecca Coleman (pro hac pending) Senior Litigation Counsel Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Telephone: (202) 435-9687 [email protected] [email protected]

Attorneys for Plaintiff Bureau of Consumer Financial Protection Case 8:20-cv-01239 Document 1 Filed 07/13/20 Page 16 of 16 Page ID #:16

Stipulation (July 2020)

PDF of this document (17 pages)

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JEFFREY BLUMBERG Email: [email protected] Phone: 202-435-9687 REBECCA COLEMAN Email: [email protected] Phone: (202) 435-7541 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722 LEANNE HARTMANN, CA Bar # 264787 - Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Email: [email protected] Phone: (415) 844-9787 Fax: (415) 844-9788 Attorneys for Plaintiff Bureau of Consumer Financial Protection UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Bureau of Consumer Financial Protection, Plaintiff, v.

GST Factoring, Inc.; Champion Marketing Solutions, LLC; Rick Graff; Gregory Trimarche; Scott Freda; Amanda Johanson; David Mize; Jacob Slaughter; and Daniel Ruggiero; Defendants.

Case No. 8:20-cv-01239 -DOC STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT DAVID MIZE [5] The Bureau of Consumer Financial Protection (the Bureau), commenced this civil action on July 13, 2020 to obtain injunctive and monetary relief and civil penalties. The Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 1 of 17 Page ID #:137

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Complaint alleges violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule, 16 C.F.R. Part 310, in connection with the sale of telemarketed debt-relief services.

The Bureau and Defendant David Mize (Defendant) agree to entry of this Stipulated Final Judgment and Order (Order), to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint. Therefore it is ORDERED:

FINDINGS 1.

This Court has jurisdiction over the parties and the subject matter of this action and venue is proper in this jurisdiction under 28 U.S.C. § 1391(b) and (c), and 12 U.S.C. § 5564(f).

Defendant neither admits nor denies the allegations in the Complaint, except as specifically stated herein. Defendant admits the facts necessary to establish the Court’s jurisdiction over him and the subject matter of this action. 3.

The Complaint alleges claims upon which relief may be granted. 4.

The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5564 and 5565.

Defendant waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim he 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, attorney’s fees.

Entry of this Order is in the public interest.

II.

DEFINITIONS Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 2 of 17 Page ID #:138

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The following definitions apply to this Order: a. “Affected Consumer” means a consumer who entered into an Engagement Agreement with Defendant and from whom Defendant received fees.

b. “Assisting Others” includes, but is not limited to: i. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including, but not limited to, any telephone sales script, direct mail solicitation, or the text of any Internet website, email, or other electronic communication;

iii. consulting in any form whatsoever;

iv. providing names of, or contributing to the generation of, potential customers;

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

vi. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity; and vii. investing or loaning money.

c. “Current Consumer” means any Affected Consumer i) who still owes payments to Defendant under the terms of his or her Engagement Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 3 of 17 Page ID #:139

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Agreement as of the Effective Date; or ii) for whom Defendant has not completed providing a Debt-Relief Service as of the Effective Date. d. “Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt or obligation, including, but not limited to a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector. e. “Defendant” means David Mize d/b/a David Mize Law, PLLC and by any other names by which he might be known. f. “Effective Date” means the date on which this Order is entered by the Court.

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

h. “Engagement Agreement” means an agreement to provide a Debt-Relief Service relating to private student-loan debt provided by Defendant, the receivables from which Defendant transferred to GST Factoring, Inc. i. “File” means the materials retained by Defendant or any third party retaining the materials on Defendant’s behalf relating to a Current Consumer for use in providing a Debt-Relief Service to the Current Consumer in whatever form those materials are kept, including electronically stored information.

j. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

k. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 4 of 17 Page ID #:140

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governmental agency brought against Defendant based on substantially the same facts as described in the Complaint. l. “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate phone call.

CONDUCT PROVISIONS III.

BAN ON DEBT-RELIEF PRODUCTS AND SERVICES IN CONNECTION WITH TELEMARKETING IT IS ORDERED that:

Defendant, whether acting directly or indirectly, is permanently restrained and enjoined from, in connection with Telemarketing: a. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service;

b. Assisting Others in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service; and c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any Person engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service. Nothing in this Order shall be read as an exception to this Paragraph. IV.

INJUNCTION CONCERNING COLLECTING PAYMENTS FROM AND PROVIDING NOTICES TO CONSUMERS IT IS FURTHER ORDERED that:

As of the Effective Date, Defendant, and his agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from causing any charges to be made to, or Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 5 of 17 Page ID #:141

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collecting, attempting to collect, causing collection or attempts to collect, selling, assigning, or otherwise transferring any right to collect, payment from any Affected Consumer.

10.

No later than 2 business days after the Effective Date, Defendant must take steps to ensure that no Current Consumer is charged any payment after the Effective Date for services provided by Defendant, including by sending notice to all Persons providing services associated with such payments, including factoring companies, customer service providers, and payment processors, explaining that the Defendant has terminated services and any associated payments are cancelled immediately. Each such notification must include a copy of the Complaint and this Order. If any Current Consumer is charged a payment after the Effective Date, Defendant will cause those amounts to be refunded. 11.

As of the Effective Date, Defendant must provide each Current Consumer access to his or her File without charge.

12.

Defendant must provide to each Current Consumer a notice containing the following information:

a. Notice of the termination of services;

b. A copy of the Complaint and this Order;

c. A summary of negotiations conducted by the Defendant on behalf of the Current Consumer to date and any outstanding settlement offers from the Current Consumer’s loan holder(s) or servicer(s); and d. How the Current Consumer may access his or her File without charge. 13.

Defendant shall provide a proposed form of the notice required by Paragraph 12 to the Enforcement Director for non-objection within 5 days of the Effective Date. 14.

Within 20 days of non-objection by the Enforcement Director, Defendant must send out the notice provided in Paragraph 12. 15.

Defendant shall include no materials other than the notice provided in Paragraph 12 in any envelope containing such notices, unless Defendant has obtained Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 6 of 17 Page ID #:142

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written confirmation from the Enforcement Director that the Bureau does not object to the inclusion of such materials.

PROHIBITED USE OF CONSUMER INFORMATION IT IS FURTHER ORDERED that:

16.

Defendant, and his agents, servants, employees, and attorneys, who receive actual notice of this Order, whether acting directly or indirectly, may not disclose, use, or benefit from, consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a consumer’s account (including a credit card, bank account, or other financial account) of any person that Defendant obtained prior to the Effective Date in connection with the advertising, marketing, promotion, offering for sale, sale, or providing of any Debt-Relief Service in connection with Telemarketing. However, consumer information may be disclosed if requested by a government agency or required by law, regulation, or court order.

MONETARY PROVISIONS VI.

ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

17.

A judgment for monetary relief is entered in favor of the Bureau and against Defendant, in the amount of $573,000 for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraphs 18 through 21 of this Section and Paragraphs 32 through 36 and 38 of Section IX and subject to Section VII of this Order. 18.

Within 10 days of the Effective Date, 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, $21,567.59 in partial satisfaction of the judgment as ordered in Paragraph 17 of this Section.

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19.

With regard to any redress that Defendant pays pursuant to Paragraph 18, if Defendant receives, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendant secures a tax deduction or tax credit with regard to any federal, state, or local tax, Defendant must: (a) immediately notify the Enforcement Director in writing, and (b) within 10 days of receiving the funds or monetary benefit, Defendant must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraph 17 will be reduced by the amount of the Additional Payment and the Additional Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 17.

20.

21.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau shall deposit the remaining funds in the U.S. Treasury as disgorgement. Defendant will have no right to challenge the Bureau’s choice of remedies under this Section, and will have no right to contest any actions that the Bureau or its representatives may take under this paragraph.

22.

Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 8 of 17 Page ID #:144

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VII. EFFECT OF MISREPRESENTATION OR OMISSION REGARDING FINANCIAL CONDITION IT IS FURTHER ORDERED that:

23.

The suspension of the monetary judgment entered in Section VI of this Order is expressly premised on the truthfulness, accuracy, and completeness of Defendant’s financial statements and supporting documents submitted to the Bureau on or about May 19, 2020 which Defendant asserts are truthful, accurate, and complete, and which include:

a. Financial Statement of Defendant, including the attachments, signed on May 19, 2020 and submitted to the Bureau on or about May 19, 2020. b. 2016 federal tax returns for Defendant, submitted to the Bureau on or about May 19, 2020.

24.

If upon motion by the Bureau, the Court determines that Defendant has failed to disclose any material asset or that any of his financial statements or oral testimony contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the monetary judgment entered in Section VI and without further adjudication, shall reinstate the judgment entered in Section VI of this Order and the full judgment of $573,000 shall be immediately due and payable, less any amounts paid to the Bureau under Section VI of this Order.

25.

26.

Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 9 of 17 Page ID #:145

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other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order. VIII. ORDER TO PAY CIVIL MONEY PENALTIES IT IS FURTHER ORDERED that:

27.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant must pay a civil money penalty of $1 to the Bureau. This amount is based on Defendant’s limited ability to pay as attested to in his financial statements listed in Section VII above.

28.

Within 10 days of the Effective Date, 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.

29.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

30.

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, 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 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.

31.

Defendant agrees that the civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and thus it is not subject to discharge under the Bankruptcy Code, 11 U.S.C. § 523(a)(7).

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IX.

ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that:

32.

In the event of any default on Defendant’s obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding payments not paid from the date of default to the date of payment, and will immediately become due and payable.

33.

Defendant relinquishes 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 Defendant.

34.

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 Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against Defendant, even in Defendant’s capacity as debtor-in-possession. 36.

Under 31 U.S.C. § 7701, Defendant must furnish to the Bureau his taxpayer identification number(s), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.

37.

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Defendant benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendant based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendant must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. 38.

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

REPORTING REQUIREMENTS IT IS FURTHER ORDERED that:

39.

Defendant must notify the Bureau of any development that may affect compliance obligations arising under this Order, including, but not limited to, the filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or address. Defendant must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development.

40.

Within 7 days of the Effective Date, Defendant must: 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 Defendant;

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b. Identify all businesses for which Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email and Internet addresses; c. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales; d. Identify all Defendant’s telephone numbers and all email, Internet, physical and postal addresses of Defendant, including all residences; and e. Describe in detail Defendant’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including his title, role, responsibilities, participation, authority, control, and ownership.

41.

Defendant must report any change in the information required to be submitted under Paragraph 40 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 42.

Within 90 days of the Effective Date, and again one year after the Effective Date, Defendant must submit to the Enforcement Director an accurate written compliance progress report sworn under penalty of perjury (Compliance Report), which, at a minimum:

a. Lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which Defendant has complied with each such paragraph and subparagraph of this Order; and b. Attaches a copy of each Order Acknowledgment obtained under Section XI, unless previously submitted to the Bureau. After the one-year period, Defendant must submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau. Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 13 of 17 Page ID #:149

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XI.

ORDER DISTRIBUTION AND ACKNOWLEDGEMENT IT IS FURTHER ORDERED that:

43.

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

44.

Within 30 days of the Effective Date, Defendant, for any business for which he is majority owner or which he directly or indirectly controls, must deliver a copy of this Order to each of its board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order. 45.

For 5 years from the Effective Date, Defendant, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section X, any future board members and executive officers, before they assume their responsibilities.

46.

Defendant must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with all 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. XII.

RECORDKEEPING IT IS FURTHER ORDERED that:

47.

Defendant must create, for at least 10 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau. Defendant must retain these documents for at least 10 years after creation and make them available to the Bureau upon the Bureau’s request.

48.

Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer:

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a. Financial records, including, but not limited to, individual and corporate tax returns, credit reports, any and all documentation required to complete the Bureau’s individual and corporate financial disclosure forms, and accounting records showing gross and net revenues, all costs incurred in generating revenues, and the resulting net profit or loss; b. For any Affected Consumer, records showing the person’s name, email and postal address, telephone number, dates and dollar amounts of payments made, and the quantity and description of goods and services purchased; and c. All consumer complaints and refund requests (whether received directly or indirectly, such as through a third party), and any response to those complaints or requests.

49.

Defendant must make the documents identified in Paragraph 48 available to the Bureau upon the Bureau’s request.

XIII. NOTICES IT IS FURTHER ORDERED that:

50.

Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. GST Factoring, Inc. et al., Case No. 8:20-cv- 01239” 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, DC 20552 Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 15 of 17 Page ID #:151

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XIV. COOPERATION WITH THE BUREAU IT IS FURTHER ORDERED that:

51.

Defendant must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendant must provide such information in his or his agents’ possession or control within 14 days of receiving a written request from the Bureau. 52.

Defendant must cooperate fully with the Bureau in this matter and in any investigation or litigation related to or associated with the conduct described in the Complaint, including, but not limited to, providing information, documents, and testimony. Defendant must provide truthful and complete information, evidence, and testimony. Defendant must appear, or cause employees or agents to appear, for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process. XV.

COMPLIANCE MONITORING IT IS FURTHER ORDERED that, to monitor Defendant’s compliance with this Order, including the financial representations upon which the monetary judgment was partially suspended:

53.

Within 14 days of receipt of a written request from the Bureau, Defendant must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents. 54.

For purposes of this Section, the Bureau may communicate directly with Defendant, unless Defendant retains counsel related to these communications. 55.

Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview. The person interviewed may have counsel present.

56.

Nothing in this Order will limit the Bureau’s lawful use of compulsory process, including pursuant to 12 C.F.R. § 1080.6. Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 16 of 17 Page ID #:152

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XVI. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

57.

The Court will retain jurisdiction of this matter for the purposes of construction, modification, and enforcement of this Order. XVII. SERVICE IT IS FURTHER ORDERED that:

58.

This Order may be served upon Defendant by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the Court, or any representative or agent of the Bureau.

IT IS SO ORDERED.

Dated: this 17th day of August, 2020.

______________________________ United States District Judge

Case 8:20-cv-01239-DOC-ADS Document 23 Filed 08/17/20 Page 17 of 17 Page ID #:153

Stipulation (July 2020)

PDF of this document (17 pages)

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GST Factoring, Inc.; Champion Marketing Solutions, LLC; Rick Graff; Gregory Trimarche; Scott Freda; Amanda Johanson; David Mize; Jacob Slaughter; and Daniel Ruggiero; Defendants.

Case No. 8:20-cv-01239 -DOC STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT DANIEL RUGGIERO [6] The Bureau of Consumer Financial Protection (the Bureau), commenced this civil action on July 13, 2020 to obtain injunctive and monetary relief and civil penalties. The Case 8:20-cv-01239-DOC-ADS Document 24 Filed 08/17/20 Page 1 of 17 Page ID #:154

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Complaint alleges violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule, 16 C.F.R. Part 310, in connection with the sale of telemarketed debt-relief services.

The Bureau and Defendant Daniel Ruggiero (Defendant) agree to entry of this Stipulated Final Judgment and Order (Order), to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.

Therefore it is ORDERED:

FINDINGS 1.

This Court has jurisdiction over the parties and the subject matter of this action and venue is proper in this jurisdiction under 28 U.S.C. § 1391(b) and (c), and 12 U.S.C. § 5564(f).

The Complaint alleges claims upon which relief may be granted. 4.

The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5564 and 5565.

In the course of providing telemarketed debt-relief services from February, 2018 to the Effective Date, Defendant provided substantial assistance or support to a seller or telemarketer when Defendant knew or consciously avoided knowing that that the seller or telemarketer had requested or received payment of fees or consideration from consumers for debt-relief services before: (1) the terms of at least one debt pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement Case 8:20-cv-01239-DOC-ADS Document 24 Filed 08/17/20 Page 2 of 17 Page ID #:155

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executed by the consumer had been renegotiated, settled, reduced, or otherwise altered; and (2) the consumer had made at least one payment pursuant to that agreement. 6.

Entry of this Order is in the public interest. II.

DEFINITIONS 8.

The following definitions apply to this Order: a. “Affected Consumer” means a consumer who entered into an Engagement Agreement and from whom, pursuant to that Engagement Agreement, Defendant obtained fees.

iii. consulting in any form whatsoever;

iv. providing names of, or contributing to the generation of, potential customers;

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

vi. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity; and vii. investing or loaning money.

c. “Current Consumer” means any consumer for whom Defendant has not completed providing a Debt-Relief Service pursuant to an Engagement Agreement as of the Effective Date or any Affected Consumer who still owes payments under the terms of an Engagement Agreement as of the Effective Date.

d. “Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt or obligation, including, but not limited to a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector. e. “Defendant” means Daniel Ruggiero d/b/a The Law Offices of Daniel Ruggiero or Pinnacle Law Group and by any other name by which he may be known.

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

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

h. “Engagement Agreement” means an agreement to provide a Debt-Relief Service relating to private student-loan debt, the receivables from which were transferred to GST Factoring, Inc., in connection with which Defendant provided a Debt-Relief Service.

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i. “File” means the materials retained by Defendant or any third party retaining the materials on Defendant’s behalf relating to a Current Consumer for use in providing a Debt-Relief Service to the Current Consumer in whatever form those materials are kept, including electronically stored information.

j. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

k. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in the Complaint. l. “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate phone call.

CONDUCT PROVISIONS III.

BAN ON DEBT-RELIEF PRODUCTS AND SERVICES IN CONNECTION WITH TELEMARKETING IT IS ORDERED that:

b. Assisting Others in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service; and c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity Case 8:20-cv-01239-DOC-ADS Document 24 Filed 08/17/20 Page 5 of 17 Page ID #:158

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for any Person engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service. Nothing in this Order shall be read as an exception to this Paragraph. IV.

INJUNCTION CONCERNING COLLECTING PAYMENTS FROM AND PROVIDING NOTICES TO CONSUMERS IT IS FURTHER ORDERED that:

10.

As of the Effective Date, Defendant, and his agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from causing any charges to be made to, or collecting, attempting to collect, causing collection or attempts to collect, selling, assigning, or otherwise transferring any right to collect, payment from any Affected Consumer.

11.

As of the Effective Date, Defendant must provide each Current Consumer access to his or her File without charge.

13.

Defendant must provide to each Current Consumer a notice containing the following information:

a. Notice of the termination of services;

b. A copy of the Complaint and this Order;

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Defendant shall provide a proposed form of the notice required by Paragraph 13 to the Enforcement Director for non-objection within 5 days of the Effective Date. 15.

Within 10 days of non-objection by the Enforcement Director, Defendant must send out the notice provided in Paragraph 13. 16.

Defendant shall include no materials other than the notice provided in Paragraph 13 in any envelope containing such notices, unless Defendant has obtained written confirmation from the Enforcement Director that the Bureau does not object to the inclusion of such materials.

PROHIBITED USE OF CONSUMER INFORMATION IT IS FURTHER ORDERED that:

17.

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MONETARY PROVISIONS VI.

ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

18.

A judgment for monetary relief is entered in favor of the Bureau and against Defendant, in the amount of $125,000 for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraphs 19 through 22 of this Section and Paragraphs 33 through 37 and 39 of Section IX and subject to Section VII of this Order. 19.

Within 10 days of the Effective Date, 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, $30,000 in partial satisfaction of the judgment as ordered in Paragraph 18 of this Section.

20.

With regard to any redress that Defendant pays pursuant to Paragraph 19, if Defendant receives, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendant secures a tax deduction or tax credit with regard to any federal, state, or local tax, Defendant must: (a) immediately notify the Enforcement Director in writing, and (b) within 10 days of receiving the funds or monetary benefit, Defendant must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraph 18 will be reduced by the amount of the Additional Payment and the Additional Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 18.

21.

Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or to the Bureau’s agent according to applicable statutes and regulations to be used for redress for injured Case 8:20-cv-01239-DOC-ADS Document 24 Filed 08/17/20 Page 8 of 17 Page ID #:161

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consumers, including, but not limited to, refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.

22.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau shall deposit the remaining funds in the U.S. Treasury as disgorgement. Defendant will have no right to challenge the Bureau’s choice of remedies under this Section, and will have no right to contest any actions that the Bureau or its representatives may take under this paragraph.

23.

Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. VII. EFFECT OF MISREPRESENTATION OR OMISSION REGARDING FINANCIAL CONDITION IT IS FURTHER ORDERED that:

24.

The suspension of the monetary judgment entered in Section VI of this Order is expressly premised on the truthfulness, accuracy, and completeness of Defendant’s financial statements and supporting documents submitted to the Bureau on or about May 20, 2020 which Defendant asserts are truthful, accurate, and complete, and which include:

a. Financial Statement of Defendant, including the attachments, signed on May 19, 2020 and submitted to the Bureau on or about May 20, 2020. b. 2016, 2017 and 2018 federal tax returns for Defendant, submitted to the Bureau on or about May 20, 2020.

25.

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monetary judgment entered in Section VI and without further adjudication, shall reinstate the judgment entered in Section VI of this Order and the full judgment of $125,000 shall be immediately due and payable, less any amounts paid to the Bureau under Section VI of this Order.

26.

27.

Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order. VIII. ORDER TO PAY CIVIL MONEY PENALTIES IT IS FURTHER ORDERED that:

28.

29.

Within 10 days of the Effective Date, 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.

30.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

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31.

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, 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 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.

IX.

ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that:

33.

34.

Defendant relinquishes 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 Defendant.

35.

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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 Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against Defendant, even in Defendant’s capacity as debtor-in-possession. 37.

38.

Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendant must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendant based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendant must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. 39.

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COMPLIANCE PROVISIONS X.

REPORTING REQUIREMENTS IT IS FURTHER ORDERED that:

40.

41.

42.

Defendant must report any change in the information required to be submitted under Paragraph 41 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. Case 8:20-cv-01239-DOC-ADS Document 24 Filed 08/17/20 Page 13 of 17 Page ID #:166

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43.

After the one-year period, Defendant must submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau. XI.

ORDER DISTRIBUTION AND ACKNOWLEDGEMENT IT IS FURTHER ORDERED that:

44.

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

45.

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47.

48.

49.

Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer:

50.

Defendant must make the documents identified in Paragraph 49 available to the Bureau upon the Bureau’s request.

Case 8:20-cv-01239-DOC-ADS Document 24 Filed 08/17/20 Page 15 of 17 Page ID #:168

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XIII. NOTICES IT IS FURTHER ORDERED that:

51.

Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. GST Factoring, Inc. et al., Case No. 8:20-cv- 01239 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, DC 20552 XIV. COOPERATION WITH THE BUREAU IT IS FURTHER ORDERED that:

52.

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XV.

54.

For purposes of this Section, the Bureau may communicate directly with Defendant, unless Defendant retains counsel related to these communications. 56.

Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview. The person interviewed may have counsel present.

57.

Nothing in this Order will limit the Bureau’s lawful use of compulsory process, including pursuant to 12 C.F.R. § 1080.6. XVI. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

58.

The Court will retain jurisdiction of this matter for the purposes of construction, modification, and enforcement of this Order. XVII. SERVICE IT IS FURTHER ORDERED that:

59.

IT IS SO ORDERED.

Dated: this ____ day of _________, 2020.

______________________________ United States District Judge

17th August Case 8:20-cv-01239-DOC-ADS Document 24 Filed 08/17/20 Page 17 of 17 Page ID #:170

Stipulation (July 2020)

PDF of this document (16 pages)

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GST Factoring, Inc.; Champion Marketing Solutions, LLC; Rick Graff; Gregory Trimarche; Scott Freda; Amanda Johanson; David Mize; Jacob Slaughter; and Daniel Ruggiero; Defendants.

Case No. 8:20-cv-01239 -DOC STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT JACOB SLAUGHTER [7] The Bureau of Consumer Financial Protection (the Bureau), commenced this civil action on July 13, 2020 to obtain injunctive and monetary relief and civil penalties. The Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 1 of 16 Page ID #:188

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Complaint alleges violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule, 16 C.F.R. Part 310, in connection with the sale of telemarketed debt-relief services.

The Bureau and Defendant Jacob Slaughter (Defendant) agree to entry of this Stipulated Final Judgment and Order (Order), to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint.

Therefore it is ORDERED:

FINDINGS 1.

This Court has jurisdiction over the parties and the subject matter of this action and venue is proper in this jurisdiction under 28 U.S.C. § 1391(b) and (c), and 12 U.S.C. § 5564(f).

The Complaint alleges claims upon which relief may be granted. 4.

The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5564 and 5565.

In the course of telemarketing and offering debt-relief services from April, 2017 to the Effective Date, Defendant requested or received payment of fees or consideration from consumers for debt-relief services before: (1) he had 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 consumer; and (2) the consumer had made at least one payment pursuant to that agreement.

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Entry of this Order is in the public interest. II.

DEFINITIONS 8.

The following definitions apply to this Order: a. “Affected Consumer” means a consumer who entered into an Engagement Agreement with Defendant and from whom Defendant received fees.

iii. consulting in any form whatsoever;

iv. providing names of, or contributing to the generation of, potential customers;

Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 3 of 16 Page ID #:190

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

vi. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity; and vii. investing or loaning money.

c. “Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt or obligation, including, but not limited to a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector. d. “Defendant” means Jacob Slaughter d/b/a Slaughter LLP, and by any other names by which he might be known.

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

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

g. “Engagement Agreement” means an agreement to provide a Debt-Relief Service relating to private student-loan debt provided by Defendant, the receivables from which Defendant transferred to GST Factoring, Inc. h. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

i. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in the Complaint. Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 4 of 16 Page ID #:191

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j. “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate phone call.

CONDUCT PROVISIONS III.

BAN ON DEBT-RELIEF PRODUCTS AND SERVICES IT IS ORDERED that:

Defendant, whether acting directly or indirectly, is permanently restrained and enjoined from:

a. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service;

INJUNCTION CONCERNING COLLECTING PAYMENTS FROM CONSUMERS IT IS FURTHER ORDERED that:

10.

As of the Effective Date, Defendant, and his agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from causing any charges to be made to, or collecting, attempting to collect, causing collection or attempts to collect, selling, assigning, or otherwise transferring any right to collect, payment from any Affected Consumer.

Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 5 of 16 Page ID #:192

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PROHIBITED USE OF CONSUMER INFORMATION IT IS FURTHER ORDERED that:

11.

Defendant, and his agents, servants, employees, and attorneys, who receive actual notice of this Order, whether acting directly or indirectly, may not disclose, use, or benefit from, consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a consumer’s account (including a credit card, bank account, or other financial account) of any person that Defendant obtained prior to the Effective Date in connection with the advertising, marketing, promotion, offering for sale, sale, or providing of any Debt-Relief Service. However, consumer information may be disclosed if requested by a government agency or required by law, regulation, or court order. MONETARY PROVISIONS VI.

ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

12.

A judgment for monetary relief is entered in favor of the Bureau and against Defendant, in the amount of $240,000 for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraphs 13 through 16 of this Section and Paragraphs 27 through 31 and 33 of Section IX and subject to Section VII of this Order. 13.

Within 10 days of the Effective Date, 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, $5,000 in partial satisfaction of the judgment as ordered in Paragraph 12 of this Section.

14.

With regard to any redress that Defendant pays pursuant to Paragraph 13, if Defendant receives, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendant secures a tax deduction or tax credit with regard to any federal, state, or local Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 6 of 16 Page ID #:193

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tax, Defendant must: (a) immediately notify the Enforcement Director in writing, and (b) within 10 days of receiving the funds or monetary benefit, Defendant must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraph 12 will be reduced by the amount of the Additional Payment and the Additional Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 12.

15.

16.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau shall deposit the remaining funds in the U.S. Treasury as disgorgement. Defendant will have no right to challenge the Bureau’s choice of remedies under this Section, and will have no right to contest any actions that the Bureau or its representatives may take under this paragraph.

17.

18.

The suspension of the monetary judgment entered in Section VI of this Order is expressly premised on the truthfulness, accuracy, and completeness of Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 7 of 16 Page ID #:194

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Defendant’s financial statements and supporting documents submitted to the Bureau on or about May 22, 2020 which Defendant asserts are truthful, accurate, and complete, and which include:

a. Financial Statement of Defendant, including the attachments, signed on May 19, 2020 and submitted to the Bureau on or about May 22, 2020, including supplemental information submitted on June 23, 2020 and July 6, 2020; and b. 2017 and 2018 federal tax returns for Defendant, submitted to the Bureau on or about May 22, 2020.

19.

If upon motion by the Bureau, the Court determines that Defendant has failed to disclose any material asset or that any of his financial statements or oral testimony contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the monetary judgment entered in Section VI and without further adjudication, shall reinstate the judgment entered in Section VI of this Order and the full judgment of $240,000 shall be immediately due and payable, less any amounts paid to the Bureau under Section VI of this Order.

20.

21.

Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order. Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 8 of 16 Page ID #:195

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VIII. ORDER TO PAY CIVIL MONEY PENALTIES IT IS FURTHER ORDERED that:

22.

23.

Within 10 days of the Effective Date, 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.

24.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

25.

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, 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 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.

26.

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IX.

ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that:

27.

28.

Defendant relinquishes 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 Defendant.

29.

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 Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against Defendant, even in Defendant’s capacity as debtor-in-possession. 31.

32.

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REPORTING REQUIREMENTS IT IS FURTHER ORDERED that:

34.

35.

Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 11 of 16 Page ID #:198

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36.

Defendant must report any change in the information required to be submitted under Paragraph 35 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 37.

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XI.

ORDER DISTRIBUTION AND ACKNOWLEDGEMENT IT IS FURTHER ORDERED that:

38.

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

39.

41.

RECORDKEEPING IT IS FURTHER ORDERED that:

42.

Defendant must create, for at least 7 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau. Defendant must retain these documents for at least 7 years after creation and make them available to the Bureau upon the Bureau’s request.

43.

Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer:

Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 13 of 16 Page ID #:200

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44.

Defendant must make the documents identified in Paragraph 43 available to the Bureau upon the Bureau’s request.

XIII. NOTICES IT IS FURTHER ORDERED that:

45.

Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. GST Factoring, Inc., et al., Case No. 8:20-cv- 01239” 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, DC 20552 Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 14 of 16 Page ID #:201

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XIV. COOPERATION WITH THE BUREAU IT IS FURTHER ORDERED that:

46.

48.

For purposes of this Section, the Bureau may communicate directly with Defendant, unless Defendant retains counsel related to these communications. 50.

Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview. The person interviewed may have counsel present.

51.

Nothing in this Order will limit the Bureau’s lawful use of compulsory process, including pursuant to 12 C.F.R. § 1080.6. Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 15 of 16 Page ID #:202

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XVI. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

52.

The Court will retain jurisdiction of this matter for the purposes of construction, modification, and enforcement of this Order. XVII. SERVICE IT IS FURTHER ORDERED that:

53.

IT IS SO ORDERED.

Dated: this 17th day of August, 2020.

______________________________ United States District Judge Case 8:20-cv-01239-DOC-ADS Document 26 Filed 08/17/20 Page 16 of 16 Page ID #:203

Stipulation (July 2020)

PDF of this document (17 pages)

Page 86

GST Factoring, Inc.; Champion Marketing Solutions, LLC; Rick Graff; Gregory Trimarche; Scott Freda; Amanda Johanson; David Mize; Jacob Slaughter; and Daniel Ruggiero; Defendants.

Case No. 8:20-cv-01239 -DOC STIPULATED FINAL JUDGMENT AND ORDER AS TO DEFENDANT GREGORY TRIMARCHE [8] The Bureau of Consumer Financial Protection (the Bureau), commenced this civil action on July 13, 2020 to obtain injunctive and monetary relief and civil penalties. The Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 1 of 17 Page ID #:171

Page 87

Complaint alleges violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule, 16 C.F.R. Part 310, in connection with the sale of telemarketed debt-relief services.

The Bureau and Defendant Gregory Trimarche (Defendant) agree to entry of this Stipulated Final Judgment and Order (Order), to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint. I.

FINDINGS 1.

This Court has jurisdiction over the parties and the subject matter of this action and venue is proper in this jurisdiction under 28 U.S.C. § 1391(b) and (c), and 12 U.S.C. § 5564(f).

The Complaint alleges claims upon which relief may be granted. 4.

The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5564 and 5565.

Entry of this Order is in the public interest.

Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 2 of 17 Page ID #:172

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II.

DEFINITIONS 7.

The following definitions apply to this Order: a. “Affected Consumer” means a consumer who paid fees pursuant to an Engagement Agreement.

b. “Assisting Others” includes, but is not limited to: i.

iii. consulting in any form whatsoever;

iv. providing names of, or contributing to the generation of, potential customers;

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

vi. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity; and vii. investing or loaning money.

c. “Consumer Financial Product or Service” is synonymous in meaning and equal in scope to the definition of the term in Section 1002(5) of the Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 3 of 17 Page ID #:173

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CFPA, 12 U.S.C. § 5481(5), and, subject to applicable restrictions contained in the CFPA, includes, but is not limited to: i. Extending credit and servicing loans, including acquiring, purchasing, selling, brokering, or other extensions of credit (other than solely extending commercial credit to a person who originates consumer credit transactions);

d. “Corporate Defendant” means GST Factoring, Inc., and its successors and assigns.

e. “Current Consumer” means any Affected Consumer i) who still owes payments under the terms of his or her Engagement Agreement as of the Effective Date; or ii) for whom the Debt-Relief Service under his or her Engagement Agreement has not been completed as of the Effective Date. f. “Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt or obligation, including, but not Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 4 of 17 Page ID #:174

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limited to a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector. g. “Defendant” means Gregory Trimarche, and by any other names by which he might be known.

h. “Designated Attorney” means an attorney who entered into an Engagement Agreement with a consumer or who has provided a Debt- Relief Service to a consumer pursuant to an Engagement Agreement. i. “Effective Date” means the date on which this Order is entered by the Court.

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

k. “Engagement Agreement” means an agreement to provide a Debt-Relief Service relating to private student-loan debt, the receivables from which were assigned to Corporate Defendant through a factoring agreement. l. “File” means the materials retained by a Designated Attorney or any third party on a Designated Attorney’s behalf relating to a Current Consumer for use in providing a Debt-Relief Service to the Current Consumer in whatever form those materials are kept, including electronically stored information.

m. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

n. “Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in the Complaint. Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 5 of 17 Page ID #:175

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o. “Settling Attorneys” means Designated Attorneys against whom Stipulated Judgments have been entered in this action. p. “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate phone call.

CONDUCT PROVISIONS III.

BAN ON DEBT-RELIEF PRODUCTS AND SERVICES IT IS ORDERED that:

Defendant, whether acting directly or indirectly, is permanently restrained and enjoined from:

a. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service;

b. Assisting Others in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service; or c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any Person that is engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service. Nothing in this Order shall be read as an exception to this Paragraph. IV.

BAN ON TELEMARKETING IT IS FURTHER ORDERED that:

Defendant, whether acting directly or indirectly, is permanently restrained and enjoined from:

a. Telemarketing any Consumer Financial Product or Service; b. Assisting Others in Telemarketing any Consumer Financial Product or Service; or Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 6 of 17 Page ID #:176

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Nothing in this Order shall be read as an exception to this Paragraph. V.

INJUNCTION CONCERNING COLLECTING PAYMENTS FROM AND PROVIDING ASSISTANCE FOR AFFECTED CONSUMERS IT IS FURTHER ORDERED that:

10.

As of the Effective Date, Defendant, and his agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from charging fees to Affected Consumers or collecting, attempting to collect, or selling, assigning, or otherwise transferring any right to collect payment from any Affected Consumer. 11.

Defendant must provide any assistance needed by the Settling Attorneys to: a. cease charging fees to, or collecting payments from, Current Consumers; b. provide refunds to Current Consumers who were charged after the Effective Date;

c. send notices to Current Consumers; and d. provide Current Consumers free access to their Files. VI.

PROHIBITED USE OF CONSUMER INFORMATION IT IS FURTHER ORDERED that:

12.

Defendant, and his agents, servants, employees, and attorneys, who receive actual notice of this Order, whether acting directly or indirectly, may not disclose, use, or benefit from, consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a consumer’s account (including a credit card, bank account, or other financial account) of any person that Defendant obtained prior to the Effective Date in Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 7 of 17 Page ID #:177

Page 93

connection with the advertising, marketing, promotion, offering for sale, sale, or providing of any Debt-Relief Service. However, consumer information may be disclosed if requested by a government agency or required by law, regulation, or court order. MONETARY PROVISIONS VII. ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

13.

A judgment for monetary relief is entered in favor of the Bureau and against Defendant in the amount of $11.8 million for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 14 of this Section and Paragraphs 28 through 32 and 34 of Section X and subject to Section VIII of this Order. 14.

Within 10 days of the Effective Date, 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, $25,000 in partial satisfaction of the judgment as ordered in Paragraph 13 of this Section.

15.

With regard to any redress that Defendant pays pursuant to Paragraph 14, if Defendant receives, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendant secures a tax deduction or tax credit with regard to any federal, state, or local tax, Defendant must: (a) immediately notify the Enforcement Director in writing, and (b) within 10 days of receiving the funds or monetary benefit, Defendant must transfer to the Bureau the full amount of such funds or monetary benefit (Additional Payment) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraph 13 will be reduced by the amount of the Additional Payment and the Additional Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 13.

Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 8 of 17 Page ID #:178

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16.

17.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau shall deposit the remaining funds in the U.S. Treasury as disgorgement. Defendant will have no right to challenge the Bureau’s choice of remedies under this Section, and will have no right to contest any actions that the Bureau or its representatives may take under this paragraph.

18.

19.

The suspension of the monetary judgment entered in Section VII of this Order is expressly premised on the truthfulness, accuracy, and completeness of Defendant’s financial statements and supporting documents submitted to the Bureau on or about June 10, 2020 which Defendant asserts are truthful, accurate, and complete, and which include:

a. Financial Statement of Defendant, including the attachments, signed on June 10, 2020 and submitted to the Bureau on or about June 10, 2020. b. 2018 federal tax returns for Defendant, submitted to the Bureau on or about June 10, 2020.

Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 9 of 17 Page ID #:179

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20.

If upon motion by the Bureau, the Court determines that Defendant has failed to disclose any material asset or that any of his financial statements or oral testimony contain any material misrepresentation or omission, including materially misstating the value of any asset, the Court shall terminate the suspension of the monetary judgment entered in Section VII and without further adjudication, shall reinstate the judgment entered in Section VII of this Order and the full judgment of $11.8 million shall be immediately due and payable, less any amounts paid to the Bureau under Section VII of this Order.

21.

22.

Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order. IX.

ORDER TO PAY CIVIL MONEY PENALTIES IT IS FURTHER ORDERED that:

23.

24.

Within 10 days of the Effective Date, 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.

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25.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

26.

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, 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 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.

27.

Defendant agrees that the civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and thus, as to Defendant, it is not subject to discharge under the Bankruptcy Code, 11 U.S.C. § 523(a)(7).

ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that:

28.

29.

Defendant relinquishes 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 Defendant.

30.

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, including in Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 11 of 17 Page ID #:181

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a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case. 31.

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 Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against Defendant, even in Defendant’s capacity as debtor-in-possession. 32.

Under 31 U.S.C. § 7701, Defendant, unless he has already done so, must furnish to the Bureau his taxpayer identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 33.

Upon written request, any consumer reporting agency must furnish consumer reports to the Bureau concerning Defendant under Section 604(a)(1) of the Fair Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 12 of 17 Page ID #:182

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Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. COMPLIANCE PROVISIONS XI.

REPORTING REQUIREMENTS IT IS FURTHER ORDERED that:

35.

36.

b. Identify all businesses for which Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email and Internet addresses; c. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales; d. Identify Defendant’s telephone numbers and email, Internet, physical and postal addresses, including all residences; and e. Describe in detail Defendant’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including his title, role, responsibilities, participation, authority, control, and ownership.

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37.

Defendant must report any change in the information required to be submitted under Paragraph 36 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 38.

After the one-year period, Defendant must submit to the Enforcement Director additional Compliance Reports within 14 days of receiving a written request from the Bureau. XII.

ORDER DISTRIBUTION AND ACKNOWLEDGEMENT IT IS FURTHER ORDERED that:

39.

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

40.

For 5 years from the Effective Date, Defendant, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 14 of 17 Page ID #:184

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Section XI, any future board members and executive officers, before they assume their responsibilities.

42.

43.

44.

Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer:

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45.

Defendant must make the documents identified in Paragraph 44 available to the Bureau upon the Bureau’s request.

XIV. NOTICES IT IS FURTHER ORDERED that:

46.

Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. GST Factoring, Inc., et.al., Case No8:20-cv- 01239” 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, DC 20552 XV.

COOPERATION WITH THE BUREAU IT IS FURTHER ORDERED that:

47.

Defendant must cooperate fully with the Bureau in this matter and in any investigation or litigation related to or associated with the conduct described in the Complaint, including, but not limited to, providing information, documents, and testimony. Defendant must provide truthful and complete information, evidence, and testimony. Defendant must appear or cause employees or agents to appear, for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process. Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 16 of 17 Page ID #:186

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XVI. COMPLIANCE MONITORING IT IS FURTHER ORDERED that, to monitor Defendant’s compliance with this Order, including the financial representations upon which the monetary judgment was partially suspended:

49.

For purposes of this Section, the Bureau may communicate directly with Defendant, unless Defendant retains counsel related to these communications. 51.

Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview. The person interviewed may have counsel present.

52.

Nothing in this Order will limit the Bureau’s lawful use of compulsory process, including pursuant to 12 C.F.R. § 1080.6. XVII. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

53.

The Court will retain jurisdiction of this matter for the purposes of construction, modification, and enforcement of this Order. XVIII.SERVICE IT IS FURTHER ORDERED that:

54.

IT IS SO ORDERED.

Dated: this 17th day of August, 2020.

______________________________ United States District Judge

Case 8:20-cv-01239-DOC-ADS Document 25 Filed 08/17/20 Page 17 of 17 Page ID #:187

Order (Jan. 2021)

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON JEFFREY BLUMBERG (MD Bar) E-mail: [email protected] Phone: 202-435-9687 REBECCA COLEMAN (MD Bar) E-mail: [email protected] Phone: 202-435-7541 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722 LEANNE HARTMANN, CA Bar # 264787 - Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9787 Email: [email protected] Attorneys for Plaintiff Bureau of Consumer Financial Protection UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Bureau of Consumer Financial Protection, Plaintiff, v.

GST Factoring, Inc., et al., Defendants.

Case No. 8-20-cv-01239-DOC-ADS DEFAULT JUDGMENT AND ORDER FOR PERMANENT INJUNCTION, MONETARY RELIEF, AND CIVIL MONEY PENALTIES AGAINST DEFENDANT AMANDA JOHANSON [64] Plaintiff, the Bureau of Consumer Financial Protection (Bureau), filed its Complaint for Injunctive Relief, Restitution, Civil Money Penalties, and Disgorgement (Complaint), ECF 1, pursuant to the Telemarketing and Consumer Fraud and Abuse Prevention Act (Telemarketing Act), 15 U.S.C. §§ 6101 et seq., and its implementing Case 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 1 of 10 Page ID #:802

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 2 rule, the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310. The Bureau alleged that the Defendants engaged in abusive telemarketing practices in violation of the TSR by requesting and receiving payment of unlawful advance fees from consumers seeking debt-relief services for their private student loans. Defendant Amanda Johanson was duly served on October 14, 2020 (ECF 40), but she failed to file an answer or otherwise respond to the Complaint. The clerk entered default against Defendant Johanson (Defaulting Defendant) on November 10, 2020. ECF 47. The Bureau has filed an Application for Entry of Default Judgment and Order for Permanent Injunction, Monetary Relief, and Civil Money Penalties against Defaulting Defendant pursuant to Fed. R. Civ. P. 55(b)(2) and Local Rules 55-1 and 55-2. The Court, having considered the Bureau’s application, supporting declarations and exhibits and other evidence filed in this matter, finds good cause to grant the relief requested. THEREFORE, it is HEREBY ORDERED, ADJUDGED, AND DECREED as follows:

FINDINGS AND CONCLUSIONS 1.

This is an action by the Bureau pursuant to Section 6 of the Telemarketing Act, its implementing rule, the TSR, 16 C.F.R. Part 310, and Sections 1054, 1055, and 1061 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5564, 5565, 5581. The Bureau has authority to seek the relief contained herein. 2.

This Court has jurisdiction over the subject-matter of this action and has jurisdiction over Defaulting Defendant pursuant to 12 U.S.C. § 5565(a)(1), and 28 U.S.C. §§ 1331 and 1345.

Venue in the Central District of California is proper under 12 U.S.C. § 5564(f).

Defaulting Defendant was duly served with the Complaint and the summons issued to her.

Defaulting Defendant has failed to answer or otherwise defend this action. 6.

The Clerk of Court properly entered default against Defaulting Defendant. Case 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 2 of 10 Page ID #:803

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 3 7.

Defaulting Defendant is not a minor, an incompetent person, or current member of the military service.

Defaulting Defendant was served with written notice of the Application via email on December 7, 2020, at least seven days before any hearing on the Application. The written notice included the amount of the money judgment requested, comprised of restitution and civil money penalties, in the Bureau’s Application. 9.

The Bureau’s Complaint states a claim upon which relief may be granted. 10.

The allegations in the Complaint, except with respect to damages, are taken as true because of Defaulting Defendant’s default. 11.

Judgment is entered on behalf of the Bureau and against Defaulting Defendant on Count I of the Complaint.

12.

This Court is empowered to issue injunctive relief, monetary relief, and civil money penalties pursuant to 12 U.S.C. § 5565.

13.

The Bureau is entitled to an Order imposing a permanent injunction against Defaulting Defendant and requiring Defaulting Defendant to pay restitution in the amount of $4,992,606, and to pay civil money penalties in the amount of $5,000,000. 14.

This action and the relief awarded in this Order are in addition to, and not in lieu of, other remedies as may be provided by law, including both civil and criminal remedies.

15.

Entry of this Order is in the public interest. Defaulting Defendant Violated the TSR By Requesting and Receiving Advance Fees For a Telemarketed Debt-Relief Service (Count I) 16.

Defaulting Defendant, having entered into engagement agreements with consumers in connection with telemarketing to provide a debt-relief service purported to reduce or eliminate those consumers’ private student-loan debts primarily through negotiation, charged those consumers fees on a monthly basis starting at or just after enrollment, and before their debts were reduced or eliminated. Case 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 3 of 10 Page ID #:804

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 4 17.

Defaulting Defendant, as a seller under the TSR, unlawfully requested and received payment of fees for debt-relief services before the terms of at least one of the consumer’s debts had been negotiated, settled, reduced, or otherwise altered pursuant to an agreement executed by the consumer; and the consumer had made at least one payment pursuant to that agreement, in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).

Basis for Equitable and Monetary Relief 18.

The Bureau is proceeding on behalf of thousands of financially distressed individuals unlawfully charged millions of dollars for debt-relief services. Consumer Fin. Prot. Bureau v. Siringoringo, No. SACV1401155JVSAJWX, 2016 WL 102435, at *6 (C.D. Cal. Jan. 7, 2016). Considering the balance of hardships and the public interest, the public interest is served by an injunction preventing Defaulting Defendant from engaging in behavior related to her previous illegal conduct. FTC v. Affordable Media, 179 F.3d 1228, 1236 (9th Cir. 1999). Defaulting Defendant was involved in an elaborate, illegal scheme from its inception, in which she participated for three years, and therefore broader “fencing-in” relief provisions help to “prevent similar and related violations from occurring in the future.” World Accounts, Inc. v. FTC, 594 F.2d 212, 215 (9th Cir. 1979). Accordingly, the permanent injunction ordered in Sections I and II below constitutes “appropriate … equitable relief.” 12 U.S.C. §§ 5564(a), 5565(a). 19.

Legal restitution is “measured by the loss to consumers.” FTC v. Inc21.com Corp., 475 F. App’x 106, 108 (9th Cir. 2012); see also Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1195 (9th Cir. 2016) (the appropriate measure for restitution is the “full amount lost by consumers rather than limiting damages to a defendant’s profits.”) (quoting FTC v. Stefanchik, 559 F.3d 924, 931 (9th Cir. 2009)). 20.

The Bureau has established, through competent evidence, that Defaulting Defendant received $4,992,606 in unlawful advance fees, net of refunds, from 1,024 consumers, providing a basis for the monetary judgment amount ordered in Section III. Case 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 4 of 10 Page ID #:805

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 21.

A penalty amount of $5,000,000 against the Defaulting Defendant is appropriate. Defaulting Defendant acted knowingly, or at least recklessly, and therefore, she could be subject to much higher penalties, but in light of the applicable mitigating factors, the lower penalty as ordered in Section IV is warranted. 12 U.S.C. §§ 5565(c)(2)(B), (C), (c)(3).

DEFINITIONS 22.

The following definitions apply to this Order: A. “Affected Consumer” means a consumer who paid fees pursuant to an Engagement Agreement.

B. “Assisting Others” includes, but is not limited to: i.

iii. consulting in any form whatsoever;

iv. providing names of, or contributing to the generation of, potential customers;

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

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 6 vi. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity; and vii. investing or loaning money.

C. “Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt or obligation, including, but not limited to a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector. D. “Defaulting Defendant” means Amanda Johanson and by any other name by which she might be known.

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

F. “Engagement Agreement” means an agreement with Defaulting Defendant to provide a Debt-Relief Service relating to private studentloan debt, the receivables from which were assigned to Defendant GST Factoring, Inc. through a factoring agreement. G. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

H. “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate phone call.

PERMANENT BAN ON DEBT-RELIEF SERVICES IT IS ORDERED that:

23.

Defaulting Defendant, whether acting directly or indirectly, is permanently restrained and enjoined from:

Case 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 6 of 10 Page ID #:807

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON A. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service;

B. Assisting Others in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service; or C. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any Person that is engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service. II.

PROHIBITION ON COLLECTING ACCOUNTS AND USE OF CONSUMER INFORMATION IT IS FURTHER ORDERED that:

24.

As of the Effective Date, Defaulting Defendant, whether acting directly or indirectly, is permanently restrained and enjoined from charging fees to Affected Consumers or collecting, attempting to collect, or selling, assigning, or otherwise transferring any right to collect payment from any Affected Consumer. 25.

Defaulting Defendant, whether acting directly or indirectly, may not disclose, use, or benefit from, consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a consumer’s account (including a credit card, bank account, or other financial account) of any person that Defaulting Defendant obtained prior to the Effective Date in connection with the advertising, marketing, promotion, offering for sale, sale, or providing of any Debt-Relief Service. However, consumer information may be disclosed if requested by a government agency or required by law, regulation, or court order.

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 8 III.

ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

26.

A judgment for monetary relief is entered in favor of the Bureau and against Defaulting Defendant in the amount of $4,992,606, for the purpose of providing redress to Affected Consumers.

27.

28.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, funds will not revert to Defaulting Defendant. Defaulting Defendant will have no right to challenge the Bureau’s choice of remedies under this Section and will have no right to contest any actions that the Bureau or its representatives may take under this paragraph.

29.

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

ORDER TO PAY CIVIL MONEY PENALTIES IT IS FURTHER ORDERED that:

30.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and taking into account the factors in 12 U.S.C. § 5565(c)(3), a judgment awarding a civil money penalty in the amount of $5,000,000 is entered against Defaulting Defendant with post-judgment interest at the Case 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 8 of 10 Page ID #:809

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DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 9 legal rate. This monetary judgment is enforceable against any asset owned by, on behalf of, for the benefit of, or in trust by or for Defaulting Defendant. 31.

The civil money penalties paid under this Order shall be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that:

32.

Defaulting Defendant must relinquish all dominion, control, and title to any funds paid pursuant to this Order to the fullest extent permitted by law and no part of the funds may be returned to Defaulting Defendant. 33.

Defaulting Defendant shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including any insurance policy, with regard to any civil money penalty paid pursuant to this Order. 34.

Defaulting Defendant shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any civil money penalty that Defaulting Defendant pays pursuant to this Order. VI.

RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

35.

The Court will retain jurisdiction of this matter for the purposes of construction, modification, and enforcement of this Order. Case 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 9 of 10 Page ID #:810

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Oo mA NYDN FP WW NYO

MO wo NY NY NY NY NY NY NO KH KH Fe He He HE Re Oe ee on Dn FP WD NY RK CO UO WANN WD NH fF WW NY KF CO

se 8:20-cv-01239-DOC-ADS Document 71 Filed 12/15/20 Page 10o0f10 Page ID #:811

VIL.

SERVICE IT IS FURTHER ORDERED that:

36. This Order may be served upon Defaulting Defendant by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of

the Court, or any representative or agent of the Bureau.

SO ORDERED this 1sthday of Dec _, 2020.

Honorable David O. Carter United States District Judge

DEFAULT JUDGMENT AND ORDER AGAINST AMANDA JOHANSON 10

Order (Jan. 2021)

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF JEFFREY BLUMBERG (MD Bar) E-mail: [email protected] Phone: 202-435-9687 REBECCA COLEMAN (MD Bar) E-mail: [email protected] Phone: 202-435-7541 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722 LEANNE HARTMANN, CA Bar # 264787 - Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9787 Email: [email protected] Attorneys for Plaintiff Bureau of Consumer Financial Protection UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Bureau of Consumer Financial Protection, Plaintiff, v.

GST Factoring, Inc., et al., Defendants.

Case No. 8-20-cv-01239-DOC-ADS DEFAULT JUDGMENT AND ORDER FOR PERMANENT INJUNCTION, MONETARY RELIEF, AND CIVIL MONEY PENALTIES AGAINST DEFENDANTS GST FACTORING, INC. AND RICK GRAFF [42] Plaintiff, The Bureau of Consumer Financial Protection (Bureau), filed its Complaint for Injunctive Relief, Restitution, Civil Money Penalties, and Disgorgement (Complaint), ECF 1, pursuant to the Telemarketing and Consumer Fraud and Abuse Prevention Act (Telemarketing Act), 15 U.S.C. §§ 6101 et seq., and its implementing Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 1 of 12 Page ID #:624

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF rule, the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310. The Bureau alleged that the Defendants engaged in abusive telemarketing practices in violation of the TSR by requesting and receiving payment of unlawful advance fees from consumers seeking debt-relief services for their private student loans. Defendants GST Factoring, Inc. (GST) and Rick Graff signed Waivers of Service of Summons, which the Bureau duly filed, ECF 12-13, but they failed to file an answer or otherwise respond to the Complaint. The clerk entered defaults against GST and Graff (the Defaulting Defendants) on October 1, 2020. ECF 33. The Bureau has filed an Application for Entry of Default Judgment and Order for Permanent Injunction, Monetary Relief, and Civil Money Penalties against the Defaulting Defendants pursuant to Fed. R. Civ. P. 55(b)(2) and Local Rules 55-1 and 55-2. The Court, having considered the Bureau’s application, supporting declarations and exhibits and other evidence filed in this matter, finds good cause to grant the relief requested. THEREFORE, it is HEREBY ORDERED, ADJUDGED, AND DECREED as follows:

FINDINGS AND CONCLUSIONS 1.

This Court has jurisdiction over the subject-matter of this action and has jurisdiction over Defaulting Defendants pursuant to 12 U.S.C. § 5565(a)(1), and 28 U.S.C. §§ 1331 and 1345.

Venue in the Central District of California is proper under 12 U.S.C. § 5564(f).

Defaulting Defendants received a copy of the Complaint in this matter and waived service of the summons.

Defaulting Defendants have failed to answer or otherwise defend this action. Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 2 of 12 Page ID #:625

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF 6.

The Clerk of Court properly entered default against Defaulting Defendants. 7.

Defaulting Defendants are not minors, incompetent persons, or current members of the military service.

Defaulting Defendants were served with written notice of the Application via U.S. Mail on November 4, 2020, at least seven days before any hearing on the Application. The written notice included the amount of the money judgment requested, comprised of restitution and civil money penalties, in the Bureau’s Application. 9.

The Bureau’s Complaint states a claim upon which relief may be granted. 10.

The allegations in the Complaint, except with respect to damages, are taken as true because of Defaulting Defendants’ default. 11.

Judgment is entered on behalf of the Bureau and against Defaulting Defendants on Counts I and II of the Complaint. 12.

This Court is empowered to issue injunctive relief, monetary relief, and civil money penalties pursuant to 12 U.S.C. § 5565.

13.

The Bureau is entitled to an Order imposing a permanent injunction against Defaulting Defendants and requiring Defaulting Defendants to pay restitution in the amount of $11,618,552, and to each pay civil money penalties in the amount of $15,000,000.

14.

This action and the relief awarded in this Order are in addition to, and not in lieu of, other remedies as may be provided by law, including both civil and criminal remedies.

15.

Entry of this Order is in the public interest.

Defaulting Defendants Violated the TSR By Requesting and Receiving Advance Fees For a Telemarketed Debt-Relief Service (Count I) 16.

Defaulting Defendants, having used telemarketing to enroll consumers with private student-loan debt into debt-relief services purportedly provided by Defendants Amanda Johanson, David Mize, Jacob Slaughter, or Daniel Ruggiero, which were supposed to reduce or eliminate the consumers’ debts primarily through negotiation, Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 3 of 12 Page ID #:626

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF charged those consumers fees on a monthly basis starting at or just after enrollment, and before their debts were reduced or eliminated.

17.

GST, as a seller under the TSR, unlawfully requested and received payment of fees for debt-relief services before the terms of at least one of the consumer’s debts had been negotiated, settled, reduced, or otherwise altered pursuant to an agreement executed by the consumer; and the consumer had made at least one payment pursuant to that agreement, in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B). 18.

Graff is liable for GST’s violations of the TSR because he participated directly in the violations or had the authority to control them, and he knew of the conduct or was recklessly indifferent to it. FTC v. Am. Fin. Benefits Ctr., 324 F. Supp. 3d 1067, 1080-81 (N.D. Cal. 2018) (citing FTC v. Publ’g Clearing House, Inc., 104 F.3d 1168, 1170 (9th Cir. 1997)).

Defaulting Defendants Violated the TSR By Providing Substantial Assistance or Support to Codefendants Who Unlawfully Requested and Received Advance Fees 19.

Defendants Johanson, Mize, and Slaughter, as sellers under the TSR, unlawfully requested and received payment of fees for debt-relief services before the terms of at least one of the consumer’s debts had been negotiated, settled, reduced, or otherwise altered pursuant to an agreement executed by the consumer; and the consumer had made at least one payment pursuant to that agreement, in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).

20.

Defaulting Defendants provided substantial assistance or support to Johanson, Mize, and Slaughter by, among other things, developing the debt-relief business as described in the Complaint, facilitating the telemarketing, and facilitating the collection and distribution of advance fees paid by consumers, and Defaulting Defendants knew or consciously avoided knowing about the violations of Johanson, Mize, and Slaughter. Therefore, Defaulting Defendants violated the TSR, 16 C.F.R. § 310.3(b). Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 4 of 12 Page ID #:627

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF Basis for Equitable and Monetary Relief 21.

The Bureau is proceeding on behalf of thousands of financially distressed individuals unlawfully charged millions of dollars for debt-relief services. Consumer Fin. Prot. Bureau v. Siringoringo, No. SACV1401155JVSAJWX, 2016 WL 102435, at *6 (C.D. Cal. Jan. 7, 2016). Considering the balance of hardships and the public interest, the public interest is served by an injunction preventing Defaulting Defendants from engaging in behavior related to their previous illegal conduct. FTC v. Affordable Media, 179 F.3d 1228, 1236 (9th Cir. 1999). Defaulting Defendants were involved in an elaborate, illegal scheme that lasted more than five years, and therefore broader “fencingin” relief provisions help to “prevent similar and related violations from occurring in the future.” World Accounts, Inc. v. FTC, 594 F.2d 212, 215 (9th Cir. 1979). Accordingly, the permanent injunction ordered in Sections I through III below constitutes “appropriate . . . equitable relief.” 12 U.S.C. §§ 5564(a), 5565(a). 22.

Restitution “may be measured by the full amount lost by consumers. . . .” Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1195 (9th Cir. 2016) (quoting FTC v. Stefanchik, 559 F.3d 924, 931 (9th Cir. 2009)). 23.

The Bureau has established, through competent evidence, that Defaulting Defendants received $11,618,552, in unlawful advance fees, net of refunds, from 2,816 consumers, providing a basis for the monetary judgment amount ordered in Section IV. 24.

A penalty amount of $15,000,000 against each Defaulting Defendant is appropriate. Defaulting Defendants acted knowingly, or at least reckless, and therefore, they could be subject to much higher penalties, but in light of the applicable mitigating factors, the lower penalty as ordered in Section V is warranted. 12 U.S.C. §§ 5565(c)(2)(B), (C), (c)(3).

DEFINITIONS 25.

The following definitions apply to this Order:

A. “Affected Consumer” means a consumer who paid fees pursuant to an Engagement Agreement.

Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 5 of 12 Page ID #:628

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF B. “Assisting Others” includes, but is not limited to: i.

iii. consulting in any form whatsoever;

iv. providing names of, or contributing to the generation of, potential customers;

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

vi. acting or serving as an owner, officer, director, manager, principal, partner, or limited partner of any entity; and vii. investing or loaning money.

C. “Consumer Financial Product or Service” is synonymous in meaning and equal in scope to the definition of the term in Section 1002(5) of the CFPA, 12 U.S.C. § 5481(5), and, subject to applicable restrictions contained in the CFPA, includes, but is not limited to: i. Extending credit and servicing loans, including acquiring, purchasing, selling, brokering, or other extensions of credit (other Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 6 of 12 Page ID #:629

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF than solely extending commercial credit to a person who originates consumer credit transactions);

D. “Corporate Defendant” means GST Factoring, Inc., and its successors and assigns.

E. “Debt-Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt or obligation, including, but not limited to a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor or debt collector. F. “Defaulting Defendants” means the Corporate Defendant and the Individual Defendant individually, collectively, or in any combination. G. “Effective Date” means the date on which this Order is entered by the Court.

H. “Engagement Agreement” means an agreement to provide a Debt- Relief Service relating to private student-loan debt, the receivables from Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 7 of 12 Page ID #:630

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF which were assigned to Corporate Defendant through a factoring agreement.

I. “Individual Defendant” means Rick Graff and by any other name by which he might be known.

J. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

K. “Telemarketing” means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate phone call.

PERMANENT BAN ON DEBT-RELIEF PRODUCTS AND SERVICES IT IS ORDERED that:

26.

Defaulting Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from:

A. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service;

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF II.

PERMANENT BAN ON TELEMARKETING CONSUMER FINANCIAL PRODUCTS OR SERVICES IT IS FURTHER ORDERED that:

27.

Defaulting Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from:

A. Telemarketing any Consumer Financial Product or Service; B. Assisting Others in Telemarketing any Consumer Financial Product or Service; or C. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any Person that is engaged in Telemarketing any Consumer Financial Product or Service.

III.

PROHIBITION ON COLLECTING ACCOUNTS AND USE OF CONSUMER INFORMATION IT IS FURTHER ORDERED that:

28.

As of the Effective Date, Defaulting Defendants, and their officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from charging fees to Affected Consumers or collecting, attempting to collect, or selling, assigning, or otherwise transferring any right to collect payment from any Affected Consumer. 29.

Defaulting Defendants, and their officers, agents, servants, employees, and attorneys, who receive actual notice of this Order, whether acting directly or indirectly, may not disclose, use, or benefit from, consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a consumer’s account (including a credit card, bank account, or other financial account) of any person that Defaulting Defendants Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 9 of 12 Page ID #:632

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF obtained prior to the Effective Date in connection with the advertising, marketing, promotion, offering for sale, sale, or providing of any Debt-Relief Service. However, consumer information may be disclosed if requested by a government agency or required by law, regulation, or court order.

IV.

ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

30.

A judgment for monetary relief is entered in favor of the Bureau and against Defaulting Defendants, jointly and severally, in the amount of $11,618,552, for the purpose of providing redress to Affected Consumers. 31.

32.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, funds will not revert to Defendants. Defendants will have no right to challenge the Bureau’s choice of remedies under this Section, and will have no right to contest any actions that the Bureau or its representatives may take under this paragraph. 33.

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

ORDER TO PAY CIVIL MONEY PENALTIES IT IS FURTHER ORDERED that:

34.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and taking into account the factors in 12 Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 10 of 12 Page ID #:633

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DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF U.S.C. § 5565(c)(3), a judgment awarding a civil money penalty in the amount of $15,000,000 is entered against Corporate Defendant with post-judgment interest at the legal rate. This monetary judgment is enforceable against any asset owned by, on behalf of, for the benefit of, or in trust by or for Corporate Defendant. 35.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and taking into account the factors in 12 U.S.C. § 5565(c)(3), a judgment awarding a civil money penalty in the amount of $15,000,000 is entered against Individual Defendant with post-judgment interest at the legal rate. This monetary judgment is enforceable against any asset owned by, on behalf of, for the benefit of, or in trust by or for Individual Defendant. 36.

The civil money penalties paid under this Order shall be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

VI.

ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that:

37.

Defaulting Defendants must relinquish all dominion, control, and title to any funds paid pursuant to this Order to the fullest extent permitted by law and no part of the funds may be returned to Defaulting Defendants.

38.

Defaulting Defendants shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including any insurance policy, with regard to any civil money penalty paid pursuant to this Order. 39.

Defaulting Defendants shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any civil money penalty that Defaulting Defendants pay pursuant to this Order. Case 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page 11 of 12 Page ID #:634

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NM NO NO NHN KN NY NHN NN NO KH KF HF HK HF KF FE OES ony Dn PW NY RK CO UO WAN DN fF WY NY KF OC

se 8:20-cv-01239-DOC-ADS Document 61 Filed 12/03/20 Page12o0f12 Page ID #:635

VII.

RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

40. The Court will retain jurisdiction of this matter for the purposes of construction, modification, and enforcement of this Order. Vill.

SERVICE IT IS FURTHER ORDERED that:

41. This Order may be served upon Defendants by electronic mail, certified mail, or United Parcel Service, either by the United States Marshal, the Clerk of the

Court, or any representative or agent of the Bureau.

SO ORDERED this 3rdday of Dec__, 2020. Ninit 0 Curtin

Honorable David O. Carter United States District Judge

DEFAULT JUDGMENT AND ORDER AGAINST GST FACTORING, INC. AND RICK GRAFF