Northern Resolution Group, LLC, Douglas MacKinnon, Mark Gray, Enhanced Acquisitions, LLC, and Delray Capital, LLC,

Documents in this case

• Complaint · 31 p.
• Stipulation · 25 p.
• Stipulation · 22 p.

Case summary

On November 2, 2016, the Consumer Financial Protection Bureau (Bureau), in partnership with the New York Attorney General, filed a lawsuit in federal district court against debt collectors Northern Resolution Group, LLC, Douglas MacKinnon, Mark Gray, Enhanced Acquisitions, LLC, and Delray Capital, LLC. The individuals and companies are debt-collectors who conducted business together based in Buffalo, New York. The Bureau and New York Attorney General alleged that the defendants violated the Consumer Financial Protection Act of 2010; the Bureau alleged that the defendants violated the Fair Debt Collection Practices Act; and the New York Attorney General alleged that the defendants violated New York laws in connection with the collection of consumer debt, placement of consumer debts for collection, and related activities.

On July 25, 2019, the Bureau and the New York Attorney General filed proposed settlements with the defendants. Under the proposed settlement with Northern Resolution Group, MacKinnon, and Enhanced Acquisitions, they will be banned from the industry and must pay $60 million. Under the proposed settlement with Delray Capital and Gray, they will be banned from the industry and a judgment for civil money penalties and redress will be entered against them. 

Complaint

PDF of this document (31 pages)

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK Consumer Financial Protection Bureau and the People of the State of New York, by Eric T. Schneiderman, Attorney General for the State of New York, Plaintiffs, v.

Douglas MacKinnon, Mark Gray, Northern Resolution Group, LLC, Enhanced Acquisitions, LLC, and Delray Capital, LLC, Defendants.

Civil Action No.

COMPLAINT The Consumer Financial Protection Bureau (Bureau) and the People of the State of New York bring this action against Defendants Douglas MacKinnon, Mark Gray, Northern Resolution Group, LLC (NRG), Enhanced Acquisitions, LLC (Enhanced), and Delray Capital, LLC (Delray) and allege as follows: INTRODUCTION 1.

This case involves a massive, illegal debt-collection scheme designed, implemented, and run by Douglas MacKinnon and his close associate, Mark Gray. 2.

MacKinnon and Gray created a network of interrelated companies to purchase defaulted consumer-debt portfolios for pennies on the dollar and then collect on them illegally.

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3. MacKinnon established NRG and Enhanced, and Gray and MacKinnon created Delray, to purchase tens of millions of dollars’ worth of defaulted consumer debt.

4. NRG, Enhanced, and Delray routinely added $200 to each debt they acquired, regardless of whether the underlying contracts or applicable law permitted it. 5. NRG, Enhanced, and Delray then either collected the inflated debts themselves or sent them for collection to dozens of debt-collection shops MacKinnon controlled. Delray also collected on debt as a third-party agency. 6. Enhanced and Delray have engaged in a host of illegal acts in collecting these inflated debts. Among other things, Enhanced and Delray have impersonated law-enforcement officials, court officials, and others; and threatened consumers with arrest or legal action the firms had no intention of taking. 7. MacKinnon and Gray have profited handsomely from this scheme, which has raked in tens of millions of dollars from millions of consumers nationwide. 8. 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 §§ 349 and 601.

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JURISDICTION AND VENUE 9. 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.

10. 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).

11. Venue is proper in this District because a substantial part of the events or omissions giving rise to the claims occurred here and Defendants do business here. 28 U.S.C. § 1391(b)(2); 12 U.S.C. § 5564(f).

PARTIES 12. 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). 13. 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 business conduct under Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 3 of 28

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NewYork Executive Law § 63(12), (ii) deceptive business practices under NewYork General Business Law § 349, and (iii) illegal debt-collection practices under NewYork General Business Law § 602, and to obtain legal, equitable, or other appropriate relief for such violations.

14. NRG is a Delaware limited-liability company with its principal place of business at 7288 Shawnee Road, North Tonawanda, New York, 14120. As a significant part of its business, NRG collects debts related to consumerfinancial products and services, including payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). NRG is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6). 15. Enhanced is a New York limited-liability company with its principal place of business at 3840 East Robinson Road, Suite 353, Amherst, New York 14228. As a significant part of its business, Enhanced collects debts related to consumer-financial products and services, including payday loans. Those activities are “consumer financial products and services” under the CFPA. 12 U.S.C. § 5481(5), 15(A)(x). Enhanced is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6). 16. Delray is an Ohio limited-liability corporation that conducts a substantial amount of business from its offices at 26 North Webster Street, Tonawanda, New York 14120. As a significant part of its business, Delray collects debts related to consumer-financial products and services, including payday loans. Those activities are Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 4 of 28

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

17. MacKinnon is the managing member and owner of NRG, the managing member of Enhanced, and the director of operations for Delray. He has managerial responsibility for NRG, Enhanced, and Delray, and has materially participated in the conduct of their affairs. MacKinnon is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because MacKinnon is a “related person,” he is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25)(B). 18. Mark Gray is the managing member and owner of Delray. He has managerial responsibility for Delray and has materially participated in the conduct of its affairs. Gray is therefore a “related person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i), (ii). Because Gray is a “related person,” he is deemed a “covered” person for purposes of the CFPA. 12 U.S.C. § 5481(25)(B). FACTS

19. At least since 2009, MacKinnon and Gray have used three companies to purchase defaulted consumer debt for pennies on the dollar: NRG, Enhanced, and Delray.

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20. MacKinnon established NRG in 2009. NRG purchased millions of dollars’ worth of defaulted consumer debt, reported the debts to consumer-reporting agencies, and collected some of those debts directly. 21. In or around January 2014, NRG changed its name to Enhanced, but the company’s business and practices continued unchanged. Like NRG, Enhanced purchased and collected on millions of dollars of defaulted consumer debt and reported the debts to consumer-reporting agencies. MacKinnon and Gray determined the debt portfolios NRG and Enhanced would purchase and negotiated the acquisitions.

22. In 2012, MacKinnon and Gray learned that a debt seller from which NRG and Enhanced purchased payday-loan debt would no longer sell to or place debt with companies that did not purportedly have collection policies and procedures in place that complied with the FDCPA. NRG and Enhanced did not have such policies and procedures in place.

23. Hoping to continue purchasing or collecting on debt from this debt-seller, MacKinnon and Gray, in 2012, created Delray to acquire millions of dollars’ worth of payday-loan debts from the debt-seller and also to collect on debt for third parties. 24. Gray was Delray’s owner and managing member. MacKinnon provided the financing for Delray’s operations as well as employees and office space for the company.

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25. Delray’s written collection policies and procedures were little more than “window dressing”; they did not reflect Delray’s actual practices. Nonetheless, Delray continued to acquire debt from the debt seller, and to collect on debt for third parties. 26. Like NRG and Enhanced, Delray not only acquired defaulted debts, but it also collected some of those debts. In addition, Delray collected debts purchased by NRG and Enhanced.

27. MacKinnon set up a network of at least 60 debt-collection firms (the MacKinnon Collection Shops) to collect on the debt portfolios that NRG, Enhanced, and Delray purchased.

28.

On paper, the MacKinnon Collection Shops are purportedly independent companies, owned and operated by others. In reality, MacKinnon controlled each of them. MacKinnon selected the managers and routinely provided them with office space, furniture, phone services, collection software, call-spoofing programs, and, occasionally, funds for payroll. MacKinnon also developed and monitored the collection practices of these firms, setting performance targets and collection strategies. A list of known MacKinnon Collection Shops is attached as Exhibit A. 29. At MacKinnon’s direction, NRG, Enhanced, and Delray have added $200 to each portfolio debt they acquired, regardless of whether applicable state law or the underlying consumer contract permitted such fees or charges. Indeed, the companies added this sum even though some of the purchase agreements under which they Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 7 of 28

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acquired the debt expressly prohibited them from imposing any additional fees or charges.

30. NRG, Enhanced, and Delray uploaded each portfolio debt – with the inflated amounts – into a database used by collection agents seeking to collect on the debts.

31. When collecting on the debts directly, NRG, Enhanced, and Delray tried to collect the face amounts of the debts as well as the additional $200 the companies tacked onto them. And the debts farmed out to the MacKinnon Collection Shops for collection likewise have the extra $200 tacked on to them. 32. Delray and Enhanced have routinely engaged in a wide range of deceptive collection tactics to extract as much money as possible from consumers. 33. Those tactics include:

a. impersonating law-enforcement officials, government agencies, and court officers;

b. threatening arrest or legal action the collectors have no intention of taking;

c. using call-spoofing technologies to make it appear that collectors are calling from government agencies; and d. further inflating the amounts owed by tacking on additional unauthorized fees and charges to the debts.

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34.

For example, in late 2013, an Enhanced collection agent called a consumer posing as someone from the “Los Angeles County Courts.” The collection agent said the consumer would be “arrested” for “check fraud” and advised that she “did not have the time to get a lawyer” because she would be arrested at her home or work the next day if she did not pay. The collection agent continued to barrage the consumer and her relatives with calls, claiming to be a government official who could arrest the consumer for non-payment of the debt.

35. In another example, a consumer received multiple calls in May 2014 from collection agents claiming lawsuits had been filed against her. The collectors sent the consumers emails purporting to be from a court. They also repeatedly contacted the consumer at work and contacted her relatives about the debt. The consumer later learned that the collectors were actually calling from Enhanced and were Enhanced collection agents.

36. Delray collectors also routinely deceived consumers about prosecutions being initiated against them. Delray’s scripts direct collectors to tell consumers the following: “You need to be aware of multiple fraud charges being filed against you in ___ County. It is imperative I speak with you to debrief you on your case and retain a statement in your defense. Failure to respond will result in you forfeiting your right to settle this case on a voluntary basis and it will be forwarded out for prosecution.” Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 9 of 28

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37. Enhanced and Delray never referred a case for “prosecution” or even filed a debt-collection lawsuit against a consumer.

38. An August 2014 audit of Delray conducted by a debt-seller from whom the company both acquired debt and did third-party collection highlighted the rampant misconduct Delray collectors engaged in. Among other things, the audit found that Delray collectors (a) threatened “pending court action, garnishment,” and suits for fraud or breach of contract; (b) falsely claimed to be “a paralegal”; (c) gave “false and misleading information”; (d) “inflated the current placed balance, at times quoting a balance exceeding 600% of the debt amount”; (e) failed to give required notice letters to consumers upon initial contact; and (f) failed to provide consumers with “mini-Miranda” warnings and disclose that calls were being recorded. 39. At the time of the audit, Gray was the managing member of Delray and oversaw its operations. MacKinnon and Gray were aware of the audit, and Delray’s illegal collection practices continued, including after MacKinnon later became head of Delray’s operations.

40. Enhanced and Delray have received numerous complaints and inquiries from consumers, government agencies, and consumer organizations about their collection practices. In many instances where they received an inquiry from a government agency or the Better Business Bureau about a consumer complaint, the Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 10 of 28

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companies blamed an outside agency for the misconduct. MacKinnon and Gray were aware of these complaints and inquiries.

41. At all times material to this complaint, MacKinnon was the owner and managing member of NRG and the manager of Enhanced. MacKinnon determined which debt portfolios the firms purchased and which firm collected those debts. He managed each firm’s employees and developed, directed, and monitored their collection policies and practices. MacKinnon caused NRG and Enhanced to add the extra $200 described above to each debt the firms purchased. 42. At all times material to this complaint, Gray was the owner and managing member of Delray. Along with MacKinnon, Gray determined which debt portfolios Delray purchased, negotiated the purchase agreements, developed the firm’s collection practices, and directed and monitored Delray’s collection activities. Gray also received and handled complaints made about Delray to one of the firms from which Delray acquired debts.

43. In addition, at all times material to this complaint, MacKinnon has provided financing for Delray’s debt purchases, provided employees and office space for the company, and served as Delray’s head of operations. MacKinnon, along with Gray, also caused Delray to add $200 to each debt it acquired. 44. Through consumer complaints, government investigations, lawsuits, and debt-buyer audits, as well as his control, direction, and monitoring of the firms’ Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 11 of 28

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collection activities, MacKinnon knew or should have known of the illegal debtcollection practices engaged in by NRG, Enhanced, and Delray. MacKinnon did not stop or prevent these acts, despite having the authority and control to do so. Instead, MacKinnon directed and encouraged these illegal acts by NRG, Enhanced, and Delray.

45. In fact, beginning in January 2015, in part due to these consumer complaints, government investigations, lawsuits, and debt-buyer audits, MacKinnon and Gray began operating Delray using additional corporate names, including Sullivan Asset Management, Solidus, and Clear Credit Solutions. The company engaged inthe same illegal debt-collection practices when operating under these names. 46. Through consumer complaints, government investigations, lawsuits, and debt-buyer audits, as well as his control, direction, and monitoring of the firms’ collection activities, Gray knew or should have known of Delray’s illegal debtcollection practices. Despite having the authority and control to do so, Gray did not stop or prevent these acts. Like MacKinnon, Gray directed and encouraged these illegal practices.

47. The reason for this is clear: MacKinnon and Gray have profited significantly from these illegal debt-collection tactics. A substantial portion of the proceeds from the illegal debt-collection scheme – which amounted to tens of millions of dollars annually – have been funneled back to MacKinnon, his relatives, Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 12 of 28

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and Gray through payments to NRG, Enhanced, and sham companies that MacKinnon, Gray, and MacKinnon’s relatives controlled. COUNT I Unfairness Under the CFPA Relating to the Collection of, and Attempts to Collect, Inflated Debts – by Plaintiffs Against All Defendants

48. The Bureau and the State of New York reallege and incorporate by reference paragraphs 1-47.

49. Section 1036(a)(1)(B) of the CFPA prohibits “unfair” acts or practices. 12 U.S.C. § 5536(a)(1)(B). An act or practice is unfair if it causes or is likely to cause consumers substantial injury, which is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or to competition. See 12 U.S.C. § 5531(c). 50. NRG, Enhanced, and Delray routinely added $200 to each debt they purchased, even though the underlying consumer contracts or relevant state law did not permit it. NRG, Enhanced, and Delray sought to collect these inflated debts directly or indirectly through the MacKinnon Collection Shops. 51. By inflating the amounts owed on the debts they purchased, collected, or attempted to collect, NRG, Enhanced, and Delray caused and were likely to cause consumers to suffer substantial injury. Consumers, unaware that sums unauthorized by contract or relevant law had been added to the amounts NRG, Enhanced, Delray and the MacKinnon Collection Shops (directly or indirectly through the MacKinnon Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 13 of 28

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Collection Shops) claimed they owed, were likely to, and often did, pay sums they did not owe.

52. Consumers could not reasonably avoid this injury, as they were unlikely to know that the sums owed had been inflated or that the additional fees and charges were not permitted under the relevant contract or state law. 53. The substantial injury caused by charging consumers sums they do not owe is not outweighed by any countervailing benefits to consumers or competition. 54. Therefore, NRG, Enhanced, and Delray have engaged in “unfair” acts and practices under §§ 1036(a)(1)(B) and 1031(a) of the CFPA. 12 U.S.C. §§ 5536(a)(1)(B), 5531(c)(l).

55. MacKinnon and Gray knew or should have known that NRG, Enhanced, and Delray were inflating the amounts consumers owed on acquired debts and attempting to collect, or have others collect, on them. MacKinnon and Gray, however, took no steps to stop or prevent these wrongful acts, even though they had authority to do so. In addition, MacKinnon and Gray engaged in the wrongful practices by, for example, setting the policy of adding $200 to each debt. 56. MacKinnon and Gray are therefore liable for these violations of the CFPA.

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COUNT II Deception Under the CFPA Relating to Collection of, and Attempts to Collect, Inflated Debts – by Plaintiffs Against All Defendants

57. The Bureau and the State of New York reallege and incorporate by reference paragraphs 1-47.

58. 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 misleads, or is likely to mislead, a consumer acting reasonably under the circumstances.

59. NRG, Enhanced, and Delray routinely added $200 to each debt they purchased, even though the underlying consumer contracts or relevant state law did not permit it. NRG, Enhanced, and Delray sought to collect these inflated debts directly or indirectly through the MacKinnon Collection Shops. 60. In seeking to collect those inflated amounts, NRG, Enhanced, and Delray thus falsely represented to consumers, both expressly and impliedly, that consumers owed sums they did not in fact owe and were not obligated to pay and that the companies had a legal right to collect such sums from consumers. 61. These false and misleading misrepresentations were material and likely to mislead consumers acting reasonably into paying sums they did not owe and were not obligated to pay.

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62. Accordingly, NRG, Enhanced, and Delray’s collections and attempts to collect, directly or indirectly, debts inflated by unauthorized fees and charges constituted deceptive acts and practices under §§ 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

63. MacKinnon and Gray knew or should have known that NRG, Enhanced, and Delray were inflating the amounts consumers owed on acquired debts and attempting to collect on them. MacKinnon and Gray, however, took no steps to stop or prevent these wrongful acts, even though they had authority to do so. In addition, MacKinnon and Gray engaged in this practice by, for example, setting the policy of adding $200 to each debt.

64. MacKinnon and Gray are therefore liable for these violations of the CFPA. COUNT III Deception Under the CFPA Related to Threats and Impersonation – by Plaintiffs Against Enhanced, Delray, MacKinnon, and Gray

65. The Bureau and the State of New York reallege and incorporate by reference paragraphs 1-47.

66. An act or practice is deceptive under the CFPA if it involves a material misrepresentation that misleads, or is likely to mislead, a consumer acting reasonably under the circumstances.

67. In collecting and attempting to collect debts from consumers, Enhanced and Delray collectors routinely:

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a. threatened consumers with arrest, imprisonment, or other legal action they had no intention of taking; and b. impersonated law-enforcement officials, court officials, and other entities.

68. These false representations were material and likely to mislead consumers acting reasonably under the circumstances to pay sums they may not have owed, in whole or in part, or to give greater priority to those debts over others. To avoid the threat of criminal prosecution, prison, or lawsuits, consumers were likely to pay amounts demanded by collectors posing as law-enforcement officials or threatening legal action they did not intend to pursue, or could not pursue, regardless of whether the consumers owed the amounts or whether they had more pressing obligations to pay.

69. As a result, Enhanced and Delray’s misrepresentations were deceptive acts and practices under §§ 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

70. MacKinnon and Gray knew or should have known that Enhanced and Delray were engaging in these deceptive and misleading acts in collecting and attempting to collect debts but took no steps to stop or prevent them, even though they had authority to do so. In addition, MacKinnon and Gray engaged in this Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 17 of 28

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practice by, for example, setting, approving and directing the firms’ unlawful collection policies and activities.

71. MacKinnon and Gray are therefore liable for these violations of the CFPA. COUNT IV False or Misleading Misrepresentations Under the FDCPA – by the Bureau Against All Defendants 72. The Bureau realleges and incorporates by reference paragraphs 1-47. 73. NRG, Enhanced, and Delray are each “debt collectors” under the FDCPA. 15 U.S.C. § 1692a(6).

74. Section 807 of the FDCPA, 15 U.S.C. § 1692e, prohibits debt collectors from using any false, deceptive, or misleading representation or means in connection with the collection of any debt.

75. Section 807(2)(A) of the FDCPA, 15 U.S.C. § 1692e(2)(A), specifically prohibits debt collectors from making false representations of the character, amount, or legal status of any debt.

76. Section 807(10) of the FDCPA, 15 U.S.C. § 1692e(10), further prohibits debt collectors from using false representations or deceptive means to collect or attempt to collect any debt.

77. In collecting and attempting to collect debts from consumers, NRG, Enhanced, and Delray represented, directly or indirectly, and expressly or impliedly, that consumers owed those debts in the amounts demanded. Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 18 of 28

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78. In fact, NRG, Enhanced, and Delray routinely inflated the amounts owed by adding unauthorized charges, fees, and other sums to the debts. 79. These representations by NRG, Enhanced, and Delray were false and misleading and constitute deceptive practices under § 807 of the FDCPA, 15 U.S.C. § 1692e, 1692e(2)(A) & 1692e(10).

80. MacKinnon is extensively involved in the debt-collection activities of NRG, Enhanced, and Delray. He determines the debt portfolios they buy; manages their debt-collection staff; and oversees and monitors their collection activities. In addition, he set and approved their collection policies and practices and directed their unlawful collection activities, including their practice of adding $200 to each debt the firms acquired. As such, MacKinnon is a “debt collector” under the FDCPA and is liable for NRG, Enhanced, and Delray’s violations of the statute. 81. Gray is also extensively involved in Delray’s debt-collection activities. Along with MacKinnon, he determines the debt portfolios Delray buys; manages the company’s debt-collection staff; and oversees and monitors collection activities. In addition, he set and approved Delray’s collection policies and practices and directed its unlawful collection activities, including its practice of adding $200 to each debt Delray acquired. As such, Gray is a “debt collector” under the FDCPA and is liable for Delray’s violations of the statute.

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COUNT V Unfair Collection Activities Under the FDCPA – by the Bureau Against All Defendants

82. The Bureau realleges and incorporates by reference paragraphs 1-47. 83. NRG, Enhanced, and Delray are “debt collectors” under the FDCPA. 15 U.S.C. § 1692a(6).

84. Section 808(1) of the FDCPA, 15 U.S.C. § 1692f(1), bars the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.

85. NRG, Enhanced, and Delray routinely added $200 to each debt they purchased, even though the underlying consumer contracts or relevant state law did not permit it, and then collected or attempted to collect the inflated amount. 86. These were unfair acts under § 808(1) of the FDCPA, 15 U.S.C. § 1692f(1). 87. MacKinnon is extensively involved in the debt-collection activities of NRG, Enhanced, and Delray. He determines the debt portfolios they buy; manages their debt-collection staff; and oversees and monitors their collection activities. In addition, he set and approved their collection policies and practices and directed their unlawful collection activities, including their practice of adding $200 to each debt the firms acquired. As such, MacKinnon is a “debt collector” under the FDCPA and is liable for NRG, Enhanced, and Delray’s violations of the statute. Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 20 of 28

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88. Gray is also extensively involved in Delray’s debt-collection activities. Along with MacKinnon, he determines the debt portfolios Delray buys; manages the company’s debt-collection staff; and oversees and monitors collection activities. In addition, he set and approved Delray’s collection policies and practices and directed its unlawful collection activities, including its practice of adding $200 to each debt Delray acquired. As such, Gray is a “debt collector” under the FDCPA and is liable for Delray’s violations of the statute.

COUNT VI False and Misleading Representations Under the FDCPA – by the Bureau Against Enhanced, Delray, MacKinnon, and Gray

89. The Bureau realleges and incorporates by reference paragraphs 1-47. 90. Enhanced and Delray are “debt collectors” under the FDCPA. 15 U.S.C. § 1692a(6).

91. Section 807 of the FDCPA, 15 U.S.C. § 1692e, prohibits debt collectors from using any false, deceptive, or misleading representation or means in connection with the collection of any debt.

92. Section 807(1) of the FDCPA, 15 U.S.C. § 1692e(1), specifically prohibits collectors from falsely representing or implying that they are affiliated with the United States or any state.

93. Section 807(4) of the FDCPA, 15 U.S.C. § 1692e(4), further bars collectors from falsely representing or implying that non-payment of a debt will result in the Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 21 of 28

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arrest or imprisonment of any person unless such action is lawful and the debt collector intends to take such action.

94. Section 807(5) of the FDCPA, 15 U.S.C. § 1692e(5), expressly prohibits debt collectors from threatening to take any action that cannot legally be taken or is not intended to be taken.

95. Section 807(7) of the FDCPA, 15 U.S.C. § 1692e(7), in turn, prohibits debt collectors from falsely representing or implying that the consumer committed a crime or other conduct in order to disgrace the consumer. 96. Section 807(10) of the FDCPA, 15 U.S.C. § 1692e(10), bars debt collectors from using false representations or deceptive means to collect or attempt to collect any debt.

97. Section 807(14) of the FDCPA, 15 U.S.C. § 1692e(14), further prohibits debt collectors from using any name other than the true name of the debt collector’s business, company, or organization in collecting debts. 98. In collecting and attempting to collect debts from consumers, Enhanced and Delray collectors routinely:

a. threaten consumers with arrest, imprisonment, or other legal action they had no intention of taking;

b. falsely accuse consumers of having committed crimes by not paying their debts;

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c. inflate the amounts allegedly owed by consumers even though the additional fees, charges, and sums added were not permitted under the relevant contracts or state law; and d. impersonate law-enforcement officials, court officials, and other entities.

99. Enhanced and Delray’s representations to consumers are false and misleading and constitute deceptive practices under § 807 of the FDCPA, 15 U.S.C. § 1692e, 1692e(1), (4)-(5), (7), (10), (14).

100. MacKinnon is extensively involved in the debt-collection activities of Enhanced and Delray. He determines the debt portfolios they buy; manages their debt-collection staff; and oversees and monitors their collection activities. In addition, he set and approved their collection policies and practices and directed their unlawful collection activities, including their practice of adding $200 to each debt the firms acquired. As such, MacKinnon is a “debt collector” under the FDCPA and is liable for Enhanced and Delray’s violations of the statute. 101. Gray is also extensively involved in Delray’s debt-collection activities. Along with MacKinnon, he determines the debt portfolios Delray buys; manages the company’s debt-collection staff; and oversees and monitors collection activities. In addition, he set and approved Delray’s collection policies and practices and directed its unlawful collection activities, including its practice of adding $200 to each debt Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 23 of 28

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Delray acquired. As such, Gray is a “debt collector” under the FDCPA and is liable for Delray’s violations of the statute.

COUNT VII Violations of the CFPA Arising from FDCPA Violations – by the Bureau Against All Defendants

102. The Bureau realleges and incorporates by reference paragraphs 1-47. 103. 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 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).

104. Because NRG, Enhanced, Delray, MacKinnon, and Gray are “covered persons” who violated the FDCPA, they also violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

COUNT VIII Repeated Fraudulent or Illegal Acts – by the State of New York Against All Defendants

105. The State of New York realleges and incorporates by reference paragraphs 1-47.

106. New York Executive Law § 63(12) empowers the Attorney General to seek restitution and injunctive relief when any person or business entity has engaged Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 24 of 28

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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 or illegal acts or otherwise demonstrated persistent fraud or illegality in the carrying on, conducting, or transaction of their debt-collection businesses for purposes of Executive Law § 63(12).

COUNT IX Deceptive Acts or Practices – by the State of New York Against All Defendants 108. The State of New York realleges and incorporates by reference paragraphs 1-47.

109. 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.”

110. 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 businesses.

COUNT X Violation of New York State Debt Collection Law – by the State of New York Against All Defendants

111. The State of New York realleges and incorporates by reference paragraphs 1-47.

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112. New York General Business Law § 601 sets forth a list of prohibited debt collection practices, including:

a.

simulating in any manner a law-enforcement officer, or a representative of any governmental agency of the state of New York or any of its political subdivisions,N.Y. Gen. Bus. Law § 601(1);

b.

knowingly collecting, attempting to collect, or asserting a right to any collection fee, attorney’s fee, court cost or expense unless such charges are justly due and legally chargeable against the debtor,N.Y. Gen. Bus. Law § 601(2);

c.

threatening any action which the debt collector in the usual course of its business does not in fact take, N.Y. Gen. Bus. Law § 601(7); d.

claiming or attempting or threatening to enforce a right with knowledge or reason to know that the right does not exist (N.Y. Gen. Bus. Law § 601(8)); and e.

using a communication which simulates in any manner legal or judicial process or which gives the appearance of being authorized, issued, or approved by a government, governmental agency, or attorney-at-law when it is not. N.Y. Gen. Bus. Law § 601(9).

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113.

In numerous instances, Defendants have violated New York General Business Law § 601 by engaging in prohibited debt-collection practices under that statute.

DEMAND FOR RELIEF Wherefore, the Plaintiffs request that the Court: 1. permanently enjoin Defendants from committing future violations of the CFPA, the FDCPA, N.Y. General Business Law Articles 22-A and 29-H, and N.Y. Executive Law § 63(12);

2. award such relief as the Court finds necessary to redress injury to consumers resulting from Defendants’ violations of the CFPA, the FDCPA, New York General Business Law Articles 22-A and 29-H, and New York Executive Law § 63(12), including but not limited to rescission or reformation of contracts, restitution, and the refund of monies paid;

3. 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; 4.

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

5.

order disgorgement of ill-gotten revenues against Defendants; 6.

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

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7. order Defendants to pay Plaintiffs’ costs in connection with this action; and 8. award additional relief as the Court may determine to be just and proper. Respectfully submitted,

Dated: November 2, 2016 Anthony Alexis Enforcement Director Jeffrey Paul Ehrlich Deputy Enforcement Director John C. Wells Assistant Litigation Deputy

s/Stefanie Isser Goldblatt Stefanie Isser Goldblatt Jade A. Burns

Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Telephone: (212) 328-7011 Facsimile: (212) 328-7050 Email: [email protected] Attorneys for Consumer Financial Protection Bureau

Eric T. Schneiderman Attorney General of the State of New York

s/James M. Morrissey James M. Morrissey Assistant Attorney General 350 Main Street, Suite 300A Buffalo, NY 14202 Telephone: (716) 853-8471 Email: [email protected]

Case 1:16-cv-00880 Document 1 Filed 11/02/16 Page 28 of 28

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EXHIBIT A

Case 1:16-cv-00880 Document 1-1 Filed 11/02/16 Page 1 of 3

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Collection Shops 1. ACB Asset 2. ADR Arbitration Services 3. ADR LLC 4. Albright Consultants 5. Allied Retention Services 6. Altamonte Springs 7. American Asset Recovery Group 8. American Capital 9. Arbitration of Peterson and Schwartz LLC 10. ARS LLC, fka Retention Services LLC 11. Asset & Arbitration Group LLC 12. Assurance Asset Management 13. Blue Circle Asset 14. Buhanen & Cohen & Associates 15. Bums & Hoffman 16. Cambridge Huxley & Associates 17. Capital Resolution Services 18. Capital Resource Consultants LLC 19. Check and Credit Solutions 20. Cornerstone Mediation 21. Credit First Recovery 22. Delaware Solutions 23. Direct Mediation Services 24. EAG 25. Eisenburg Roth and Associates 26. Empire Mediation 27. Executive Acquisition Group LLC 28. Executive Summary Services 29. Featured Mediation 30. Fidelity Asset Recovery INC 31. FNAS 32. Focus Gold 33. Goldstein, Weinberg & Associates 34. Gordon, Cappolli & Associates 35. Harbor Front Acquisitions 36. Hartford Management Group 37. Integrity Management Group 38. JAB Arbitration 39. Joshua Tree Funding LLC 40. JTF Management 41. Kaden Asset Group 42. Kauffman, Burstein & Associates 43. Law Offices of Scott Wheat 44. Leading Edge Solutions 45. Lockhart Mediation Services 46. Mariner & Associates Case 1:16-cv-00880 Document 1-1 Filed 11/02/16 Page 2 of 3

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47. Mariner & Associates/ Northpointe 48. Mediated Credit Solutions 49. Midway Mediation Services Group 50. Mile High Mediation 51. Morgan Mediation Group LLC 52. National Credit Works 53. Nationwide Intermediary Services 54. Nationwide Processing 55. NCW Ridge Lea 56. Neiman, Rona & Associates 57. New Beginnings 58. Northeast Capital 59. Northeast Credit Solutions 60. Northeast Receivables Management 61. Onsite Collection Bureau LLC 62. Paramount Solution Services 63. Peak Recovery/Peak Resolution 64. PR Associates LLC 65. Premier Mediation Solutions LLC 66. RPG 67. S Brookfield Consulting 68. Shapiro & Price 69. Siegel Bennett & Associates 70. Simon Eichler & Associates 71. Solidus 72. Southern Capital Arbitrations 73. Southpoint Management Group 74. Spielman, Weiss & Associates 75. Spotlight Resolution 76. Stein & Witzen Receivables 77. Sun Resolution 78. The Cambridge Group 79. Thomas Bella & Associates 80. TS Holdings 81. UAG 82. United Skye Portfolio Recovery 83. Viking Holding Group 84. WHL Enterprises 85. William Isaro & Associates 86. Zimmerman Young & Associates 87. Zittermann, Bosh & Associates Case 1:16-cv-00880 Document 1-1 Filed 11/02/16 Page 3 of 3

Stipulation

PDF of this document (25 pages)

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Case 1:16-cv-00880-FPG-HKS Document 88 Filed 08/23/19 Page 1 of 25

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

CONSUMER FINANCIAL PROTECTION BUREAU AND THE PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, ATTORNEY GENERAL FOR THE STATE OF NEW YORK,

Plaintiffs, V.

DOUGLAS MACKINNON, MARK GRAY, NORTHERN RESOLUTION GROUP, LLC, ENHANCED ACQUISITIONS, LLC, AND DELRAY CAPITAL, LLC,

Defendants.

No. 1:16-CV-00880-FPG-HKS

STIPULATED FINAL JUDGMENT AND ORDER

The Consumer Financial Protection Bureau (Bureau) and the People of the State of New

York, by Letitia James, the Attorney General of the State of New York (NYAG) commenced this

civil action on November 2, 2016, to obtain injunctive and monetary relief and civil penalties,

from Douglas MacKinnon, Mark Gray, Northern Resolution Group, LLC (NRG), Enhanced

Acquisitions, LLC (Enhanced), and Delray Capital, LLC (Delray) (collectively, Defendants).

The Complaint alleges violations of sections 1031(a) and 1036(a)(1) of the Consumer Financial

Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1); sections 807 and 808 of the

Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692e, 1692f; New York Executive

Law § 63(12), and New York General Business Law Article 22-A, § 349 and Article 29-H,

§ 602, in connection with Defendants’ collection of Consumer Debt, placement of Consumer

Debts for collection, and related activities.

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Plaintiffs and Settling Defendants Mark Gray and Delray agree to entry of this Stipulated

Final Judgment and Order (Order), to settle and resolve all matters in dispute as alleged in the

Complaint.

THEREFORE, it is ORDERED:

FINDINGS 1. This Court has jurisdiction over the parties and the subject matter of this action. 2. The Complaint charges that Defendants engaged in unfair and deceptive Debt-

collection practices in violation of sections 1031(a) and 1036(a)(1) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1); sections 807 and 808 of the FDCPA, 15 U.S.C. §§ 1692e, 1692f; and N.Y. General Business Law Article 22-A § 349 and Article 29-H § 602.

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

4. Settling 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.

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

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DEFINITIONS

6. The following definitions apply to this Order:

a, “Affected Consumers” means any Consumer from whom Defendants, or anyone acting on behalf of Defendants (including any Collection Shop), collected, or attempted to collect, a Debt during the Relevant Period.

b. “Collection Shop” means any Person listed on Appendix | to this Order.

c. “Consumer” means an individual or an agent, trustee, or representative acting on behalf of an individual.

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);

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

iii. collecting, analyzing, maintaining, or providing consumer report

information or other account information, including information relating

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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. e. “Corporate Defendant” means Delray Capital, LLC and its successors and assigns.

f. “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. g. “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; and (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. h. “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 Douglas MacKinnon, Mark Gray, NRG, Enhanced, and Delray.

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

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

|. “Individual Defendant” means Mark Gray and any other names by which he might be known.

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

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

o. “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 a Defendant based on substantially the same facts as described in the Complaint.

p. “Relevant Period” includes the period from January 1, 2009, to the Effective Date.

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. §

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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

ii. 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).

r, “Settling Defendants” means the Individual Defendant and the Corporate

Defendant, individually, collectively, or in any combination.

ORDER CONDUCT RELIEF I Permanent Ban on Debt Collection IT IS ORDERED that:

7. Each Settling Defendant, whether acting directly or indirectly, is 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;

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c. providing services or assistance to, or working in any capacity for, 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 Debt or any information related to a Debt; and

e. engaging in Payment Processing.

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

Prohibition on Misrepresentations Concerning Consumer Financial Products or Services

IT IS FURTHER ORDERED that:

8. Each Settling Defendant, 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, is permanently restrained and enjoined from:

a. misrepresenting, omitting, or assisting others in misrepresenting or omitting, expressly or by implication, any material fact, including but not limited to: i. the terms or rates that are available for any loan or other extension of credit;

ii. a Consumer’s ability to improve or otherwise affect the Consumer’s credit record, credit history, credit rating, or ability to obtain credit; iii. that a Consumer can improve the Consumer’s credit record, credit

history, or credit rating by permanently removing negative information

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iv.

vi.

vii.

from the Consumer’s credit record, 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;

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.

iil

Customer Information

IT IS FURTHER ORDERED that:

9. Settling Defendants, and their officers, agents, servants, employees, and attorneys

and all other Persons in active concert or participation with any of them, who receive actual

notice of this Order, whether acting directly or indirectly, are permanently restrained and

enjoined from:

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a. disclosing, using, or benefiting from Consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a Consumer’s account (including a credit card, bank account, or other financial account), that a Defendant obtained before the Effective Date in connection with the purchase, sale, collection, or placement for collection of Debt; and

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

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 Order to Pay Redress IT IS FURTHER ORDERED that:

10. A judgment for monetary relief is entered in favor of Plaintiffs and against Settling Defendants, jointly and severally, in the amount of FOUR MILLION DOLLARS ($4,000,000) for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 11 of this Section and Paragraph 18 of Section V and subject to Section VII of this Order.

11. | Within 30 days of the Effective Date, Settling Defendants must pay to Plaintiffs

by wire transfer to Plaintiffs or to Plaintiffs’ agent, and according to Plaintiffs’ wiring

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instructions, TEN THOUSAND DOLLARS ($10,000), in partial satisfaction of the judgment referenced in Paragraph 10 of this Section.

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

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

14, If the Bureau determines, in its sole discretion, that redress to Consumers is wholly or partially impracticable or if funds deposited into a fund or funds administered by the

Bureau or its agent remain after redress is completed, the Bureau shall deposit the remaining

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funds in its possession in the U.S. Treasury as disgorgement. Settling Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this section.

15. If the NYAG determines, in its sole discretion, that redress to Consumers is wholly or partially impracticable or if funds deposited into a fund or funds administered by the NYAG or its agent remain after redress is completed, the NYAG shall deposit the remaining funds in its possession with the New York State Comptroller as disgorgement. Settling Defendants will have no right to challenge any actions that the NYAG or its representatives may take under this section.

16. Payment of redress to any Affected Consumer under this Order may not be

conditioned on that Affected Consumer waiving any right.

Vv Order to Pay Civil Money Penalty to the Consumer Financial Protection Bureau IT IS FURTHER ORDERED that:

17. Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(3), a judgment for a civil money penalty is entered in favor of the Bureau and against Settling Defendants, jointly and severally, in the amount of ONE MILLION DOLLARS ($1,000,000); however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 11 of Section IV and Paragraph 18 of this Section and subject to Section VII of this Order.

18. Within 30 days of the Effective Date, Settling Defendants must pay to the Bureau

by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring

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instructions, ONE DOLLAR ($1), in partial satisfaction of the judgment referenced in Paragraph 17 of this Section.

19. 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). 20. Settling 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, Settling Defendants may not:

a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 21. Individual Defendant agrees that the civil penalty to the Bureau imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, as to Individual Defendant, is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).

VI Order to Pay Civil Money Penalty to the State of New York IT IS FURTHER ORDERED that:

22. | Under N.Y. General Business Law § 350-d, a judgment for a civil money penalty is entered in favor of the NYAG and against Settling Defendants, jointly and severally, in the

amount of ONE MILLION DOLLARS ($1,000,000); however, full payment of this judgment for

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a civil money penalty will be suspended upon satisfaction of the obligations in Paragraph 11 of Section IV and subject to Section VII of this Order. 23. The civil money penalty paid to the NYAG under this Order will be deposited with the New York State Comptroller in accordance with New York state laws and regulations. 24. Settling 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 NYAG ultimately uses those funds, Settling Defendants may not:

a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 25. Individual Defendant agrees that the civil penalty to the NYAG imposed by the Order represents a civil penalty owed to the State of New York, is not compensation for actual pecuniary loss, and, thus, as to Individual Defendant, is not subject to discharge under the

Bankruptcy Code under 11 U.S.C. § 523(a)(7).

VII

Effect of Misrepresentation or Omission Regarding Financial Condition

IT IS FURTHER ORDERED that:

26. The suspension of the judgments for redress and civil money penalties entered in Sections IV, V, and VI of this Order are expressly premised on the truthfulness, accuracy, and completeness of Settling Defendants’ financial statements and supporting documents submitted

to Plaintiffs on or about June 20, 2019, July 16, 2019, and July 17, 2019, which Settling

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Defendants assert are truthful, accurate, and complete, and which include Financial Statement of Individual Defendant Mark Gray, including the attachments, signed on June 20, 2019 and submitted to Plaintiffs on or about June 20, 2019, and Financial Statement of Corporate Defendant Delray, including the attachments, signed on June 20, 2019 and submitted to Plaintiffs on or about June 20, 2019, and letter from Joseph Makowski to Christopher Boyd signed on July 16, 2019 and submitted to Plaintiffs on or about July 16, 2019, and Affidavit of Mark Gray signed on July 17, 2019 and submitted to Plaintiffs on or about July 17, 2019.

27. If upon motion by the Bureau or the NYAG, the Court determines that Settling Defendants have failed to disclose any material asset or that any of their financial statements contain material misrepresentations or omissions, the Court shall terminate the suspension of the judgments for redress and civil money penalties entered in Sections IV, V, and VI and without further adjudication, shall reinstate the judgments entered in Sections IV, V, and VI of this Order and the full judgment for redress of FOUR MILLION DOLLARS ($4,000,000), and the full judgments for civil penalties of TWO MILLION DOLLARS ($2,000,000), shall be immediately due and payable, less any amounts previously paid to Plaintiffs under Sections IV, V, and VI of this Order.

28. Ifthe Court terminates the suspension of the judgments for redress and civil money penalties under this Section, Plaintiffs will be entitled to interest on the judgments, computed from the date of entry of this Order, at the rate prescribed by 28 U.S.C. § 1961, as amended, on any outstanding amounts not paid.

29. Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings

instituted under Section VII would be in addition to, and not in lieu of, any other civil or criminal

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remedies as may be provided by law, including any other proceedings that Plaintiffs may initiate to enforce this Order.

Vil Additional Monetary Provisions IT IS FURTHER ORDERED that:

30. ‘In the event of any default on Settling 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.

31, Settling Defendants relinquish all dominion, control, and title to the funds, and all other assets transferred or paid to Plaintiffs in satisfaction of the monetary judgments contained in this Order to the fullest extent permitted by law and no part of the funds, or other assets, may be returned to Settling Defendants.

32. The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on or arising out of, this Order, or in any subsequent civil litigation by or on behalf of Plaintiffs in a proceeding to enforce their rights under this Order, including the injunctive provisions of this Order, and any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case.

33. The facts alleged in the Complaint establish all elements necessary to sustain an action by Plaintiffs under to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C.

§ 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each

Settling Defendant, even in such Settling Defendant’s capacity as debtor-in-possession.

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34, Settling Defendants agree to waive any statute of limitations or other time-related defenses in any action brought by Plaintiffs to enforce compliance with the requirements of this Order.

35, Under 31 U.S.C. § 7701, Settling Defendants, unless they already have done so, must furnish to Plaintiffs their respective taxpayer identifying numbers within 10 days of the Effective Date, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.

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

amount of the civil money penalties imposed in this action.

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37. Under Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 168lb(a)(1), any Consumer reporting agency may furnish a Consumer report concerning any Settling Defendant to Plaintiffs, which may be used for purposes of collecting and reporting on any

delinquent amount arising out of this Order.

COMPLIANCE PROVISIONS Ix Reporting Requirements IT IS FURTHER ORDERED that:

38. Settling 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, 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 Settling Defendant; or a change in a Settling Defendant’s name or address. Settling Defendants must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 39. Within 7 days of the Effective Date, each Settling Defendant must submit to Plaintiffs an accurate report sworn to under the penalty of perjury: a. designating at least one telephone number and email, physical, and postal address as points of contact. which Plaintiffs may use to communicate with

Settling Defendant;

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identifying all businesses for which Settling Defendant is the majority owner, or that Settling 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 Individual Defendant’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and

describing in detail Individual Defendant’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including Individual Defendant’s title, role, responsibilities,

participation, authority, control, and ownership.

40. Settling Defendants must report any change in the information required to be

submitted under Paragraph 35 at least 30 days before the change or as soon as practicable after

learning about the change, whichever is sooner.

41. | Within 90 days of the Effective Date, and again one year after the Effective Date,

each Settling 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 Settling Defendant has complied with each such paragraph and subparagraph of this Order;

attaches a copy of each Order Acknowledgment obtained under Section IX,

unless previously submitted to Plaintiffs.

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xX Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:

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

43. Within 30 days of the Effective Date, Settling Defendants, and any business for which a Settling Defendant is the majority owner or which a Settling 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.

44. __ For 5 years from the Effective Date, Settling Defendants, and any business for which a Settling Defendant is the majority 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 IX, 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.

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

Persons receiving a copy of this Order under this Section.

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XI Recordkeeping IT IS FURTHER ORDERED that:

46. Each Settling Defendant must create, for at least 10 years from the Effective Date, for any business of which it is the majority owner or that it directly or indirectly controls, all documents, records, and data necessary to demonstrate full compliance with each provision of this Order. Each Settling Defendant must retain these documents for at least 10 years after creation and make them available to Plaintiffs upon request.

47, Each Settling Defendant must maintain for any business for which a Defendant is a majority owner or controls directly or indirectly, for at least 10 years from the Effective Date or 5 years after creation, whichever is longer:

a. accounting records showing the gross and net revenues from all goods or services sold;

b. records showing the amounts collected for each individual Affected Consumer;

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; and (if applicable) the reason for termination;

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

e. acopy of each unique advertisement or other marketing material.

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Settling Defendants must make these materials available to Plaintiffs upon a request by the Bureau or the NYAG. The recordkeeping requirements of this paragraph do not apply to any

materials Settling Defendants are directed to destroy pursuant to paragraph 9(b) of this Order.

XU Notices IT IS FURTHER ORDERED that:

48. Unless otherwise directed in writing by Plaintiffs, Settling Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CF PB, et al. vy. MacKinnon, et al., Case No. 16-cv-00880,” and send them by overnight courier or first-class mail to the below addresses and contemporaneously by email to:

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]

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Xl Cooperation IT IS FURTHER ORDERED that:

49. Settling Defendants must cooperate fully to provide sufficient information to

enable the Bureau and the NYAG to efficiently administer Consumer redress, including the determination of the identity and location of, the amount paid to Defendants by, and the amount of any other injury sustained by, each Affected Consumer. Settling Defendants must provide such information in its or its agents’ possession, custody, or control within 14 days of receiving a written request from the Bureau or the NYAG.

50. Settling Defendants must cooperate fully with Plaintiffs in this matter and in any investigation related to or associated with the conduct described in the Complaint, or arising therefrom. Settling Defendants must provide truthful and complete information, evidence, and testimony. Individual Defendant must appear and Corporate Defendant must cause such Defendant’s officers, employees, representatives, or agents to appear for interviews, discovery, depositions, 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.

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

51. | Within 14 days of receipt of a written request from the Bureau or the NYAG,

Settling Defendants must submit additional compliance reports or other requested non-privileged

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information, related to requirements of this Order, which must be sworn under penalty of perjury; provide sworn testimony related to requirements of this Order and Settling Defendants’ compliance with those requirements; or produce non-privileged documents related to requirements of this Order and Settling Defendants’ compliance with those requirements.

52. For matters concerning, or arising from, this Order, the Bureau or the NYAG may communicate directly with Settling Defendants, their employees, and agents, unless Settling Defendants retain counsel related to these communications.

53. Settling Defendants must permit Bureau or NYAG representatives to interview about the requirements of this Order and Settling Defendants’ compliance with those requirements any employee or other Person affiliated with Defendants who has agreed to such an interview. The Person interviewed may have counsel present.

54. 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 Settling Defendants or any individual or entity affiliated with Defendants, without the necessity of identification or prior notice.

55. 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.

XV Miscellaneous IT IS FURTHER ORDERED that:

56. 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

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construed and enforced as if such invalid, illegal, or unenforceable clause, provision, or section had not been contained herein.

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

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

XVI Entry of Judgment

IT IS FURTHER ORDERED that:

59. 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

Settling Defendants Mark Gray and Delray Capital, LLC.

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XVII Retention of Jurisdiction IT IS FURTHER ORDERED that:

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

Order and corresponding final judgments.

IT IS SO ORDERED.

DATED: August 22, 2019

Chief Judge United States District Court

Stipulation

PDF of this document (22 pages)

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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

CONSUMER FINANCIAL PROTECTION BUREAU AND THE PEOPLE OF THE

STATE OF NEW YORK, BY LETITIA No. 1:16-CV-00880-FPG-HKS JAMES, ATTORNEY GENERAL FOR THE STATE OF NEW YORK, STIPULATED FINAL Plaintiffs, JUDGMENT AND ORDER

Vv.

DOUGLAS MACKINNON, MARK GRAY, NORTHERN RESOLUTION GROUP, LLC, ENHANCED ACQUISITIONS, LLC,

AND DELRAY CAPITAL, LLC,

Defendants.

The Consumer Financial Protection Bureau (Bureau) and the People of the State of New York, by Letitia James, the Attorney General of the State of New York (NYAG) commenced this civil action on November 2, 2016, to obtain injunctive and monetary relief and civil penalties, from Douglas MacKinnon, Mark Gray, Northern Resolution Group, LLC (NRG), Enhanced Acquisitions, LLC (Enhanced), and Delray Capital, LLC (collectively, Defendants). The Complaint alleges violations of sections 1031(a) and 1036(a)(1) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1); sections 807 and 808 of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692e, 1692f; New York Executive Law § 63(12), and New York General Business Law Article 22-A, § 349 and Article 29-H, § 602, in connection with Defendants’ collection of Consumer Debt, placement of Consumer

Debts for collection, and related activities.

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Plaintiffs and Settling Defendants Douglas MacKinnon, NRG, and Enhanced agree to entry of this Stipulated Final Judgment and Order (Order), to settle and resolve all matters in

dispute as alleged in the Complaint.

THEREFORE, it is ORDERED:

FINDINGS 1. This Court has jurisdiction over the parties and the subject matter of this action. 2. The Complaint charges that Defendants engaged in unfair and deceptive Debt-

collection practices in violation of sections 1031(a) and 1036(a)(1) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1); sections 807 and 808 of the FDCPA, 15 U.S.C. §§ 1692e, 1692f; and N.Y. General Business Law Article 22-A § 349 and Article 29-H § 602.

3. For purposes of this Order, Settling Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.

4. Settling 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.

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

DEFINITIONS

6. The following definitions apply to this Order:

a. “Affected Consumers” means any Consumer from whom Defendants, or anyone acting on behalf of Defendants (including any Collection Shop), collected, or attempted to collect, a Debt during the Relevant Period.

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b. “Collection Shop” means any Person listed on Appendix 1 to this Order.

c. “Consumer” means an individual or an agent, trustee, or representative acting

on behalf of an individual.

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.

ii.

iil.

iv.

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);

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;

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

collecting debt related to any Consumer Financial Product or Service.

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e. “Corporate Defendants” means Northern Resolution Group, LLC and Enhanced Acquisitions, LLC, collectively, and their successors and assigns.

f. “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.

g. “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; and (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.

h. “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.

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

j. “Enforcement Director” means the Assistant Director of the Office of

Enforcement for the Bureau, or his or her delegate.

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k. “Individual Defendant” means Douglas MacKinnon and any other names by which he might be known.

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

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

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

o. “Relevant Period” includes the period from January 1, 2009, to the Effective Date.

p. “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

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ii. 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).

q. “Settling Defendants” means the Individual Defendant and the Corporate

Defendants, individually, collectively, or in any combination.

ORDER CONDUCT RELIEF I Permanent Ban on Debt Collection IT IS ORDERED that:

7. Each Settling Defendant, whether acting directly or indirectly, is 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. providing services or assistance to, or working in any capacity for, 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 Debt or any information related to a Debt; and

e. engaging in Payment Processing.

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

Il

Prohibition on Misrepresentations Concerning

Consumer Financial Products or Services

IT IS FURTHER ORDERED that:

8. Each Settling Defendant, 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, is permanently restrained and enjoined from:

a. misrepresenting, omitting, or assisting others in misrepresenting or omitting,

expressly or by implication, any material fact, including but not limited to:

il.

lil.

iv.

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, 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;

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

vii. 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.

Il Customer Information IT IS FURTHER ORDERED that:

9. Settling Defendants, and their officers, agents, servants, employees, and attorneys and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from:

a. disclosing, using, or benefiting from Consumer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a Consumer’s account (including a credit card, bank account, or other financial account), that a Defendant obtained before the Effective Date in connection with the

purchase, sale, collection, or placement for collection of Debt; and

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b. failing 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.

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 Order to Pay Redress IT IS FURTHER ORDERED that:

10. A judgment for monetary relief is entered in favor of Plaintiffs and against Settling Defendants, jointly and severally, in the amount of FORTY MILLION DOLLARS ($40,000,000).

11. Within 10 days of the Effective Date, Settling Defendants must pay to Plaintiffs, by wire transfer to Plaintiffs or to Plaintiffs’ agents, and according to Plaintiffs’ wiring instructions, FORTY MILLION DOLLARS ($40,000,000) in full satisfaction of the judgment as ordered in Paragraph 10 of this Section.

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

13. If the Bureau determines, in its sole discretion, that redress to Consumers is

wholly or partially impracticable or if funds deposited into a fund or funds administered by the

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Bureau or its agent remain after redress is completed, the Bureau shall deposit the remaining funds in its possession in the U.S. Treasury as disgorgement. Settling Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this section.

14. If the NYAG determines, in its sole discretion, that redress to Consumers is wholly or partially impracticable or if funds deposited into a fund or funds administered by the NYAG or its agent remain after redress is completed, the NYAG shall deposit the remaining funds in its possession with the New York State Comptroller as disgorgement. Settling Defendants will have no right to challenge any actions that the NYAG or its representatives may take under this section.

15. Payment of redress to any Affected Consumer under this Order may not be

conditioned on that Affected Consumer waiving any right.

Vv Order to Pay Civil Money Penalty to the Consumer Financial Protection Bureau IT IS FURTHER ORDERED that:

16. Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint and continuing until the Effective Date, and taking into account the factors in 12 U.S.C. § 5565(c)(3), a judgment for a civil money penalty is entered in favor of the Bureau and against Settling Defendants, jointly and severally, in the amount of TEN MILLION DOLLARS ($10,000,000).

17. Within 10 days of the Effective Date, Settling Defendants must pay the civil money penalty to the Bureau by wire transfer to the Bureau or to the Bureau’s agent in

compliance with the Bureau’s wiring instructions.

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18. 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).

19. Settling 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, Settling Defendants may not:

a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or

b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.

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

VI Order to Pay Civil Money Penalty to the State of New York IT IS FURTHER ORDERED that:

21. Under N.Y. General Business Law § 350-d, a judgment for a civil money penalty is entered in favor of the NYAG and against Settling Defendants, jointly and severally, in the amount of TEN MILLION DOLLARS ($10,000,000).

22. Within 10 days of the Effective Date, Settling Defendants must pay the civil money penalty to the NYAG by wire transfer to the NYAG or to the NYAG’s agent in

compliance with the NYAG’s wiring instructions.

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23. The civil money penalty paid to the NYAG under this Order will be deposited with the New York State Comptroller in accordance with New York state laws and regulations.

24, Settling 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 NYAG ultimately uses those funds, Settling Defendants may not:

a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or

b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.

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

vil Additional Monetary Provisions IT IS FURTHER ORDERED that:

26. Inthe event of any default on Settling 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.

27. Settling Defendants relinquish all dominion, control, and title to the funds, and all

other assets transferred or paid to Plaintiffs in satisfaction of the monetary judgments contained

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in this Order to the fullest extent permitted by law and no part of the funds, or other assets, may be returned to Settling Defendants.

28. The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on or arising out of, this Order, or in any subsequent civil litigation by or on behalf of Plaintiffs in a proceeding to enforce their rights under this Order, including the injunctive provisions of this Order, and any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case.

29. The facts alleged in the Complaint establish all elements necessary to sustain an action by Plaintiffs under to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C.

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

30. Settling Defendants agree to waive any statute of limitations or other time-related defenses in any action brought to enforce compliance with the requirements of this Order.

31. Under 31 U.S.C. § 7701, Settling Defendants, unless they already have done so, must furnish to Plaintiffs their respective taxpayer identifying numbers within 10 days of the Effective Date, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.

32. Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Settling 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 a Settling Defendant paid or is required to pay to Consumers and describe the

Consumers or classes of Consumers to whom that redress has been or will be paid. To preserve

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the deterrent effect of the civil money penalty in any Related Consumer Action, Settling Defendants may not argue that any Settling Defendants are entitled to, nor may any Settling Defendants benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalties paid in this action. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against a Settling Defendant based on the civil money penalties paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, the Settling Defendant must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalties imposed in this action.

33. Under Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 1681b(a)(1), any Consumer reporting agency may furnish a Consumer report concerning any Settling Defendant to Plaintiffs, which may be used for purposes of collecting and reporting on any

delinquent amount arising out of this Order.

COMPLIANCE PROVISIONS Vil Reporting Requirements IT IS FURTHER ORDERED that:

34. Settling 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, parent, or affiliate that engages in

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any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding

by or against a Settling Defendant; or a change in a Settling Defendant’s name or address.

Settling Defendants must provide this notice at least 30 days before the development or as soon

as practicable after learning about the development, whichever is sooner.

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

Plaintiffs an accurate report sworn to under the penalty of perjury:

a.

designating at least one telephone number and email, physical, and postal address as points of contact, which Plaintiffs may use to communicate with Settling Defendant;

identifying all businesses for which Settling Defendant is the majority owner, or that Settling 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 Individual Defendant’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and

describing in detail Individual Defendant’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including Individual Defendant’s title, role, responsibilities,

participation, authority, control, and ownership.

36. Settling Defendants must report any change in the information required to be

submitted under Paragraph 35 at least 30 days before the change or as soon as practicable after

learning about the change, whichever is sooner.

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37. Within 90 days of the Effective Date, and again one year after the Effective Date, each Settling 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 Settling Defendant has complied with each such paragraph and subparagraph of this Order;

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:

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

39. Within 30 days of the Effective Date, Settling Defendants, and any business for which a Settling Defendant is the majority owner or which a Settling 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.

40. For 5 years from the Effective Date, Settling Defendants, and any business for which a Settling Defendant is the majority 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

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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.

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

Persons receiving a copy of this Order under this Section.

x Recordkeeping IT IS FURTHER ORDERED that:

42. Each Settling Defendant must create, for at least 10 years from the Effective Date, for any business of which it is the majority owner or that it directly or indirectly controls, all documents, records, and data necessary to demonstrate full compliance with each provision of this Order. Each Settling Defendant must retain these documents for at least 10 years after creation and make them available to Plaintiffs upon request.

43. Each Settling Defendant must maintain for any business for which a Defendant is a majority owner or controls directly or indirectly, for at least 10 years from the Effective Date or 5 years after creation, whichever is longer:

a. accounting records showing the gross and net revenues from all goods or services sold;

b. records showing the amounts collected for each individual Affected

Consumer;

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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: and (if applicable) the reason for termination;

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

e. acopy of each unique advertisement or other marketing material.

Settling Defendants must make these materials available to Plaintiffs upon a request by the Bureau or the NYAG. The recordkeeping requirements of this paragraph do not apply to any

materials Settling Defendants are directed to destroy pursuant to paragraph 9(b) of this Order.

XI Notices IT IS FURTHER ORDERED that:

44. —_ Unless otherwise directed in writing by Plaintiffs, Settling Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFB, et al. v. MacKinnon, et al., Case No. 16-cv-00880,” and send them by overnight courier or first-class mail to the below addresses and contemporaneously by email to:

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]

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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:

45. Settling Defendants must cooperate fully to provide sufficient information to

enable the Bureau and the NYAG to efficiently administer Consumer redress, including the determination of the identity and location of, the amount paid to Defendants by, and the amount of any other injury sustained by, each Affected Consumer. Settling Defendants must provide such information in its or its agents’ possession, custody, or control within 14 days of receiving a written request from the Bureau or the NYAG.

46. — Settling Defendants must cooperate fully with Plaintiffs in this matter and in any investigation related to or associated with the conduct described in the Complaint, or arising therefrom. Settling Defendants must provide truthful and complete information, evidence, and testimony. Individual Defendant must appear and Corporate Defendants must cause such Defendants’ officers, employees, representatives, or agents to appear for interviews, discovery, depositions, 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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XUI Compliance Monitoring IT IS FURTHER ORDERED that, to monitor Settling Defendants’ compliance with this Order, including:

47. Within 14 days of receipt of a written request from the Bureau or the NYAG, Settling Defendants must submit additional compliance reports or other requested non-privileged information, related to requirements of this Order, which must be sworn under penalty of perjury; provide sworn testimony related to requirements of this Order and Settling Defendants’ compliance with those requirements; or produce non-privileged documents related to requirements of this Order and Settling Defendants’ compliance with those requirements.

48. For matters concerning, or arising from, this Order, the Bureau or the NYAG may communicate directly with Settling Defendants, their employees, and agents, unless Settling Defendants retain counsel related to these communications.

49. Settling Defendants must permit Bureau or NYAG representatives to interview about the requirements of this Order and Settling Defendants’ compliance with those requirements any employee or other Person affiliated with Defendants who has agreed to such an interview. The Person interviewed may have counsel present.

50. 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 Settling Defendants or any individual or entity affiliated with Defendants, without the necessity of identification or prior notice.

51. 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 Miscellaneous IT IS FURTHER ORDERED that:

52. 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.

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

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

XV Entry of Judgment IT IS FURTHER ORDERED that:

55. 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 Settling Defendants Douglas MacKinnon, Northern Resolution Group, LLC; and Enhanced

Acquisitions, LLC.

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XVI Retention of Jurisdiction IT IS FURTHER ORDERED that:

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

Order and corresponding final judgments.

IT ISSO ORDERED.

DATED: August 22, 2019

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: AD A / FRANK P. GERACTI, JR.

Chief Judge Vv United States District Court