JPL Recovery Solutions, LLC; Check Security Associates, LLC (dba Warner Location Services, Pinnacle Location Services, and Orchard Payment Processing Systems); ROC Asset Solutions LLC (dba API Recovery Solutions and Northern Information Services); Regency

Agency: Consumer Financial Protection Bureau
Date: Sept. 8, 2020
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/jpl-recovery-solutions-llc-et-
Pages: 125
PDFs: 3 documents (links below)

Documents in this case

Complaint · Aug. 2020 · 46 p.
Amended complaint · May 2022 · 50 p.
Order · July 2022 · 28 p.

Case summary

One Capital LLC; Keystone Recovery Group, LLC; Bluestreet Asset Partners, Inc.; Christopher L. Di Re; Scott A. Croce; Brian J. Koziel; Marc D. Gracie; and Susan A. Croce

On September 8, 2020, the Consumer Financial Protection Bureau (Bureau), in partnership with the New York Attorney General, filed suit in the federal district court for the Western District of New York against a network of five different companies based outside of Buffalo, New York, two of their owners, and two of their managers, for their participation in a debt-collection operation using illegal methods to collect debts. As set forth in the amended complaint filed on December 20, 2021, the company defendants are: JPL Recovery Solutions, LLC; Regency One Capital LLC; ROC Asset Solutions LLC, which does business as API Recovery Solutions; Check Security Associates LLC, which does business as Warner Location Services and Orchard Payment Processing Systems; Keystone Recovery Group; and Blue Street Asset Partners, Inc. The individual defendants are Christopher Di Re, Scott Croce, and Susan Croce, who have held ownership interests in some or all of the defendant companies, and Brian Koziel and Marc Gracie, who are members of Keystone Recovery Group, and have acted as managers of some or all of the defendant companies. Susan Croce is also a relief defendant. The complaint alleged that from at least 2015 through the present, the defendants have participated in a debt-collection operation that has used deceptive, harassing, and improper methods to induce consumers to make payments to them in violation of the Fair Debt Collection Practices Act and the Consumer Financial Protection Act of 2010.

On May 25, 2022, the court entered a stipulated judgment which requires the defendants to pay $4 million in civil money penalties split between the Bureau and New York, which increases to $5 million if they fail to make timely payment. The judgment also permanently bans them from being debt collectors and prohibits them from engaging in deceptive practices in connection with consumer financial products or services.

Complaint (Aug. 2020)

PDF of this document (46 pages)

Page 2

IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

Civil Action No.

COMPLAINT

The Bureau of Consumer Financial Protection (Bureau) and the People of the State of New York, by Letitia James, Attorney General for the State of New York (NYAG), bring this action against Defendants JPL Recovery Solutions, LLC (JPL); Check Security Associates, LLC (CSA) dba Warner Location Services (Warner) and Orchard Payment Processing Bureau of Consumer Financial Protection and the People of the State of New York, by Letitia James, Attorney General for the State of New York, Plaintiffs, v.

JPL Recovery Solutions, LLC; Check Security Associates, LLC (dba Warner Location Services and Orchard Payment Processing Systems); ROC Asset Solutions LLC (dba API Recovery Solutions); Regency One Capital LLC; Keystone Recovery Group, LLC; Christopher L. Di Re; Scott A. Croce; Brian J. Koziel; and Marc D. Gracie,

Defendants.

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Systems (Orchard); ROC Asset Solutions LLC (ROC) dba API Recovery Solutions (API); Regency One Capital LLC (Regency); Keystone Recovery Group, LLC (Keystone) (collectively, the Corporate Defendants); and Christopher L. Di Re; Scott A. Croce; Brian J. Koziel; and Marc D. Gracie (collectively, the Individual Defendants), and allege as follows: INTRODUCTION 1.

This case concerns an illegal debt-collection scheme involving a network of interrelated companies that purchases millions of dollars of defaulted consumer debt and, using deceptive and harassing methods, collects on that debt illegally (the Debt-Collection Operation). 2.

The Debt-Collection Operation, which has operated from at least 2015 through the present, is owned and run by Di Re and Croce and managed by Koziel and Gracie.

The Debt-Collection Operation uses illegal methods to induce consumers to make payments, including: threatening consumers with arrest or legal action the firms had no intention of taking or could not legally take; threatening to contact consumers’ employers, implying they would disclose the existence of the debt; claiming consumers owed more debt than they did in order to convince them to pay the amount they owed; impermissibly contacting consumers’ friends, family, and workplace to Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 2 of 46

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disclose the existence of a consumer’s debt or to shame or humiliate them about the debt; harassing consumers by using intimidating, belittling, or menacing language and repeatedly and excessively phoning consumers; and failing to provide legally required notices informing consumers of their right to know how much they owed and of their ability to dispute the amount or existence of the purported debt. 4.

Defendants’ illegal debt-collection practices violate the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a), the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692p, N.Y. Executive Law § 63(12), and N.Y. General Business Law (GBL) Article 22-A, Consumer Protection from Deceptive Acts and Practices, and Article 29-H, Debt Collection Procedures. JURISDICTION AND VENUE 5.

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. 6.

This Court has supplemental jurisdiction over New York’s state-law claims because they are so related to the federal claims that they form part of the same case or controversy. 28 U.S.C. § 1367(a). Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 3 of 46

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Venue is proper in this District because Defendants are located, reside, or do business in this District. 12 U.S.C. § 5564(f). PARTIES 8.

The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer-financial products and services under Federal consumer financial laws. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority to enforce Federal consumer financial laws, including the CFPA and the FDCPA. 12 U.S.C. §§ 5564(a)-(b); 5481(12), (14); 15 U.S.C. § 1692l(b)(6). 9.

The State of New York is one of the 50 sovereign states of the United States. The State of New York, by its Attorney General, is authorized to take action to enjoin (i) repeated and persistent fraudulent and illegal conduct under New York Executive Law § 63(12), (ii) deceptive business practices under New York General Business Law § 349, and (iii) illegal debt-collection practices under New York General Business Law § 602, and to obtain legal, equitable, or other appropriate relief for such violations. The NYAG is authorized to seek redress for repeated and persistent violations of the FDCPA as such conduct constitutes repeated and persistent illegality in violation of Executive Law § 63(12). The NYAG is also authorized to enforce the CFPA. 12 U.S.C. § 5552. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 4 of 46

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10.

JPL is a New York limited liability company formed in 2016, with its principal place of business at 2390 North Forest Road, Getzville, New York, 14068. As a significant part of its business, JPL, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). JPL is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6). 11.

CSA is a New York limited liability company formed in 2013, with its principal place of business at 2390 North Forest Road, Getzville, New York, 14068. It does business under the names CSA, Warner, and Orchard. As a significant part of its business, CSA, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). CSA is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6). 12.

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API Recovery Solutions or API. As a significant part of its business, ROC, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). ROC is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

13.

Regency is a Delaware limited liability company with its principal place of business at 8828 Main Street, Williamsville, New York, 14221. As a significant part of its business, Regency, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Regency has also purchased and sold debts that are the subject of the debt-collection activities of the other entities within the Debt-Collection Operation. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). Regency is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

14.

Keystone is a New York limited liability company formed in 2019. Its principal place of business is 2390 North Forest Road, Getzville, Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 6 of 46

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New York, 14068. As a significant part of its business, Keystone, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). Keystone is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

15.

The Corporate Defendants operate as a common enterprise. The Corporate Defendants are under common control, operate out of a combined headquarters, and commingle funds, with one entity purchasing and selling debt that the other entities collect. Collectors employed by the Corporate Defendants share training materials and compete against each other for workplace incentives. Collectors use various Corporate Defendant names when identifying themselves to consumers in order to cause consumers to believe that a debt has been sold to or placed with a new collection agency when, in fact, the debt has not been sold or placed outside the Debt-Collection Operation.

16.

Because the Corporate Defendants operate as a common enterprise, an act by one entity constitutes an act by each entity Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 7 of 46

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comprising the common enterprise, and each is jointly and severally liable for the acts and practices of all the Corporate Defendants, as alleged below. 17.

From at least 2012 through the present, Christopher L. Di Re has held ownership interests in some or all of the Corporate Defendants, including Regency, ROC, CSA, and JPL. He holds the title of President, CEO, or is an officer in Regency, ROC, CSA, and JPL, and has materially participated in the conduct of their affairs. Di Re is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Di Re is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B).

18.

From at least 2015 through the present, Scott A. Croce has held ownership interests in some or all of the Corporate Defendants, including Regency, ROC, and CSA. He has materially participated in the conduct of the affairs of the Corporate Defendants. Croce is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Croce is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B).

19.

From at least 2015 through the present, Brian J. Koziel has had a management role in the Debt-Collection Operation. He has had an ownership interest in and has been an officer of at least one of the Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 8 of 46

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Corporate Defendants, CSA, and has been identified as a “manager” of JPL and a “managing member” of Keystone. He has been charged with managerial responsibility for, and has materially participated in the conduct of the affairs of, some or all of the Corporate Defendants. Koziel is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Koziel is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B). 20.

From at least 2015 through at least June 2020, Marc D. Gracie has had a management role in the Debt-Collection Operation. He has been identified as a “manager” of JPL and a “managing member” of Keystone. He has been charged with managerial responsibility for, and has materially participated in the conduct of the affairs of, some or all of the Corporate Defendants. Gracie is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Gracie is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B).

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FACTS

21.

The Debt-Collection Operation is operated by the Corporate Defendants, a series of interrelated companies that conduct business out of a single location in the Buffalo, New York area. 22.

Through one or more of the Corporate Defendants, such as Regency, the Debt-Collection Operation obtains defaulted consumer debt for pennies on the dollar. A substantial portion of the defaulted debt obtained by the Debt-Collection Operation for collection during the past year consists of high-interest personal loans originated by the lender LoanMe, Inc. (LoanMe), although the Debt-Collection Operation has also obtained for collection defaulted installment loans, defaulted payday loans, and defaulted credit card debt from various other sources. Some of this debt is purchased outright while some of this debt is transferred or placed for collection in another manner, such as a lease. 23.

Through about 40 collectors employed by at least two of the Corporate Defendants, such as ROC and CSA, the Debt-Collection Operation collects or attempts to collect debt from consumers under the names of one or more of the Corporate Defendants. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 10 of 46

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24.

These collectors routinely engage in a wide range of deceptive and other illegal collection tactics in connection with the collection of this debt.

25.

Using these illegal tactics, the Debt-Collection Operation appears to have obtained revenues of approximately $10 million in 2015 to over $23 million in 2018.

False Threats 26.

In numerous instances from at least 2015 through the present, collectors from the Debt-Collection Operation have threatened consumers with legal action, including wage garnishment or attachment of property, or arrest and imprisonment, if they did not make payments. 27.

These threats were false.

28.

Consumers are not subject to arrest or imprisonment for failure to pay debts.

29.

The Debt-Collection Operation has never sought or obtained a legal judgment that would be required as a pre-requisite for seeking to garnish a consumer’s wages or attach their property. 30.

Docket searches have revealed no debt-collection lawsuits filed by any of the Corporate Defendants against a consumer. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 11 of 46

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Falsely Claiming Consumers Owe More than they Do

31.

For the collection of at least LoanMe debt, the Debt-Collection Operation employs a ruse, which it refers to as its “LoanMe Pitch,” in which collectors tell consumers that they owe more than they do in order to convince them that paying the amount they actually owe represents a substantial discount.

32.

In the LoanMe Pitch, collectors tell consumers who have defaulted on LoanMe debt that they are liable for the full amount that they would have paid if they had made timely payments of principal and interest for the entire loan period. Collectors from the Debt-Collection Operation call this the “full contract balance.” This representation is bolstered by the fact that it is an amount equal to the “total of payments” appearing in bold letters on the face of the loan agreement. 33.

However, consumers do not owe this amount on a defaulted loan; they only owe the remaining unpaid principal of the loan plus any unpaid contractually authorized amounts. Depending on when the consumer defaulted in the loan contract period, the supposed “full contract balance” may be thousands of dollars more than the actual amount owed. 34.

The Debt-Collection Operation instructs its collectors to tell consumers that the original creditor could pursue them for the “full Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 12 of 46

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contract balance,” but they have an “opportunity” to “save . . . a ton of money” by paying the amount demanded by the collectors, which is the amount actually owed (or sometimes less). Collectors are told to present this as an offer that will only be available for a short period of time. 35.

In fact, no consumers who defaulted on their LoanMe loans owe the “full contract balance,” and neither LoanMe nor the Debt- Collection Operation have the right to pursue that amount from consumers.

Contacting and Disclosing Debt to Third Parties

36.

From at least 2015, the Debt-Collection Operation has contacted friends, family, work colleagues, or supervisors of consumers in order to pressure consumers to pay the debts under collection. 37.

In this tactic, collectors for the Debt-Collection Operation begin their collection efforts by using a skip tracing service and social media to identify the consumer’s address, other location information relating to the consumer, and, most importantly, third parties associated with that consumer. This is called the “Circles” approach by the Debt- Collection Operation because the collector can visualize these third parties in a series of concentric circles around the consumer, who is at the bull’s eye center. The surrounding circles consist of immediate family members, Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 13 of 46

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grandparents, distant family members, in-laws, ex-spouses, employers, work colleagues, landlords, Facebook friends, and other known associates. 38.

The collector then begins calling each of these third parties under the pretense of attempting to find the consumer, although the collector already has location information for the consumer. During these calls, the collectors expressly or implicitly disclose that the consumer is in debt or in some type of distress or difficulty. The Debt-Collection Operation does this to “stir the pot,” so that the third parties start calling the consumer. Thus, the consumer’s family, friends, and colleagues can serve as the collector’s “army,” pressuring the consumer to address the collector’s demands.

39.

Collectors reach out to the consumer only after they have set their “army” of third parties in motion.

40.

Debt-Collection Operation collectors have used this approach even after a consumer has spoken to a collector and asked to halt further communications, or after a consumer has initiated but then stopped payments to the collector.

41.

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approach, the Debt-Collection Operation equates it to a form of repossession, telling collectors: “If I buy a car and I don’t pay for it . . . they take the car. If I don’t pay for my house, they take the house . . . . [W]e’re taking [their] pride . . . .”

Harassing Consumers and Third Parties 42.

In numerous instances, Debt-Collection Operation collectors have harassed consumers or third parties related to those consumers to coerce payment.

43.

Many consumers have complained that calls from the Debt- Collection Operation to their employers or work colleagues potentially jeopardized their jobs. Multiple consumers expressed concerns about collectors continuing to phone consumers at work despite being told the consumer’s workplace prohibits the consumer from receiving such communications.

44.

Many consumers have complained that collectors from the Debt-Collection Operation also have used insulting and belittling language, or engaged in intimidating behavior when calling consumers or third parties. Consumers have also complained, as described above, that collectors from the Debt-Collection Operation used threats of legal action, Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 15 of 46

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garnishment, arrest, or imprisonment, as well as threats to call consumers’ workplaces.

45.

The Circles scheme, described above, is another harassment tactic, intended to intimidate or embarrass consumers into paying to stop the calls.

46.

Collectors from the Debt-Collection Operation also repeatedly call consumers to induce payment. Many consumers complained that collectors called them more than once a day over prolonged periods of time, with several complaining of multiple calls every day over periods lasting a month or longer.

47.

These repeated calls to consumers reflect an intent to harass, evidenced by the Debt-Collection Operation’s “zero gap” calling strategy. This practice requires collectors to press consumers “every single day” for payment, even after they make contact and have a live conversation with the consumer. The Debt-Collection Operation instructs its collectors that they should let the consumer hang up on each call so they can maintain a pretense in their call logs that they were disconnected, and then call back as soon as the next day.

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48.

According to consumer complaints, many collectors continued to call consumers even after the consumer asked them to stop, hung up on them, or told them they would not or could not pay. Failing to Provide Debt Verification Rights Notices 49.

Debt collectors are required to send a notice within five days after the initial communication with the consumer. This legally mandated notice must tell consumers (1) the amount of the alleged debt; (2) the name of the creditor to whom the purported debt is owed; (3) a statement that unless the consumer disputes the debt, the debt will be assumed valid; (4) a statement that if the consumer disputes all or part of the debt in writing within 30 days, the debt collector will obtain verification of the debt and mail it to the consumer; and (5) a statement that, upon the consumer’s written request within the 30-day period, the debt collector will provide the name and address of the original creditor, if different from the current creditor. Collectors are not required to send the notice if this information is contained in the initial communication with the consumer. 50.

The Debt-Collection Operation did not provide the statutorilyrequired notices. Many consumers reported that the collector claimed to have sent such notices, even though they never received them. Some Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 17 of 46

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consumers said collectors refused to provide such notices, wrongly stating they were not obligated to send them.

51.

Because consumers did not receive the validation notice, they were not informed that they must dispute the debt in writing in order to require the collector to provide verification of the debt. When consumers made the verification request orally, Corporate Defendants did not provide verification or cease collection. According to consumer complaints, some consumers who asked for a physical address to send such a request were denied that information.

Role and Knowledge of the Individual Defendants 52.

Di Re and Croce together appear to own nearly 100% of at least three of the Corporate Defendants. They are bank signatories or officers of certain Corporate Defendants. They also co-own the LLC that purchased the building out of which the Debt-Collection Operation is run. 53.

Di Re and Croce are owners who are in the office regularly and approve, adopt, or ratify the Corporate Defendants’ unlawful collection practices, including by meeting regularly with the Corporate Defendants’ managers to rate randomly-selected collectors’ calls to ensure adherence to company policies. Di Re and Croce also regularly monitor collectors’ calling patterns to ensure there are no “gaps” in their calling of consumers. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 18 of 46

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They award workplace incentives to the employees who earn the most money for the Corporate Defendants. Di Re encourages collectors to contact him directly for advice on how to improve their collection skills and earn more money for themselves and the Corporate Defendants. 54.

Koziel and Gracie have been held out as “members” of Keystone. Koziel has also been held out as a manager of JPL, and as President, one-third owner (until sometime in 2018 when he transferred his interest to Di Re and Croce), Compliance Officer, and bank signatory for CSA. Koziel is identified in collectors’ employee handbooks as their supervisor. Gracie has been held out as an officer or manager of ROC and JPL.

55.

Koziel revises and approves talk-off scripts, meets with Di Re and Croce regularly, and is responsible for recruiting new employees. Koziel and Gracie have both worked to hire new collectors for the Debt- Collection Operation through social media as recently as April 2020. 56.

Di Re, Croce, Gracie, and Koziel knew about, were reckless to the fact of, or ignored red flags reflecting, the practices described above. This was the case through their management, authority, and control over the Debt-Collection Operation.

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57.

Collectors were told that Di Re and Croce reviewed recordings of their collection calls twice weekly with managers of the Debt-Collection Operation.

58.

Collectors were told that Di Re and Croce reviewed their training session, at which some of the tactics described above were explained.

59.

The training manual used for the Debt-Collection Operation describes how collectors should use skip-tracing software, Facebook, and Google to locate a consumer’s parents, in-laws, grandparents, grandparent in-laws, siblings, cousins, employers, friends lists, other possible relatives, and other likely associates that are at the heart of the Circles approach. The training manual also includes scripts detailing how to present the LoanMe Pitch to consumers, and scripts instructing collectors to say their company will “explore every means necessary” if consumers refuse to pay. The “CSA+ROC” Employee Handbook included in the training materials identifies Brian Koziel as a “supervisor.” 60.

Since 2015, numerous consumer complaints have been lodged against the Debt-Collection Operation through the Bureau, NYAG, other law enforcement agencies, and consumer organizations, each of which identified at least one of the debt-collection practices described above. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 20 of 46

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Many of these complaints were forwarded to the Debt-Collection Operation for its response.

61.

In 2018, the BBB publicly issued a “scam tracker” warning against API (one of ROC’s dbas) stating “BBB just wants to advise you to not pay any debt to API Recovery Solutions.” The BBB also publicly assigned F ratings to JPL, Warner (one of CSA’s dbas), and API. Koziel and Gracie are listed as points of contact for complaints from the BBB and the Bureau.

62.

Since 2015, more than 20 private lawsuits have been filed by consumers against varying Corporate Defendants relating to the Debt- Collection Operation, with several naming Di Re, Koziel, and Gracie personally, alleging some of the debt-collection practices described above. 63.

The Corporate Defendants were subject to high chargeback rates in connection with their work for the Debt-Collection Operation. High chargeback rates are a red flag for wrongdoing, and as owners and managers, the Individual Defendants would have notice of the chargeback rates. Koziel and Gracie are listed as points of contact for complaints and chargebacks from the Corporate Defendants’ payment processor. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 21 of 46

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VIOLATIONS OF THE FDCPA AS TO ALL DEFENDANTS

64.

Each of the Corporate Defendants is or has been a person who has used an instrumentality of interstate commerce or the mails in a business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, and is a “debt collector” under the FDCPA. 15 U.S.C. § 1692a(6).

65.

Each of the Individual Defendants, due to his position of control and involvement in the Debt-Collection Operation, and his authorization, adoption, or ratification of the acts of the Corporate Defendants, is or has been a person who has used an instrumentality of interstate commerce or the mails in a business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, and is a “debt collector” under the FDCPA. 15 U.S.C. § 1692a(6).

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COUNT I False or Misleading Misrepresentations Under the FDCPA (All Defendants) 66.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-35, 52-65.

67.

In numerous instances, in connection with the collection of debts, Corporate Defendants, directly or indirectly, expressly or by implication, have used false, deceptive, or misleading representations or means, in violation of Section 807 of the FDCPA, 15 U.S.C. § 1692e, including, but not limited to:

Falsely representing to the consumer the amount of debt owed by the consumer by stating that the original creditor could collect more than the consumer legally owed, in violation of Section 807(2)(A) of the FDCPA, 15 U.S.C. § 1692e(2)(A);

Falsely representing that nonpayment of a debt will result in the arrest or imprisonment of a person, when such action is not lawful or when Corporate Defendants have no intention of taking such action, in violation of Section 807(4) of the FDCPA, 15 U.S.C. § 1692e(4); Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 23 of 46

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Threatening to take action that Corporate Defendants do not intend to take, such as filing a lawsuit, garnishing a consumer’s wages, or attaching the personal property of a consumer, in violation of Section 807(5) of the FDCPA, 15 U.S.C. § 1692e(5); and d.

Using a false representation or deceptive means to collect or attempt to collect a debt, or to obtain information concerning a consumer, in violation of Section 807(10) of the FDCPA, 15 U.S.C. § 1692e(10).

68.

Therefore, Corporate Defendants have violated the FDCPA, 15 U.S.C. § 1692e.

69.

The Individual Defendants were involved in the debtcollection activities of the Corporate Defendants. In addition, the Individual Defendants knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, the Individual Defendants are “debt collectors” under the FDCPA and are liable for violations of the statute, 15 U.S.C. § 1692e. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 24 of 46

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COUNT II Unlawful Communications with Third Parties Under the FDCPA (All Defendants)

70.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-25, 36-48, 52-65.

71.

Section 804 of the FDCPA, 15 U.S.C. § 1692b, provides that any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall identify his employer only if expressly asked and may not state that the consumer owes any debt.

72.

Section 805(b) of the FDCPA, 15 U.S.C. § 1692c(b), prohibits communications about a debt with any person other than the consumer or the consumer’s attorney, a consumer reporting agency, the creditor or the creditor’s attorney, or the debt collector’s attorney, except as allowed by Section 804 of the FDCPA, with the permission of the consumer or a court of competent jurisdiction, or as reasonably necessary to effectuate postjudgment relief. For the purpose of Section 805(b), Section 805 of the FDCPA defines the term “consumer” to include “the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.” 73.

In numerous instances, in connection with the collection of debts, Corporate Defendants have communicated with persons other than Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 25 of 46

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the persons listed in Section 805(b) for purposes other than acquiring location information about the consumer, without having obtained directly the prior consent of the consumer or the express permission of a court of competent jurisdiction, and when not reasonably necessary to effectuate a post judgment judicial remedy, in violation of Section 805(b) of the FDCPA, 15 U.S.C. § 1692c(b).

74.

During many of these communications, Corporate Defendants stated that the consumers owed debt, in violation of Section 804(2) of the FDCPA, 15 U.S.C. § 1692b(2).

75.

Therefore, Corporate Defendants have violated 15 U.S.C. §§ 1692b and 1692c.

76.

The Individual Defendants were involved in the debt-collection activities of the Corporate Defendants. In addition, the Individual Defendants knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, the Individual Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. §§ 1692b and 1692c.

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COUNT III Harassing and Abusive Conduct Under the FDCPA (All Defendants)

77.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-48, 52-65.

78.

In numerous instances, in connection with the collection of debts, Corporate Defendants have engaged in conduct the natural consequence of which has been to harass, oppress, or abuse the consumer, in violation of Section 806 of the FDCPA, 15 U.S.C. § 1692d. 79.

This includes, but is not limited to, using intimidating, menacing, or belittling language, and making impermissible threats. 80.

This also includes causing a telephone to ring or engaging a person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass a person at the called number, in violation of Section 806(5) of the FDCPA, 15 U.S.C. § 1692d(5). 81.

Therefore, Corporate Defendants have violated 15 U.S.C. § 1692d.

82.

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unlawful practices described above. As such, the Individual Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692d.

COUNT IV Failure to Inform Consumers of their Legal Rights Under the FDCPA (All Defendants)

83.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-25, 49-65.

84.

In numerous instances, in connection with the collection of debts, Corporate Defendants have failed to provide consumers, either in the initial communication or a written notice sent within five days after the initial communication, with information about the debt and the right to dispute the debt, in violation of Section 809(a) of the FDCPA, 15 U.S.C. § 1692g(a).

85.

Therefore, Corporate Defendants have violated 15 U.S.C. § 1692g(a).

86.

The Individual Defendants were involved in the debt-collection activities of the Corporate Defendants. In addition, the Individual Defendants knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, the Individual Defendants Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 28 of 46

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are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692g(a).

VIOLATIONS OF THE CFPA AS TO ALL DEFENDANTS COUNT V Deception Under the CFPA Relating to Collection of, and Attempts to Collect, Debts (All Defendants)

87.

Plaintiffs reallege and incorporate by reference paragraphs 5, 7-35, 52-63.

88.

Section 1036(a)(1)(B) of the CFPA prohibits deceptive acts or practices. 12 U.S.C. § 5536(a)(1)(B). An act or practice is deceptive if it involves a material misrepresentation that is likely to mislead a consumer acting reasonably under the circumstances. 89.

In numerous instances, in connection with the collection of purported consumer debts, Corporate Defendants have represented, directly or indirectly, expressly or by implication, that: a. Corporate Defendants will have the consumer arrested or imprisoned for nonpayment;

b. Corporate Defendants would file lawsuits against consumers if they failed to pay, and that the filing of such lawsuits was imminent;

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c. Corporate Defendants would seek to garnish or attach consumers’ wages or property if they failed to pay; and d. Consumers owed an amount of money that the Corporate Defendants described as the “full contract balance,” and that the original creditor could seek to collect this amount if it chose to.

90.

In truth and in fact, where Corporate Defendants have made the representations set forth in Paragraph 89 of this Complaint: a. Corporate Defendants have not, and could not have, had consumers arrested or imprisoned;

b. Corporate Defendants have not filed, and do not intend to file, lawsuits against consumers for nonpayment; c. Corporate Defendants would not seek and could not seek to garnish or attach consumers’ wages or property if they failed to pay; and d. Consumers did not owe the amounts Corporate Defendants described as the “full contract balance,” and neither Corporate Defendants nor the original creditor could legally collect such amounts, which were sometimes thousands of dollars more than the consumer legally owed. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 30 of 46

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91.

These false and misleading misrepresentations were material and likely to mislead consumers acting reasonably under the circumstances.

92.

Therefore, the representations set forth in Paragraph 89 of this Complaint constitute deceptive acts or practices in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). 93.

The Individual Defendants have engaged in these deceptive acts and practices because they had authority to control these representations or participated in them. They have known about, have been reckless to the fact of, or have ignored red flags with respect to, these false and misleading representations. The Individual Defendants are therefore liable for these violations of the CFPA. COUNT VI Violations of the CFPA Arising from FDCPA Violations (All Defendants)

94.

Plaintiffs reallege and incorporate by reference paragraphs 5, 7-86.

95.

Section 1036(a)(1)(A) of the CFPA provides that is “unlawful for . . . any covered person or service provider . . . to offer or provide to a consumer any financial product or service not in conformity with Federal Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 31 of 46

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consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A). 96.

Defendants offer or provide consumer financial products or services because they collect debts related to consumer financial products and services, including installment and payday loans. 12 U.S.C. § 5481(5), 15(A)(x).

97.

As detailed in Counts I through IV, Defendants have engaged in violations of the FDCPA in the course of their collection of debts related to consumer financial products or services. 98.

Therefore, Defendants are offering consumer financial products or services not in conformity with Federal consumer financial law, and have committed acts or omissions in violation of Federal consumer financial law, in violation of § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A).

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COUNT VII Substantially Assisting Violations of the CFPA (Individual Defendants)

99.

Plaintiffs reallege and incorporate by reference paragraphs 5, 7-35, 52-63, 87-93.

100. It is unlawful for any person to knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of 12 U.S.C. § 5531. 12 U.S.C. § 5536(a)(3). 101. From at least 2015 through the present, as described in Count V, the Corporate Defendants have engaged in deceptive acts or practices in violation of the CFPA, 12 U.S.C. §§ 5531 and 5536(a)(1)(B), by making false or deceptive threats to consumers, and misrepresenting, expressly or by implication, the amount of debt consumers owed, in order to induce payments to Corporate Defendants.

102. The Individual Defendants provided substantial assistance to the Corporate Defendants that engaged in the practices described in Count V. As owners and managers, they associated themselves with the venture of the Corporate Defendants and by helping to run the Debt-Collection Operation, they sought by their actions to make it succeed. 103. The Individual Defendants knew about, or were reckless with respect to, the deceptive conduct alleged in Count V. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 33 of 46

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104. Therefore, the Individual Defendants violated 12 U.S.C. § 5536(a)(3).

VIOLATIONS OF NEW YORK STATE LAW COUNT VIII Repeated Fraudulent Acts in Violation of Exec. Law § 63(12) (All Defendants) 105. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-48, 52-63.

106. New York Executive Law § 63(12) empowers the Attorney General to seek restitution, damages and injunctive relief when any person or business entity has engaged in repeated fraudulent or illegal acts or otherwise demonstrates persistent fraud or illegality in the carrying on, conducting, or transaction of business.

107. Defendants have engaged in repeated fraudulent acts or otherwise demonstrated persistent fraud in the carrying on, conducting, or transaction of their debt collection business for purposes of Executive Law § 63(12).

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COUNT IX Repeated Illegality in Violation of Exec. Law § 63(12) False or Misleading Misrepresentations Under the FDCPA (All Defendants) 108. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-35, 52-65.

109. In numerous instances, in connection with the collection of debts, Corporate Defendants, directly or indirectly, expressly or by implication, have used false, deceptive, or misleading representations or means, in violation of Section 807 of the FDCPA, 15 U.S.C. § 1692e, including, but not limited to:

a. Falsely representing to the consumer the amount of debt owed by the consumer by stating that the original creditor could collect more than the consumer legally owed, in violation of Section 807(2)(A) of the FDCPA, 15 U.S.C. § 1692e(2)(A);

b. Falsely representing that nonpayment of a debt will result in the arrest or imprisonment of a person, when such action is not lawful or when Corporate Defendants have no intention of taking such action, in violation of Section 807(4) of the FDCPA, 15 U.S.C. § 1692e(4);

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c. Threatening to take action that Corporate Defendants do not intend to take, such as filing a lawsuit, garnishing a consumer’s wages, or attaching the personal property of a consumer, in violation of Section 807(5) of the FDCPA, 15 U.S.C. § 1692e(5); and d. Using a false representation or deceptive means to collect or attempt to collect a debt, or to obtain information concerning a consumer, in violation of Section 807(10) of the FDCPA, 15 U.S.C. § 1692e(10).

110. Therefore, Corporate Defendants have violated the FDCPA, 15 U.S.C. § 1692e.

111. The Individual Defendants were involved in the debtcollection activities of the Corporate Defendants. In addition, the Individual Defendants knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, the Individual Defendants are “debt collectors” under the FDCPA and are liable for violations of the statute, 15 U.S.C. § 1692e. 112. Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12). Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 36 of 46

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COUNT X Repeated Illegality in Violation of Exec. Law § 63(12) Unlawful Communications with Third Parties Under the FDCPA (All Defendants)

113. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-25, 36-48, 52-65.

114. Section 804 of the FDCPA, 15 U.S.C. § 1692b, provides that any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall identify his employer only if expressly asked and may not state that the consumer owes any debt.

115. Section 805(b) of the FDCPA, 15 U.S.C. § 1692c(b), prohibits communications about a debt with any person other than the consumer or the consumer’s attorney, a consumer reporting agency, the creditor or the creditor’s attorney, or the debt collector’s attorney, except as allowed by Section 804 of the FDCPA, with the permission of the consumer or a court of competent jurisdiction, or as reasonably necessary to effectuate postjudgment relief. For the purpose of Section 805(b), Section 805 of the FDCPA defines the term “consumer” to include “the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.” Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 37 of 46

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116. In numerous instances, in connection with the collection of debts, Corporate Defendants have communicated with persons other than the persons listed in Section 805(b) for purposes other than acquiring location information about the consumer, without having obtained directly the prior consent of the consumer or the express permission of a court of competent jurisdiction, and when not reasonably necessary to effectuate a post judgment judicial remedy, in violation of Section 805(b) of the FDCPA, 15 U.S.C. § 1692c(b).

117. During many of these communications, Corporate Defendants stated that the consumers owed debt, in violation of Section 804(2) of the FDCPA, 15 U.S.C. § 1692b(2).

118. Therefore, Corporate Defendants have violated 15 U.S.C. §§ 1692b and 1692c.

119. The Individual Defendants were involved in the debt-collection activities of the Corporate Defendants. In addition, the Individual Defendants knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, the Individual Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. §§ 1692b and 1692c.

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120. Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12). COUNT XI Repeated Illegality in Violation of Exec. Law § 63(12) Harassing and Abusive Conduct Under the FDCPA (All Defendants)

121. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-30, 42-48, 52-65.

122. In numerous instances, in connection with the collection of debts, Corporate Defendants have engaged in conduct the natural consequence of which has been to harass, oppress, or abuse the consumer, in violation of Section 806 of the FDCPA, 15 U.S.C. § 1692d. 123. This includes, but is not limited to, using intimidating, menacing, or belittling language, and making impermissible threats. 124. This also includes causing a telephone to ring or engaging a person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass a person at the called number, in violation of Section 806(5) of the FDCPA, 15 U.S.C. § 1692d(5). 125. Therefore, Corporate Defendants have violated 15 U.S.C. § 1692d.

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126. The Individual Defendants were involved in the debt-collection activities of the Corporate Defendants. In addition, the Individual Defendants knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, the Individual Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692d.

127. Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12). COUNT XII Repeated Illegality in Violation of Exec. Law § 63(12) Failure to Inform Consumers of their Legal Rights Under the FDCPA (All Defendants) 128. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-25, 49-65.

129. In numerous instances, in connection with the collection of debts, Corporate Defendants have failed to provide consumers, either in the initial communication or a written notice sent within five days after the initial communication, with information about the debt and the right to dispute the debt, in violation of Section 809(a) of the FDCPA, 15 U.S.C. § 1692g(a).

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130. Therefore, Corporate Defendants have violated 15 U.S.C. § 1692g(a).

131. The Individual Defendants were involved in the debt-collection activities of the Corporate Defendants. In addition, the Individual Defendants knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, the Individual Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692g(a).

132. Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12). COUNT XIII Deceptive Acts or Practices in Violation of GBL § 349 (All Defendants) 133. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-48, 52-63.

134. New York General Business Law § 349 provides that “[d]eceptive acts or practices in the conduct of any business . . . in this state are hereby declared unlawful.”

135. In numerous instances, Defendants have violated New York General Business Law § 349 by engaging in deceptive acts or practices in connection with conducting their debt collection business. Case 1:20-cv-01217 Document 1 Filed 09/08/20 Page 41 of 46

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COUNT XIV Violation of GBL Article 29-H, New York State Debt Collection Procedures (All Defendants) 136. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-48, 52-63.

137. Each Defendant qualifies as a principal creditor or his agent as defined by GBL § 600.

138. Each Corporate Defendant qualifies as a debt collection agency as defined by GBL § 600.

139. New York General Business Law § 601 sets forth a list of prohibited debt collection practices, including: a. Knowingly collecting, attempting to collect, or asserting a right to any collection fee, attorney’s fee, court cost or expense when such charges were not justly due and legally chargeable against the debtor. GBL § 601(2); b. Disclosing or threatening to disclose information affecting the debtor's reputation for credit worthiness with knowledge or reason to know that the information is false. GBL § 601(3);

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c. Communicating or threatening to communicate the nature of a claim to the debtor’s employer prior to obtaining final judgment against the debtor. GBL § 601(4); d. Disclosing or threatening to disclose information concerning the existence of a debt known to be disputed by the debtor without disclosing that fact. GBL § 601(5); e. Communicating with the debtor or any member of his family or household with such frequency or at such unusual hours or in such a manner as can reasonably be expected to abuse or harass the debtor. GBL § 601(6); f. Threatening any action which the debt collector in the usual course of its business does not in fact take. GBL § 601(7); and g. Claiming, or attempting or threatening to enforce a right with knowledge or reason to know that the right does not exist. GBL § 601(8).

140. GBL § 602 provides the NYAG with authority to enforce the provisions of GBL § 601.

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141. In numerous instances, Defendants have violated GBL Article 29-H by engaging in debt collection practices prohibited under that statute.

DEMAND FOR RELIEF Wherefore, the Plaintiffs request that the Court: a. permanently enjoin Defendants from committing future violations of the CFPA, the FDCPA, GBL Articles 22-A and 29-H, and N.Y. Executive Law § 63(12); b. award such relief as the Court finds necessary to redress injury to consumers resulting from Defendants’ violations of the CFPA, the FDCPA, GBL Articles 22-A and 29-H, and New York Executive Law § 63(12), including but not limited to rescission or reformation of contracts, restitution, damages, and the refund of monies paid; c. grant additional injunctive relief as the Court may deem to be just and proper;

d. order disgorgement of ill-gotten revenues against Defendants;

e. as authorized under the CFPA, impose civil money penalties against Defendants;

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f. pursuant to New York General Business Law § 350-d, impose a civil penalty of $5,000 for each violation of New York General Business Law Article 22-A; g. order Defendants to pay Plaintiffs’ costs in connection with this action; and h. award additional relief as the Court may determine to be just and proper.

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Respectfully submitted,

Dated: September 8, 2020

Thomas G. Ward Enforcement Director David M. Rubenstein Deputy Enforcement Director Cynthia Gooen Lesser Assistant Deputy Enforcement Director

s/ Reid B. Horwitz_______________ Reid B. Horwitz Jessica Rank Divine

Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Telephone: (202) 435-7752 (Horwitz) Telephone: (202) 435-7863 (Divine) Email: [email protected] Email: [email protected] Attorneys for Plaintiff Bureau of Consumer Financial Protection

Letitia James Attorney General of the State of New York

s/ Christopher L. Boyd___________ Christopher L. Boyd Assistant Attorney General 350 Main Street, Suite 300A Buffalo, NY 14202 Telephone: (716) 853-8457 Email: [email protected] Attorney for Plaintiff State of New York

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Amended complaint (May 2022)

PDF of this document (50 pages)

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IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK Civil Action No. 1:20-cv- 01217-JLS-JJM

AMENDED COMPLAINT

The Bureau of Consumer Financial Protection (Bureau) and the People of the State of New York, by Letitia James, Attorney General for the State of New York (NYAG), bring this action against Defendants JPL Bureau of Consumer Financial Protection and the People of the State of New York, by Letitia James, Attorney General for the State of New York, Plaintiffs, v.

JPL Recovery Solutions, LLC; Check Security Associates, LLC (dba Warner Location Services, Pinnacle Location Services, and Orchard Payment Processing Systems); ROC Asset Solutions LLC (dba API Recovery Solutions and Northern Information Services); Regency One Capital LLC; Keystone Recovery Group, LLC; Bluestreet Asset Partners, Inc.; Christopher L. Di Re; Scott A. Croce; Brian J. Koziel; Marc D. Gracie; and Susan A. Croce,

Defendants, and

Susan A. Croce,

Relief Defendant.

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Recovery Solutions, LLC (JPL); Check Security Associates, LLC (CSA) dba Warner Location Services (Warner), Pinnacle Location Services (Pinnacle), and Orchard Payment Processing Systems (Orchard); ROC Asset Solutions LLC (ROC) dba API Recovery Solutions (API) and Northern Information Services (Northern); Regency One Capital LLC (Regency); Keystone Recovery Group, LLC (Keystone); Bluestreet Asset Partners, Inc. (Bluestreet); (collectively, the Corporate Defendants); and Christopher L. Di Re; Scott A. Croce; Susan A. Croce; Brian J. Koziel; and Marc D. Gracie (collectively, the Individual Defendants), and allege as follows: INTRODUCTION 1.

The Debt-Collection Operation, which has operated from at least 2015 through the present, is owned and/or run by Di Re and the Croces and managed by Koziel and Gracie.

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legally take; threatening to contact consumers’ employers, implying they would disclose the existence of the debt; claiming consumers owed more debt than they did in order to convince them to pay the amount they owed; impermissibly contacting consumers’ friends, family, and workplace to disclose the existence of a consumer’s debt or to shame or humiliate them about the debt; harassing consumers by using intimidating, belittling, or menacing language and repeatedly and excessively phoning consumers; and failing to provide legally required notices informing consumers of their right to know how much they owed and of their ability to dispute the amount or existence of the purported debt.

This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 3 of 50

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§ 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. 6.

Venue is proper in this District because Defendants are located, reside, or do business in this District. 12 U.S.C. § 5564(f). PARTIES 8.

The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer financial products and services under Federal consumer financial laws. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority to enforce Federal consumer financial laws, including the CFPA and the FDCPA. 12 U.S.C. §§ 5564(a)-(b); 5481(12), (14); 15 U.S.C. § 1692l(b)(6). 9.

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§ 602, and to obtain legal, equitable, or other appropriate relief for such violations. The NYAG is authorized to seek redress for repeated and persistent violations of the FDCPA as such conduct constitutes repeated and persistent illegality in violation of Executive Law § 63(12). The NYAG is also authorized to enforce the CFPA. 12 U.S.C. § 5552. 10.

CSA is a New York limited liability company formed in 2013, with its principal place of business at 2390 North Forest Road, Getzville, New York, 14068. It does business under the names CSA, Warner, Pinnacle, and Orchard. As a significant part of its business, CSA, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 5 of 50

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financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). CSA is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

12.

ROC is a New York limited liability company formed in 2012, with its principal place of business at 2390 North Forest Road, Getzville, New York, 14068. It does business under the names ROC or ROCA, API Recovery Solutions or API, and Northern. As a significant part of its business, ROC, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). ROC is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

13.

Regency is a Delaware limited liability company with its principal place of business at 8828 Main Street, Williamsville, New York, 14221. As a significant part of its business, Regency, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Regency has also purchased and sold debts that are the subject of the debt-collection activities of the other entities within the Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 6 of 50

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Debt-Collection Operation. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). Regency is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

14.

Keystone is a New York limited liability company formed in 2019. Its principal place of business is 2390 North Forest Road, Getzville, New York, 14068. As a significant part of its business, Keystone, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). Keystone is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

15.

Bluestreet is a New York corporation formed in 2016. Its principal place of business is 8828 Main Street, Williamsville, New York, 14221. As a significant part of its business, Bluestreet, directly and through the Debt-Collection Operation common enterprise, has collected debts related to consumer financial products and services, including installment and payday loans. Those activities are “consumer financial products and Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 7 of 50

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services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). Bluestreet is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6). 16.

17.

Because the Corporate Defendants operate as a common enterprise, an act by one entity constitutes an act by each entity comprising the common enterprise, and each is jointly and severally liable for the acts and practices of all the Corporate Defendants, as alleged below. 18.

From at least 2012 through the present, Christopher L. Di Re has held ownership interests in some or all of the Corporate Defendants, including Regency, ROC, CSA, Keystone, Bluestreet, and JPL. He holds the title of President, CEO, or is an officer in Regency, ROC, CSA, Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 8 of 50

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Bluestreet, and JPL, and has materially participated in the conduct of their affairs. Di Re is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Di Re is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B). 19.

Scott Croce held an ownership interest in Regency, ROC, and CSA at or around the time these corporations were originally formed. Scott Croce has represented that in or after June 2014, he transferred his entire ownership interests in these corporations to his spouse, Susan A. Croce. However, from at least 2015 through at least March 22, 2021, Regency, ROC, and CSA have held out Scott A. Croce as a co-owner in their businesses through representations made in their annual federal tax filings and corporate transactional documents. In addition, Scott Croce has also held himself out as an owner of the Corporate Defendants and materially participated in the conduct of the affairs of the Corporate Defendants during this time. Scott Croce is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Scott Croce is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B).

20.

Susan A. Croce holds the ownership interests in Regency, ROC, and CSA that Scott Croce originally held. Her stake includes a 50 percent Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 9 of 50

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ownership interest in Regency and ROC, and a 33 percent ownership interest in CSA, which eventually became a 50 percent ownership in 2018 when Brian Koziel sold his CSA ownership interest to Susan Croce and Di Re. Susan Croce did not pay any consideration for the transfer of ownership. Since their founding in 2016, Susan Croce has also owned 51 percent of JPL and 50 percent of Bluestreet, and she has owned 50 percent of Keystone since its founding in 2019. Nearly all of the amounts distributed to the Croces since 2014 – almost $4 million – were transferred to Susan Croce, not Scott Croce. As a controlling shareholder, Susan Croce is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i). Because Susan Croce is a “related person,” she is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B). 21.

Brian J. Koziel had an ownership interest in CSA between 2013 and 2018. He also has a management role in the Debt-Collection Operation. He has served as a manager of CSA from October 2013 to the present, and has also been identified as a “manager” of JPL and a “managing member” of Keystone. He has been charged with managerial responsibility for, and has materially participated in the conduct of the affairs of, some or all of the Corporate Defendants. Koziel is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 10 of 50

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Koziel is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B).

22.

From January 2013 to July 2020, Marc D. Gracie had a management role in the Debt-Collection Operation. He served as a manager of ROC, and has been identified as a “manager” of JPL and a “managing member” of Keystone. He has been charged with managerial responsibility for, and has materially participated in the conduct of the affairs of, some or all of the Corporate Defendants. Gracie is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Gracie is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B).

FACTS

23.

The Debt-Collection Operation is operated by the Corporate Defendants, a series of interrelated companies that conduct business out of a single location in the Buffalo, New York area. 24.

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LoanMe, Inc. (LoanMe), although the Debt-Collection Operation has also obtained for collection defaulted installment loans, defaulted payday loans, and defaulted credit card debt from various other sources. Some of this debt is purchased outright while some of this debt is transferred or placed for collection in another manner, such as a lease. 25.

These collectors routinely engage in a wide range of deceptive and other illegal collection tactics in connection with the collection of this debt.

27.

Using these illegal tactics, the Debt-Collection Operation generated gross revenues of approximately $93 million between 2015 and 2020.

False Threats 28.

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with legal action, including wage garnishment or attachment of property, or arrest and imprisonment, if they did not make payments. 29.

These threats were false.

30.

Consumers are not subject to arrest or imprisonment for failure to pay debts.

31.

The Debt-Collection Operation has never sought or obtained a legal judgment that would be required as a pre-requisite for seeking to garnish a consumer’s wages or attach their property. 32.

Docket searches have revealed no debt-collection lawsuits filed by any of the Corporate Defendants against a consumer. Falsely Claiming Consumers Owe More than they Do 33.

34.

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Operation call this the “full contract balance.” This representation is bolstered by the fact that it is an amount equal to the “total of payments” appearing in bold letters on the face of the loan agreement. 35.

The Debt-Collection Operation instructs its collectors to tell consumers that the original creditor could pursue them for the “full contract balance,” but they have an “opportunity” to “save . . . a ton of money” by paying the amount demanded by the collectors, which is the amount actually owed (or sometimes less). Collectors are told to present this as an offer that will only be available for a short period of time. 37.

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Contacting and Disclosing Debt to Third Parties 38.

From at least 2015, the Debt-Collection Operation has contacted friends, family, work colleagues, or supervisors of consumers in order to pressure consumers to pay the debts under collection. 39.

In this tactic, collectors for the Debt-Collection Operation begin their collection efforts by using a skip tracing service and social media to identify the consumer’s address, other location information relating to the consumer, and, most importantly, third parties associated with that consumer. This is called the “Circles” approach by the Debt- Collection Operation because the collector can visualize these third parties in a series of concentric circles around the consumer, who is at the bull’s eye center. The surrounding circles consist of immediate family members, grandparents, distant family members, in-laws, ex-spouses, employers, work colleagues, landlords, Facebook friends, and other known associates. 40.

The collector then begins calling each of these third parties under the pretense of attempting to find the consumer, although the collector already has location information for the consumer. During these calls, the collectors expressly or implicitly disclose that the consumer is in debt or in some type of distress or difficulty. The Debt-Collection Operation does this to “stir the pot,” so that the third parties start calling Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 15 of 50

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the consumer. Thus, the consumer’s family, friends, and colleagues can serve as the collector’s “army,” pressuring the consumer to address the collector’s demands.

41.

Collectors reach out to the consumer only after they have set their “army” of third parties in motion.

42.

43.

Consumers have described these tactics as “smear campaign[s],” “extortion,” “terrorist collecting tactics,” and “emotional terrorism.” In explaining why their collectors should follow the “Circles” approach, the Debt-Collection Operation equates it to a form of repossession, telling collectors: “If I buy a car and I don’t pay for it . . . they take the car. If I don’t pay for my house, they take the house . . . . [W]e’re taking [their] pride . . . .”

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Harassing Consumers and Third Parties 44.

In numerous instances, Debt-Collection Operation collectors have harassed consumers or third parties related to those consumers to coerce payment.

45.

46.

Many consumers have complained that collectors from the Debt-Collection Operation also have used insulting and belittling language, or engaged in intimidating behavior when calling consumers or third parties. Consumers have also complained, as described above, that collectors from the Debt-Collection Operation used threats of legal action, garnishment, arrest, or imprisonment, as well as threats to call consumers’ workplaces.

47.

The Circles scheme, described above, is another harassment tactic, intended to intimidate or embarrass consumers into paying to stop the calls.

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48.

49.

50.

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name of the creditor to whom the purported debt is owed; (3) a statement that unless the consumer disputes the debt, the debt will be assumed valid; (4) a statement that if the consumer disputes all or part of the debt in writing within 30 days, the debt collector will obtain verification of the debt and mail it to the consumer; and (5) a statement that, upon the consumer’s written request within the 30-day period, the debt collector will provide the name and address of the original creditor, if different from the current creditor. Collectors are not required to send the notice if this information is contained in the initial communication with the consumer. 52.

The Debt-Collection Operation did not provide the statutorilyrequired notices. Many consumers reported that the collector claimed to have sent such notices, even though they never received them. Some consumers said collectors refused to provide such notices, wrongly stating they were not obligated to send them.

53.

Because consumers did not receive the validation notice, they were not informed that they must dispute the debt in writing in order to require the collector to provide verification of the debt. When consumers made the verification request orally, Corporate Defendants did not provide verification or cease collection. According to consumer complaints, some Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 19 of 50

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consumers who asked for a physical address to send such a request were denied that information.

Role and Knowledge of the Individual Defendants 54.

Di Re and Susan Croce together own 100% of the six Corporate Defendants. Though Scott Croce is no longer an owner of the Corporate Defendants, they have continued to hold him out as an owner, and he has continued to hold himself out as an owner.

55.

Di Re and Scott Croce are bank signatories or officers of certain Corporate Defendants. They also co-own the LLC that purchased the building out of which the Debt-Collection Operation is run. 56.

Di Re and Scott Croce are in the office regularly and approve, adopt, or ratify the Corporate Defendants’ unlawful collection practices, including by meeting regularly with the Corporate Defendants’ managers to rate randomly-selected collectors’ calls to ensure adherence to company policies. Di Re and Scott Croce also regularly monitor collectors’ calling patterns to ensure there are no “gaps” in their calling of consumers. They award workplace incentives to the employees who earn the most money for the Corporate Defendants. Di Re encourages collectors to contact him directly for advice on how to improve their collection skills and earn more money for themselves and the Corporate Defendants. Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 20 of 50

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57.

Susan Croce signed state registration and license applications and provided her fingerprints where necessary to enable JPL to operate in various states. An organizational chart for JPL lists Susan Croce as Vice- President. These applications identified her and Di Re as managers or “governing people” of JPL. Most of the amounts distributed by the Corporate Defendants to the Croces since 2014 – almost $4 million – were transferred to Susan Croce.

58.

Koziel and Gracie have been held out as “members” of Keystone. Koziel has also been held out as a manager of JPL, and as President, one-third owner (until sometime in 2018 when he transferred his interest to Di Re and Susan Croce), Compliance Officer, and bank signatory for CSA. Koziel is identified in collectors’ employee handbooks as their supervisor. Gracie has been held out as an officer or manager of ROC and JPL.

59.

Koziel revises and approves talk-off scripts, meets with Di Re and Scott Croce regularly, and is responsible for recruiting new employees. Koziel and Gracie have both worked to hire new collectors for the Debt- Collection Operation through social media as recently as April 2020. 60.

Di Re, Scott Croce, Susan Croce, Gracie, and Koziel knew about, were reckless to the fact of, or ignored red flags reflecting, the Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 21 of 50

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practices described above. This was the case through their management, authority, and control over the Debt-Collection Operation. 61.

Collectors were told that Di Re and Scott Croce reviewed recordings of their collection calls twice weekly with managers of the Debt- Collection Operation.

62.

Collectors were told that Di Re and Scott Croce reviewed their training session, at which some of the tactics described above were explained.

63.

Since 2015, numerous consumer complaints have been lodged against the Debt-Collection Operation through the Bureau, NYAG, other Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 22 of 50

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law enforcement agencies, and consumer organizations, each of which identified at least one of the debt-collection practices described above. Many of these complaints were forwarded to the Debt-Collection Operation for its response.

65.

66.

Since 2015, more than 20 private lawsuits have been filed by consumers against varying Corporate Defendants relating to the Debt- Collection Operation, with several naming Di Re, Susan Croce, Koziel, and/or Gracie personally, alleging some of the debt-collection practices described above.

67.

The Corporate Defendants were subject to high chargeback rates in connection with their work for the Debt-Collection Operation. High chargeback rates are a red flag for wrongdoing, and as owners and managers, Di Re, Scott Croce, Koziel, and Gracie would have notice of the chargeback rates. Koziel and Gracie are listed as points of contact for Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 23 of 50

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complaints and chargebacks from the Corporate Defendants’ payment processor.

VIOLATIONS OF THE FDCPA

68.

69.

Di Re, Scott Croce, Koziel, and Gracie, due to their position of control and involvement in the Debt-Collection Operation, and their authorization, adoption, or ratification of the acts of the Corporate Defendants, are or have been persons who have used an instrumentality of interstate commerce or the mails in a business the principal purpose of which is the collection of debts, or who regularly collect or attempt to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, and are “debt collectors” under the FDCPA. 15 U.S.C. § 1692a(6).

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COUNT I False or Misleading Misrepresentations Under the FDCPA (All Corporate Defendants, Di Re, Scott Croce, Koziel, and Gracie) 70.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-37, 54-69.

71.

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72.

Therefore, Corporate Defendants have violated the FDCPA, 15 U.S.C. § 1692e.

73.

Defendants Di Re, Scott Croce, Koziel, and Gracie were involved in the debt-collection activities of the Corporate Defendants. In addition, these individuals knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, these Defendants are “debt collectors” under the FDCPA and are liable for violations of the statute, 15 U.S.C. § 1692e. Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 26 of 50

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COUNT II Unlawful Communications with Third Parties Under the FDCPA (All Corporate Defendants, Di Re, Scott Croce, Koziel, and Gracie)

74.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-27, 38-50, 54-69.

75.

76.

In numerous instances, in connection with the collection of debts, Corporate Defendants have communicated with persons other than Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 27 of 50

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78.

During many of these communications, Corporate Defendants stated that the consumers owed debt, in violation of Section 804(2) of the FDCPA, 15 U.S.C. § 1692b(2).

79.

Therefore, Corporate Defendants have violated 15 U.S.C. §§ 1692b and 1692c.

80.

Defendants Di Re, Scott Croce, Koziel, and Gracie were involved in the debt-collection activities of the Corporate Defendants. In addition, these individuals knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, these Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. §§ 1692b and 1692c. Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 28 of 50

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COUNT III Harassing and Abusive Conduct Under the FDCPA (All Corporate Defendants, Di Re, Scott Croce, Koziel, and Gracie)

81.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-50, 54-69.

82.

This includes, but is not limited to, using intimidating, menacing, or belittling language, and making impermissible threats. 84.

Therefore, Corporate Defendants have violated 15 U.S.C. § 1692d.

86.

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or ratified the unlawful practices described above. As such, these Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692d. COUNT IV Failure to Inform Consumers of their Legal Rights Under the FDCPA (All Corporate Defendants, Di Re, Scott Croce, Koziel, and Gracie)

87.

The Bureau realleges and incorporates by reference paragraphs 5, 7-8, 10-27, 51-69.

88.

89.

Therefore, Corporate Defendants have violated 15 U.S.C. § 1692g(a).

90.

Defendants Di Re, Scott Croce, Koziel, and Gracie were involved in the debt-collection activities of the Corporate Defendants. In addition, these individuals knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, these Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 30 of 50

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Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692g(a). VIOLATIONS OF THE CFPA COUNT V Deception Under the CFPA Relating to Collection of, and Attempts to Collect, Debts (All Defendants)

91.

Plaintiffs reallege and incorporate by reference paragraphs 5, 7-37, 54-67.

92.

b. Corporate Defendants would file lawsuits against consumers if they failed to pay, and that the filing of such lawsuits was imminent;

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94.

In truth and in fact, where Corporate Defendants have made the representations set forth in Paragraph 93 of this Complaint: a. Corporate Defendants have not, and could not have, had consumers arrested or imprisoned;

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95.

These false and misleading misrepresentations were material and likely to mislead consumers acting reasonably under the circumstances.

96.

Therefore, the representations set forth in Paragraph 93 of this Complaint constitute deceptive acts or practices in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). 97.

The Individual Defendants have engaged in or are liable for these deceptive acts and practices because they had authority to control these misrepresentations or participated in them. They have known about, have been reckless to the fact of, or have ignored red flags with respect to, these false and misleading representations. The Individual Defendants are therefore liable for these violations of the CFPA. COUNT VI Violations of the CFPA Arising From Violations of Federal Consumer Financial Law (All Defendants)

98.

Plaintiffs reallege and incorporate by reference paragraphs 5, 7-97.

99.

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consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A). 100. Defendants have offered or provided a consumer financial product or service by collecting debts related to consumer financial products and services, including installment and payday loans. 12 U.S.C. § 5481(5), 15(A)(x).

101. As detailed in Counts I through IV, Corporate Defendants, Di Re, Scott Croce, Koziel, and Gracie have engaged in violations of the FDCPA in the course of their collection of debts related to consumer financial products or services.

102. Susan Croce, with a 51% ownership stake in JPL and a purported 50% ownership stake in Regency, Keystone, Bluestreet, ROC, and CSA, has had authority to control the Corporate Defendants, and has had knowledge of, should have had knowledge of, or has recklessly disregarded the violations alleged in Counts I through IV. 103. As detailed in Count V, Defendants have engaged in or are liable for deceptive acts and practices in the course of the collection of debts related to consumer financial products or services. 104. Therefore, Defendants have offered or provided financial products or services not in conformity with Federal consumer financial law Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 34 of 50

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in violation of §§ 1031(a), 1036(a)(1)(A), and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

105. As detailed in Counts I through V, Corporate Defendants, Di Re, Scott Croce, Koziel, and Gracie have violated the FDCPA and the CFPA, and have therefore committed acts or omissions in violation of Federal consumer financial laws, violating § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A).

COUNT VII Substantially Assisting Violations of the CFPA (Defendants Di Re, Scott Croce, Koziel, and Gracie)

106. Plaintiffs reallege and incorporate by reference paragraphs 5, 7-37, 54-67, 91-97.

107. It is unlawful for any person to knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of 12 U.S.C. § 5531. 12 U.S.C. § 5536(a)(3). 108. From at least 2015 through the present, as described in Count V, the Corporate Defendants have engaged in deceptive acts or practices in violation of the CFPA, 12 U.S.C. §§ 5531 and 5536(a)(1)(B), by making false or deceptive threats to consumers, and misrepresenting, expressly or by implication, the amount of debt consumers owed, in order to induce payments to Corporate Defendants.

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109. Defendants Di Re, Scott Croce, Koziel, and Gracie provided substantial assistance to the Corporate Defendants that engaged in the practices described in Count V. As owners, purported owners, and managers, they associated themselves with the venture of the Corporate Defendants and by helping to run the Debt-Collection Operation, they sought by their actions to make it succeed. 110. Defendants Di Re, Scott Croce, Koziel, and Gracie knew about, or were reckless with respect to, the deceptive conduct alleged in Count V. 111. Therefore, Defendants Di Re, Scott Croce, Koziel, and Gracie violated 12 U.S.C. § 5536(a)(3).

VIOLATIONS OF NEW YORK STATE LAW COUNT VIII Repeated Fraudulent Acts in Violation of Exec. Law § 63(12) (All Defendants) 112. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-50, 54-67.

113. New York Executive Law § 63(12) empowers the Attorney General to seek restitution, damages and injunctive relief when any person or business entity has engaged in repeated fraudulent or illegal acts or otherwise demonstrates persistent fraud or illegality in the carrying on, conducting, or transaction of business. Individuals may be held liable Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 36 of 50

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under Executive Law § 63(12) if they participated in the fraudulent or illegal conduct. Business owners and officers may be held liable under Executive Law § 63(12) if they had knowledge of such fraudulent or illegal conduct.

114. The Corporate Defendants have engaged in repeated fraudulent acts or otherwise demonstrated persistent fraud in the carrying on, conducting, or transaction of their debt collection business for purposes of Executive Law § 63(12).

115. The Individual Defendants participated in or were aware of the fraudulent acts of the Corporate Defendants. COUNT IX Repeated Illegality in Violation of Exec. Law § 63(12) False or Misleading Misrepresentations Under the FDCPA (All Defendants) 116. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-37, 54-69.

117. In numerous instances, in connection with the collection of debts, Corporate Defendants, directly or indirectly, expressly or by implication, have used false, deceptive, or misleading representations or means, in violation of Section 807 of the FDCPA, 15 U.S.C. § 1692e, including, but not limited to:

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118. Therefore, Corporate Defendants have violated the FDCPA, 15 U.S.C. § 1692e.

119. Defendants Di Re, Scott Croce, Koziel and Gracie were involved in the debt-collection activities of the Corporate Defendants. In addition, these individuals knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, these Defendants are “debt collectors” under the FDCPA and are liable for violations of the statute, 15 U.S.C. § 1692e. These Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12).

120. Susan Croce was aware of the Corporate Defendants’ repeated and persistent illegality and as such is liable pursuant to Executive Law § 63(12).

COUNT X Repeated Illegality in Violation of Exec. Law § 63(12) Unlawful Communications with Third Parties Under the FDCPA (All Defendants)

121. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-27, 38-50, 54-69.

122. Section 804 of the FDCPA, 15 U.S.C. § 1692b, provides that any debt collector communicating with any person other than the Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 39 of 50

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consumer for the purpose of acquiring location information about the consumer shall identify his employer only if expressly asked and may not state that the consumer owes any debt.

123. Section 805(b) of the FDCPA, 15 U.S.C. § 1692c(b), prohibits communications about a debt with any person other than the consumer or the consumer’s attorney, a consumer reporting agency, the creditor or the creditor’s attorney, or the debt collector’s attorney, except as allowed by Section 804 of the FDCPA, with the permission of the consumer or a court of competent jurisdiction, or as reasonably necessary to effectuate postjudgment relief. For the purpose of Section 805(b), Section 805 of the FDCPA defines the term “consumer” to include “the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.” 124. In numerous instances, in connection with the collection of debts, Corporate Defendants have communicated with persons other than the persons listed in Section 805(b) for purposes other than acquiring location information about the consumer, without having obtained directly the prior consent of the consumer or the express permission of a court of competent jurisdiction, and when not reasonably necessary to effectuate a post judgment judicial remedy, in violation of Section 805(b) of the FDCPA, 15 U.S.C. § 1692c(b).

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125. During many of these communications, Corporate Defendants stated that the consumers owed debt, in violation of Section 804(2) of the FDCPA, 15 U.S.C. § 1692b(2).

126. Therefore, Corporate Defendants have violated 15 U.S.C. §§ 1692b and 1692c.

127. Defendants Di Re, Scott Croce, Koziel, and Gracie were involved in the debt-collection activities of the Corporate Defendants. In addition, these individuals knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, these individuals are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. §§ 1692b and 1692c. 128. These Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12). 129. Susan Croce was aware of the Corporate Defendants’ repeated and persistent illegality and as such is liable pursuant to Executive Law § 63(12).

COUNT XI Repeated Illegality in Violation of Exec. Law § 63(12) Harassing and Abusive Conduct Under the FDCPA (All Defendants)

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130. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-32, 44-50, 54-69.

131. In numerous instances, in connection with the collection of debts, Corporate Defendants have engaged in conduct the natural consequence of which has been to harass, oppress, or abuse the consumer, in violation of Section 806 of the FDCPA, 15 U.S.C. § 1692d. 132. This includes, but is not limited to, using intimidating, menacing, or belittling language, and making impermissible threats. 133. This also includes causing a telephone to ring or engaging a person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass a person at the called number, in violation of Section 806(5) of the FDCPA, 15 U.S.C. § 1692d(5). 134. Therefore, Corporate Defendants have violated 15 U.S.C. § 1692d.

135. Defendants Di Re, Scott Croce, Koziel, and Gracie were involved in the debt-collection activities of the Corporate Defendants. In addition, the these individuals knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, these Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692d. Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 42 of 50

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136. These Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12). 137. Susan Croce was aware of the Corporate Defendants’ repeated and persistent illegality and as such is liable pursuant to Executive Law § 63(12).

COUNT XII Repeated Illegality in Violation of Exec. Law § 63(12) Failure to Inform Consumers of their Legal Rights Under the FDCPA (All Defendants) 138. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-27, 51-69.

139. In numerous instances, in connection with the collection of debts, Corporate Defendants have failed to provide consumers, either in the initial communication or a written notice sent within five days after the initial communication, with information about the debt and the right to dispute the debt, in violation of Section 809(a) of the FDCPA, 15 U.S.C. § 1692g(a).

140. Therefore, Corporate Defendants have violated 15 U.S.C. § 1692g(a).

141. Defendants Di Re, Scott Croce, Koziel, and Gracie were involved in the debt-collection activities of the Corporate Defendants. In Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 43 of 50

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addition, these individuals knew about, participated in, approved, adopted, or ratified the unlawful practices described above. As such, these Defendants are “debt collectors” under the FDCPA and are liable for violations of the FDCPA, 15 U.S.C. § 1692g(a). 142. These Defendants’ violations of the FDCPA constitute repeated and persistent illegality in violation of N.Y. Executive Law § 63(12). 143. Susan Croce was aware of the Corporate Defendants’ repeated and persistent illegality and as such is liable pursuant to Executive Law § 63(12).

COUNT XIII Deceptive Acts or Practices in Violation of GBL § 349 (All Defendants) 144. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-50, 54-67.

145. New York General Business Law § 349 provides that “[d]eceptive acts or practices in the conduct of any business . . . in this state are hereby declared unlawful.”

146. In numerous instances, the Corporate Defendants and Defendants Di Re, Scott Croce, Koziel and Gracie have violated GBL § 349 by engaging in deceptive acts or practices in connection with conducting their debt collection business.

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147. Susan Croce was aware of the Corporate Defendants’ deceptive acts and practices and is therefore liable pursuant to GBL § 349. COUNT XIV Violation of GBL Article 29-H, New York State Debt Collection Procedures (All Defendants) 148. The NYAG realleges and incorporates by reference paragraphs 6-7, 9-50, 54-67.

149. Defendants Di Re, Scott Croce, Koziel and Gracie qualify as a principal creditor or his agent as defined by GBL § 600. 150. Each Corporate Defendant qualifies as a debt collection agency as defined by GBL § 600.

151. New York General Business Law § 601 sets forth a list of prohibited debt collection practices, including: a. Knowingly collecting, attempting to collect, or asserting a right to any collection fee, attorney’s fee, court cost or expense when such charges were not justly due and legally chargeable against the debtor. GBL § 601(2); b. Disclosing or threatening to disclose information affecting the debtor's reputation for credit worthiness with knowledge or reason to know that the information is false. GBL § 601(3);

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152. GBL § 602 provides the NYAG with authority to enforce the provisions of GBL § 601.

153. In numerous instances, the Corporate Defendants and Defendants Di Re, Scott Croce, Koziel and Gracie have violated GBL Article Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 46 of 50

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29-H by engaging in debt collection practices prohibited under that statute.

154. Susan Croce was aware of the Corporate Defendants’ violations of GBL § 601 and as such is liable pursuant to GBL Article 29-H. Count XV Unjust Enrichment by Relief Defendant

155. The Plaintiffs re-allege and incorporate by reference paragraphs 1-154.

156. Susan A. Croce has received cash transfers and other monetary transfers from the Defendants that are traceable to funds obtained from consumers through violations of the FDCPA, CFPA, N.Y. Executive Law, and N.Y. General Business Law as alleged in Counts I through XIV of this Complaint. She has no legitimate claim to such funds and would be unjustly enriched if not required, as permitted by 12 U.S.C. § 5565(a)(2)(D), to disgorge, compensate consumers for, or provide restitution with respect to the funds or the value of the benefits she received.

DEMAND FOR RELIEF Wherefore, the Plaintiffs request that the Court: Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 47 of 50

Page 95

a. permanently enjoin Defendants from committing future violations of the CFPA, the FDCPA, GBL Articles 22-A and 29-H, and N.Y. Executive Law § 63(12); b. award such relief as the Court finds necessary to redress injury to consumers resulting from Defendants’ violations of the CFPA, the FDCPA, GBL Articles 22-A and 29-H, and New York Executive Law § 63(12), including but not limited to rescission or reformation of contracts, restitution, damages, and the refund of monies paid; c. grant additional injunctive relief as the Court may deem to be just and proper;

d. order disgorgement of ill-gotten revenues against Defendants;

e. as authorized under the CFPA, impose civil money penalties against Defendants;

f. pursuant to New York General Business Law § 350-d, impose a civil penalty of $5,000 for each violation of New York General Business Law Article 22-A; g. order Defendants to pay Plaintiffs’ costs in connection with this action; and Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 48 of 50

Page 96

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

Respectfully submitted,

Dated: December 20, 2021

Eric Halperin Enforcement Director David M. Rubenstein Deputy Enforcement Director Cynthia Gooen Lesser Assistant Deputy Enforcement Director

/s/ Reid B. Horwitz . Reid B. Horwitz Laura Gaztambide-Arandes Taylor McConkie

Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Telephone: (202) 435-7752 (Horwitz) Telephone: (202) 435-7210 (Gaztambide-Arandes) Email: [email protected] Email: [email protected] Email: [email protected] Attorneys for Plaintiff Bureau of Consumer Financial Protection

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Letitia James Attorney General of the State of New York

/s/ Christopher L. Boyd . Christopher L. Boyd Assistant Attorney General 350 Main Street, Suite 300A Buffalo, NY 14202 Telephone: (716) 853-8457 Email: [email protected] Attorney for Plaintiff State of New York

Case 1:20-cv-01217-JLS-JJM Document 55 Filed 12/20/21 Page 50 of 50

Order (July 2022)

PDF of this document (28 pages)

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

Bureau of Consumer Financial Protection and the People of the State of New York, by Letitia James, Attorney General for the State of New York,

1:20-cv- 2 Plaintiffs, 0-cv-1217-JLS-JJM

Vv.

JPL Recovery Solutions, LLC; Check Security Associates, LLC (dba Warner STIPULATED FINAL JUDGMENT

Location Services, Pinnacle Location AND ORDER

Services, and Orchard Payment Processing Systems); ROC Asset Solutions LLC (dba API Recovery Solutions and Northern Information Services); Regency One Capital LLC; Keystone Recovery Group, LLC; Bluestreet Asset Partners, Inc.; Christopher L. Di Re; Scott A. Croce; Brian J. Koziel; Mare D. Gracie; and Susan A. Croce,

Defendants, and

Susan A. Croce,

Relief Defendant.

The Bureau of Consumer Financial Protection (Bureau) and the People of the State of New York, by Letitia James, Attorney General for the State of New York

(NYAG), commenced this civil action on September 8, 2020 to obtain injunctive and

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monetary relief and civil penalties. The Amended Complaint, filed on December 20, 2021, names as defendants JPL Recovery Solutions, LLC; Check Security Associates, LLC, dba Warner Location Services, Pinnacle Location Services, and Orchard Payment Processing Systems; ROC Asset Solutions LLC, dba API Recovery Solutions and Northern Information Services; Regency One Capital LLC; Keystone Recovery Group, LLC; and Bluestreet Asset Partners, Inc. (collectively, the Corporate Defendants); and Christopher L. Di Re, Scott A. Croce, Susan A. Croce, Brian J. Koziel, and Marc D. Gracie (collectively, the Individual Defendants). The Amended Complaint alleges violations of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a), the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p, N.Y. Executive Law § 63(12), and N.Y. General Business Law (GBL) Article 22-A, Consumer Protection from Deceptive Acts and Practices, and Article 29-H, Debt Collection Procedures, in connection with the Defendants’ purchase and collection of Consumer Debt.

The Plaintiffs and 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 Amended Complaint.

FINDINGS 1. This Court has jurisdiction over the parties and the subject matter of this action.

2. Defendants neither admit nor deny the allegations in the Complaint,

except as specified in this Order. For purposes of this Order, Defendants admit the

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facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.

3. Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.

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

DEFINITIONS 5. The following definitions apply to this Order: a. “Assist[ing]” or “Assist Others” includes, but is not limited to: i. consulting in any form whatsoever;

li. providing paralegal or administrative support services; il. performing customer service functions, including, but not limited to, receiving or responding to Consumer complaints; iv. 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 or advertisement; v. formulating or providing, or arranging for the formulation or

provision of, any marketing support material or service,

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including, but not limited to, web or Internet Protocol addresses or domain name registration for any Internet websites, affiliate marketing services, or media placement services;

vi. providing names of, or assisting in the generation of, potential customers;

vil. performing marketing, billing, or payment services of any kind, including Payment Processing; and vill. acting or serving as an owner, officer, director, manager, or principal of any entity.

b. “Consumer” means an individual or an agent, trustee, or representative acting on behalf of an individual. c. “Consumer Debt” means Debt incurred or owed by a Consumer. d. “Consumer Financial Product or Service” is synonymous in meaning and equal in scope to the definition of the term, as of the Effective Date, in Section 1002(5) of the CFPA, 12 U.S.C. § 5481(5), 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);

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li. 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;

ii. 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.

“Corporate Defendants” means JPL Recovery Solutions, LLC; Check Security Associates, LLC, dba Warner Location Services, Pinnacle Location Services, and Orchard Payment Processing Systems; ROC Asset Solutions LLC, dba API Recovery Solutions and Northern Information Services; Regency One Capital LLC, Keystone Recovery Group, LLC; and Bluestreet Asset Partners; and

their successors and assigns.

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“Debt” means any obligation or alleged obligation to pay money arising out of a transaction, whether or not such obligation has been reduced to judgment.

“Debt Collector” means (i) any Person who uses an instrumentality of interstate commerce or the mail in any business the principal purpose of which is the collection of Debts or who regularly collects or attempts to collect, directly or indirectly, Debts owed or due or asserted to be owed or due another; (ii) any creditor who, in the process of collecting its own Debts, uses any name other than its own that would indicate that a third Person is collecting or attempting to collect the creditor’s Debts; or (iii) any Person to the extent that such Person collects or attempts to collect any Debt that was in default at the time it was obtained by such Person. “Debt-Relief Service” means any good, program, or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of a Debt between an individual and one or more unsecured creditors, secured creditors, or Debt Collectors, including, but not limited to a reduction in the balance, interest rate, or fees owed by an individual to an unsecured creditor, secured creditor, or Debt

Collector.

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i. “Defendants” means all of the Individual Defendants and the Corporate Defendants, including their successors and assigns, individually, collectively, or in any combination.

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

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

l. “Individual Defendants” means Christopher L. Di Re, Scott A. Croce, Susan A. Croce, Brian J. Koziel, and Marc D. Gracie, collectively, or in any combination, and each of them by any other names by which they might be known.

m. “Original Creditor” means a Person which offers or extends credit creating a Consumer Debt or to which a debt was owed prior to default.

n. “Payment Processing” means facilitating payments on Debts owed or due or asserted to be owed or due another, or Debts purchased from another.

o. “Person” means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate,

cooperative organization, or other entity.

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p. “Related Consumer Action” means a private action by or on behalf of one or more Consumers or an enforcement action by another governmental agency brought against any Defendant based on substantially the same facts as described in the Amended Complaint.

q. “Service Provider’ is synonymous in meaning and equal in scope to the definition of the term, as of the Effective Date, in section 1002(26) of the CFPA, 12 U.S.C. § 5481(26), and, subject to applicable restrictions contained in the CFPA, includes, but is not limited to, any Person that provides a material service to a Person that is a “covered person” under the CFPA, 12 U.S.C. § 5481(6), in connection with the offering or provision by such covered person of a Consumer Financial Product or Service, including a Person that:

i. participates in designing, operating, or maintaining the

Consumer Financial Product or Service; or

ll. processes transactions relating to the Consumer Financial Product or Service (other than unknowingly or incidentally transmitting or processing financial data in a manner that such data is undifferentiated from other types of date of the same form as the Person transmits or processes);

iii. but does not include a Person solely by virtue of

such Person offering or providing to a covered person a

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support service of a type provided to businesses generally or a similar ministerial service.

r. “Stipulation” means the Joint Stipulation for Entry of Proposed Stipulated Final Judgment and Order dated April 29, 2022. ORDER CONDUCT RELIEF I Permanent Ban on Debt Collection IT IS ORDERED that:

6. Defendants, whether acting directly or indirectly, are permanently

restrained and enjoined from:

a. acting as a Debt Collector;

b. receiving any remuneration or other consideration from, or holding any ownership interest in, any Person acting as a Debt Collector or a Service Provider to a Debt Collector;

c. Assisting any Person acting as a Debt Collector, including, but not limited to acting as a Service Provider, employee, or independent contractor to a Debt Collector;

d. advertising, marketing, promoting, offering for sale, selling, or buying any Consumer Debt or any information related toa

Consumer Debt; and

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e. engaging in Payment Processing for any Person acting as a Debt Collector.

Nothing in this Order shall be read as an exception to this Paragraph; except that Defendant Gracie may be employed by or receive remuneration from a company providing VoIP telephone and internet services for businesses that provide services to a Debt Collector as long as he or such company does not act as a Debt Collector. This section prohibits any Defendant or any person which Defendant holds an interest in from knowingly leasing real property to a Debt Collector. This section does not prohibit any Defendant or any Person which Defendant holds an interest in, is employed by, acts as an independent contractor to, or holds any position with, from collecting or attempting to collect, or engaging the services of a Debt Collector to collect, Debts owed to them as a landlord or as an Original Creditor.

II Prohibition on Deceptive Practices IT IS FURTHER ORDERED that:

7. Defendants and their officers, agents, servants, employees, and attorneys, and all other Persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, in connection with any Consumer Financial Product or Service, may not:

a. misrepresent, or Assist Others in misrepresenting, expressly or

impliedly, any material fact, including, but not limited to:

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iil.

lV.

Vl.

Vil.

Vili.

1x.

the amount of a Consumer Debt;

that nonpayment of a Consumer Debt will result in arrest or imprisonment;

that nonpayment of a Consumer Debt will result in the filing of a lawsuit, the garnishing of a Consumer’s wages, or the attachment or seizure of a Consumer’s personal property; that nonpayment of a Consumer Debt will result in harassment of the Consumer;

that nonpayment of a Consumer Debt will result in the contact or harassment of third parties known to the Consumer;

that notices required by law or regulation have been sent to the Consumer;

the terms or rates that are available for any loan or other extension of credit;

a Consumer’s ability to improve or otherwise affect the Consumer' s credit record, credit history, credit rating, or ability to obtain credit;

that a Consumer can improve the Consumer’s credit record, credit history, or credit rating by permanently removing

negative information from the Consumer’s credit record,

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Xi.

Xil.

Xill.

credit history, or credit rating, even where such information is accurate and not obsolete;

any aspect of a Debt-Relief Service, including, but not limited to how much a Consumer will save from purchasing, using, or enrolling in such Debt-Relief Service; how long it will take to settle any Debts; or the reduction or cessation of collection attempts;

that a Consumer will receive legal representation;

the likelihood of any particular outcome or result from a Consumer Financial Product or Service; or

the nature or terms of any refund, cancellation, exchange, or repurchase policy, including, but not limited to the likelihood of a Consumer obtaining a full or partial refund, or the circumstances in which a full or partial refund will be

provided to the Consumer; and

b. advertising or Assisting Others in advertising credit terms other

than those terms that actually are or will be arranged or offered by

a creditor or lender.

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III Consumer Information IT IS FURTHER ORDERED that:

8. 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, may not:

a. disclose, use, or benefit from Consumer information, including names, addresses, telephone numbers, email addresses, social security numbers, other identifying information, or any data that enables access to a Consumer’s account (including a credit card, bank account, or other financial account), that Defendants obtained before the Effective Date in connection with the purchase, sale, collection, or placement of Debt;

b. fail to destroy such Consumer information in all forms in their possession, custody, or control within thirty (30) days after receipt of written direction to do so from a representative of the Bureau or the NYAG; and

c. attempt to collect, sell, assign, or otherwise transfer any right to collect payment using Consumer information in the Defendants’

possession, custody, or control.

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Provided, however, that Consumer information need not be disposed of, and may be disclosed, if requested by a government agency or required by law, regulation, or court order.

MONETARY PROVISIONS IV Escrow IT IS FURTHER ORDERED that:

9. Prior to signing the Stipulation, Defendants transferred a total of ONE MILLION DOLLARS ($1,000,000) to an escrow account maintained by their counsel (Escrow). These funds shall be used for the sole purpose of funding the monetary relief ordered in Sections V-VII.

Order to Pay Civil Money Penalty to the Bureau of Consumer Financial Protection

IT IS FURTHER ORDERED that:

10. Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Amended Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(8), a judgment for a civil money penalty is entered in favor of the Bureau and against Defendants, jointly and severally, in the amount of TWO MILLION DOLLARS ($2,000,000).

11. Within three [3] business days of the Effective Date, Defendants must

make their first payment of the civil money penalty, FIVE HUNDRED THOUSAND

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DOLLARS ($500,000), by wire transfer to the Bureau or to the Bureau's agent in compliance with the Bureau’s wiring instructions, using 50 percent of the funds placed in the Escrow by Defendants.

12. Within one hundred and eighty (180) days of the Effective Date, Defendants must pay the balance of the civil money penalty, ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000), by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.

13. 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).

14. 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, 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.

15. Individual Defendants agree that the civil penalty imposed by the

Order represents a civil penalty owed to the United States Government, is not

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compensation for actual pecuniary loss, and, thus, as to Individual Defendants, is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 5238(a)(7). VI Order to Pay Damages to the State of New York IT IS FURTHER ORDERED that:

16. Under N.Y. Executive Law § 63(12) and General Business Law § 350-d, a judgment is entered in favor of the NYAG and against Defendants, jointly and severally, in the amount of TWO MILLION DOLLARS ($2,000,000).

17. Within three [8] business days of the Effective Date, Defendants must make their first payment of FIVE HUNDRED THOUSAND DOLLARS ($500,000), by wire transfer as directed by the NYAG in compliance with the NYAG’s wiring instructions, using 50 percent of the funds placed in the Escrow by Defendants.

18. Within one hundred and eighty (180) days of the Effective Date, Defendants must pay the balance of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000), by wire transfer as directed by the NYAG in compliance with the NYAG’s wiring instructions.

19. Individual Defendants agree that the amounts payable to the NYAG imposed by the Order represents damages owed to the State of New York, is not compensation for actual pecuniary loss, and, thus, as to Individual Defendants, is

not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).

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VII Additional Monetary Provisions IT IS FURTHER ORDERED that:

20. The amount of the payments imposed in Sections V and VI assume timely payment by Defendants. If Defendants fail to make timely payment of the entire amounts owed pursuant to Paragraphs 12 and/or 18, then, taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendants will be required to pay immediately and without any further delay an additional civil money penalty of FIVE HUNDRED THOUSAND DOLLARS ($500,000) to the Bureau and FIVE HUNDRED THOUSAND DOLLARS ($500,000) to the NYAG, so that the total owed and to be paid by Defendants to Plaintiffs is TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) in civil money penalties to the Bureau and TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) to the NYAG, for a total of FIVE MILLION DOLLARS ($5,000,000) to Plaintiffs. For the avoidance of doubt, if Defendants fail to make timely payment of the entire amounts owed pursuant to Paragraphs 12 and/or 18, then the Escrow payment shall be applied toward the additional amount due , and Plaintiffs shall still have judgment against Defendants for the full amounts provided for in Paragraphs 10 and 16.

21. Inthe event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the

date of payment, and will immediately become due and payable.

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22. 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, including funds in Escrow, may be returned to Defendants.

23. The facts alleged in the Amended Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of Plaintiffs, including in a proceeding to enforce their rights to any payment or monetary judgment under this Order.

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

25. Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director and the NYAG of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to Consumers and describe the Consumers or classes of Consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the damages and 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 damages and civil money penalty paid in this action or because of

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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 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.

26. Upon written request of a representative of the Bureau or NYAG, any consumer reporting agency must furnish consumer reports to the Bureau or NYAG concerning any Individual Defendants under Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 1681 b(a)(1), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.

COMPLIANCE PROVISIONS VIII Reporting Requirements IT IS FURTHER ORDERED that:

27. Defendants must notify the Bureau and the NYAG 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,

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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 a Defendant; or a

change in a Defendant’s name or address. Defendants must provide this notice at

least 30 days before the development or as soon as practicable after the learning

about the development, whichever is sooner.

28. Within 7 days of the Effective Date, each Defendant must submit to

Plaintiffs an accurate report sworn to under penalty of perjury:

Designating at least one telephone number and email, physical, and postal addresses as points of contact that Plaintiffs may use to communicate with Defendant;

Identifying all businesses for which Defendant is a 50 percent or greater owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses;

Describing the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales;

Identifying each Individual Defendant’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and

Describing in detail each Individual Defendant’s involvement in

any business for which he performs services in any capacity or

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which he wholly or partially owns, including Defendant’s title, role, responsibilities, participation, authority, control, and ownership.

29. Defendants must report any change in the information required to be submitted under Paragraph 28 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner.

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

a. Lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which Defendant has complied with each such paragraph and subparagraph of this Order; and

b. Attaches a copy of each Order Acknowledgment obtained under Section IX, unless previously submitted to Plaintiffs.

IX Order Distribution and Acknowledgment IT IS FURTHER ORDERED that,

31. Within 7 days of the Effective Date, each Defendant must submit to

the Enforcement Director and the NYAG an acknowledgment of receipt of this

Order, sworn under penalty of perjury.

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32. Within 30 days of the Effective Date, Defendants, and any business that offers or provides a Consumer Financial Product or Service for which a Defendant is at least 50 percent owner or which a Defendant 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.

33. For 10 years from the Effective Date, Defendants, and any business that offers or provides a Consumer Financial Product or Service for which a Defendant is the majority or 50 percent owner or which a Defendant directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section VIII, any future board members and executive officers, as well as to any managers, employees, Service Providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities.

34. Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001-7006, within 30 days of delivery, from all Persons receiving a copy of this Order under this Section.

35. Within 90 days of the Effective Date, each Defendant must provide the

Plaintiffs with a list of all Persons and their titles to whom this Order was delivered

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through that date under Paragraphs 32 and 38 and a copy of all signed and dated statements acknowledging of receipt of this Order under Paragraph 34. x Recordkeeping

IT IS FURTHER ORDERED that

36. Each Defendant must create, for at least 10 years from the Effective Date, for any business that offers or provides a Consumer Financial Product or Service for which the Defendant is at least a 50 percent owner or which a Defendant directly or indirectly controls, all documents, data, and records necessary to demonstrate full compliance with each provision of this Order. Defendants must retain these documents, including all submissions to Plaintiffs, for at least 10 years after creation and make them available to Plaintiffs upon request.

37. Each Defendant must maintain for any business that offers or provides a Consumer Financial Product or Service for which a Defendant is at least 50 percent owner or controls directly or indirectly, for at least 10 years from the Effective Date or 10 years after creation, whichever is longer:

a. Copies of all sales scripts; training materials; advertisements; websites; and other marketing materials, including any such materials used by a third party on each Defendant’s behalf;

b. Accounting records showing the gross and net revenues from all

goods or services sold;

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c. Personnel records showing for each Person providing services, whether as an employee or otherwise, that Person’s name; addresses; telephone numbers; job title or position; dates of service; name of their point of contact; and, if applicable, the reason for termination; and

d. Records of all Consumer complaints and refund requests, whether received directly or indirectly, such as through a third party, and any response.

Defendants must make these materials available to Plaintiffs upon a request by the Bureau or NYAG. The recordkeeping requirements of this paragraph do not apply to any materials Defendants are directed to destroy pursuant to Paragraph 8(b) of this Order.

XI Notices IT IS FURTHER ORDERED that:

38. Unless otherwise directed in writing by Plaintiffs, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “BCFP v. JPL Recovery Solutions, LLC, et al., Case No. 1:20-cv-01217,” and send them by overnight courier or first-class

mail to the below address and contemporaneously by email to:

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a. Bureau Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.

Washington D.C. 20552 [email protected]

b. NYAG

New York State Office of the Attorney General ATTENTION: Bureau of Consumer Frauds 350 Main Street, Suite 300A Buffalo, New York 14222 [email protected]

XII

Cooperation IT IS FURTHER ORDERED that:

39. Defendants must cooperate fully with Plaintiffs in this matter and in any investigation or litigation related to or associated with the conduct described in the Amended Complaint. Defendants must provide truthful and complete information, evidence, and testimony. Individual Defendants must appear and Corporate Defendants must cause such Defendant’s officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau or the NYAG may reasonably request upon

10 days written notice, or other reasonable notice, at such places and times as the

Bureau or the NYAG may designate, without the service of compulsory process.

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XIII Compliance Monitoring IT IS FURTHER ORDERED that, to monitor Defendants’ compliance with this Order:

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

41. For matters concerning, or arising from, this Order, the Bureau or NYAG may communicate directly with each Defendant, unless such Defendant retains counsel related to these communications.

42. Defendants must permit Bureau or NYAG representatives to interview any employee or other Person affiliated with Defendants who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated with the conduct described the Amended Complaint; or (c) compliance with this Order. The Person interviewed may have counsel present.

43. The Bureau and NYAG may use all other lawful means of gathering information, including posing, through its representatives, as Consumers, suppliers, or other individuals or entities, to Defendants or any individual or entity affiliated with Defendants, without the necessity of identification or prior notice.

44. Nothing in this Order will limit the Bureau’s lawful use of compulsory

process, under 12 C.F.R. § 1080.6 or the NYAG’s use of its subpoena power.

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XIV Transfer of Operations IT IS FURTHER ORDERED that:

45. Should Corporate Defendants seek to transfer or assign all or part of their operations that are subject to this Order, such Defendants must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order.

XV Miscellaneous IT IS FURTHER ORDERED that:

46. If any clause, provision, or section of this Order shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other clause, provision, or section of this Order and this Order shall be construed and enforced as if such invalid, illegal, or unenforceable clause, provision, or section had not been contained herein.

47. Nothing contained herein shall be construed as to deprive any Person, not a party to this case, of any private right under the law.

48. Plaintiffs may serve Defendants, directly or through their attorneys, via electronic mail any written notices required or permitted to be served pursuant

to this Order.

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XVI Entry of Judgment IT IS FURTHER ORDERED that:

49. There is no just reason for delay of entry of this judgment, and under Federal Rule of Civil Procedure 54(b), the Clerk immediately shall enter this Order as a final judgment as to Defendants.

XVII Retention of Jurisdiction IT IS FURTHER ORDERED that:

50. All pending motions are hereby denied as moot. 51. The Court will retain jurisdiction of this matter for the purpose of

enforcing this Order.

IT IS SO ORDERED.

DATED: May 25, 2022.

NL. SINATRA, JR>— //US. DISTRICT JUDGE