Performance SLC, LLC, Performance Settlement, LLC and Daniel Crenshaw

Agency: Consumer Financial Protection Bureau
Date: Nov. 5, 2020
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/performance-slc-llc-performanc
Pages: 67
PDFs: 3 documents (links below)

Documents in this case

Complaint · Nov. 2020 · 21 p.
Amended complaint · July 2021 · 24 p.
Stipulation · May 2022 · 21 p.

Case summary

On November 5, 2020, the Bureau filed a lawsuit in the federal district court for the Central District of California against Performance SLC, LLC (PSLC), a California debt-relief business focused on federal student loan debt; Performance Settlement, LLC (PSettlement), a California debt-settlement company; and Daniel Crenshaw, the owner and CEO of the two companies. The Bureau alleged that: PSLC and Crenshaw conducted a student-loan debt-relief business that charged thousands of consumers with federal student-loan debt approximately $9.2 million in illegal upfront fees in violation of the Telemarketing Sales Rule (TSR), to file paperwork on their behalf to apply for programs that were available to them for free from the United States Department of Education; PSLC failed to provide disclosures mandated by the TSR to consumers it required to place funds in trust accounts; Crenshaw and PSettlement used deceptive sales tactics to sign consumers up for PSettlement’s debt-relief services, in violation of the Consumer Financial Protection Act of 2010 (CFPA); and Crenshaw substantially assisted PSLC in requesting or receiving fees illegally and PSettlement in engaging in deceptive acts and practices.

On July 6, 2021, the Bureau filed an amended complaint adding a claim against PSettlement alleging it violated the TSR and CFPA when it asked consumers who enrolled in its program to sign a form that preauthorized PSettlement to agree to settlements on the consumer’s behalf.

On April 29 2022, the Bureau filed a proposed stipulated judgment and order, which the court entered the same day. The order permanently bans PSLC from debt-relief services; bans Crenshaw from debt-relief services for five years; and permanently enjoins PSettlement from obtaining referrals from companies purporting to make or arrange loans. The order requires Crenshaw to pay a civil money penalty of $30,000, and the companies to pay $1 penalties each, based on their demonstrated inability to pay. It imposes a monetary judgment for redress of $10,448,467.90 for consumers harmed by PSLC and $704,350.30 for consumers harmed by PSettlement. This judgment will be suspended, conditioned on the defendants’ payment of the civil money penalty, among other things, and based on the defendants’ demonstrated inability to pay.

Complaint (Nov. 2020)

PDF of this document (21 pages)

Page 2

COMPLAINT

MARY K. WARREN (NY Reg. #2557684) (Application for Pro Hac Vice Admission Pending)

Email: [email protected] Phone: (202) 435-7815 Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Fax: (202) 435-7722

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

Attorneys for Plaintiff Bureau of Consumer Financial Protection

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Bureau of Consumer Financial Protection,

Plaintiff, v.

Performance SLC, LLC, Performance Settlement, LLC and Daniel Crenshaw,

Defendants.

Case No.

COMPLAINT FOR INJUNCTIVE RELIEF, RESTITUTION AND CIVIL MONEY PENALTIES

Introduction

The Bureau of Consumer Financial Protection (“Bureau”) brings this action against Performance SLC, LLC, Performance Settlement, LLC, and Daniel Crenshaw Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 1 of 21 Page ID #:1

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COMPLAINT

under the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6102(c), 6105(d); the Telemarketing Sales Rule (“TSR”), 16 C.F.R. pt. 310; and the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, in connection with the marketing and sale of debt-relief services by Defendants. 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.

Defendants Performance SLC, LLC and Performance Settlement, LLC, along with their owner and manager Defendant Daniel Crenshaw, are engaging in debtrelief activities that have harmed consumers nationwide by charging illegal advance fees, failing to make required disclosures, and engaging in deceptive sales practices. 3.

The Bureau brings this action to stop Defendants’ unlawful conduct, obtain relief for harmed consumers, and impose civil money penalties on Defendants for their unlawful actions.

Venue 4.

Venue is proper in this district because each Defendant is located, resides, or does business in this District. 12 U.S.C. § 5564(f). Parties 5.

The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). It has independent litigating authority and may secure appropriate relief for violations of the CFPA, 12 U.S.C. § 5564(a)-(b), and for violations of the TSR with respect to consumer financial products or services subject to the CFPA, 15 U.S.C. §§ 6102(c), 6105(d).

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COMPLAINT

Barranca Parkway, Irvine, CA, 92618; and 2445 McCabe Way, Irvine, CA, 92614. At all times material to this Complaint, PSLC has advertised, marketed, promoted, offered for sale, sold, and provided financial advisory services in the form of debt-settlement services, in particular student-loan debt-relief services, to consumers throughout the United States.

Performance Settlement, LLC (“PSettlement”), a California limited liability company, maintains its principal place of business at 675 Anton Blvd, Costa Mesa, CA, 92626. At all times material to this Complaint, PSettlement advertised, marketed, promoted, offered for sale, sold, or provided financial advisory services in the form of debt-settlement services to consumers throughout the United States. 8.

Daniel Crenshaw (“Crenshaw”) is the sole owner and CEO of PSLC, and is the CEO and controlling owner of PSettlement. Crenshaw resides in Newport Beach, California.

PSLC’s Business Practices 9.

PSLC was a student-loan document-preparation and debt-relief service. It prepared and submitted paperwork for consumers to the U.S. Department of Education (“ED”) in support of applications for loan consolidation, income-driven repayment plans, forgiveness programs, and other debt-relief options available to consumers with federal student loans. It also submitted recertification paperwork to ED for one or two years after a consumer’s application for repayment programs was accepted. 10.

ED does not charge federal student loan borrowers to submit applications to participate in loan consolidation, income-driven repayment plans, forgiveness programs, and other debt-relief programs or to submit recertification paperwork for those programs. 11.

Formed in late 2015, PSLC solicited and signed up consumers nationwide by telephone, using lead generators to transfer consumer phone calls to PSLC’s sales staff.

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COMPLAINT

12.

PSLC collected a fee for its services in two ways: (1) by way of a loan provided to PSLC’s customers by a third-party finance company, Equitable Acceptance Corporation (“EAC”), and (2) by requiring its customers to make monthly installment payments of the fee into trust accounts established for that purpose. Under both payment methods, PSLC requested or received payment of its fee in advance of consumers making any payments on loan consolidations or modifications that PSLC obtained for them. 13.

The first way that PSLC charged its fee was through financing. From late 2015 through 2017, PSLC partnered with EAC, an indirect finance company that enters into contracts with businesses to offer and provide credit to customers of those businesses to pay for services.

14.

Pursuant to an agreement with PSLC, EAC extended credit in the form of a high-interest loan to many of PSLC’s customers, on a case-by-case basis, to pay for PSLC’s services. For these customers, PSLC’s fee (not including the interest on the loan) was $1,450.

15.

During PSLC’s sales calls with a consumer to pitch enrollment in PSLC’s program, the PSLC sales agent would request the $1,450 fee and offer the consumer a loan from EAC to cover the fee if he or she met certain creditworthiness requirements. PSLC used an electronic portal connected to EAC to enter the consumer’s financial information and determine whether the consumer met EAC’s requirements. If the consumer agreed to the financing, the sales agent would electronically provide the consumer with the PSLC contract and the EAC loan agreement (or cause EAC to provide the loan agreement by means of the portal) and require the consumer to e-sign both documents while on the call.

16.

When they signed the EAC loan agreement, these consumers (“Loan Customers”) became obligated on the loan at the inception of their relationship with PSLC.

Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 4 of 21 Page ID #:4

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COMPLAINT

17.

The EAC loan financed PSLC’s $1,450 service fee with an annual percentage rate that was typically between 17% and 22% and a term of three years. The effective interest rate was higher due to compounding. Thus, Loan Customers were charged hundreds of dollars in addition to PSLC’s stated $1,450 fee. 18.

Some Loan Customers were required to make a $200 cash deposit into a trust account as a down payment on PSLC’s fee, and to finance the remaining $1,250. 19.

EAC paid PSLC a portion of the $1,450 service fee within two weeks of a Loan Customer signing the loan document at enrollment, holding a certain percentage back in reserve depending on its assessment of the risk that the customer would default. Typically, EAC’s initial payment to PSLC was 40-60% of the $1,450 fee. 20.

The EAC loan would appear on Loan Customers’ credit histories. After signing the EAC loan agreement, Loan Customers were expected to make monthly payments of principal and interest to EAC for three years, typically in the amount of $40 to $50 per month.

21.

Some Loan Customers were confused about the loan payments to EAC, believing that the money was going to pay their student debt and that at the end of the three-year term of the loan, their student debt would be forgiven. 22.

The second way PSLC charged its fee was by directing customers to pay by monthly installments into a dedicated trust account with a third-party trust account provider. The duration of the payment schedule and the amount of the monthly payment varied, but these customers (“Trust Plan Customers”) were generally charged a fee ranging from $1,000 to $1,450.

23.

PSLC required that Trust Plan Customers make the initial monthly payment on the day of enrollment or within a few days of enrollment. Some Trust Plan Customers chose a payment schedule consisting of larger installments paid monthly for a period less than a year, while others chose a payment schedule of smaller installments paid monthly for 12 to 18 months.

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COMPLAINT

24.

PSLC established trust accounts for its customers for no other purpose than the payment of fees. In addition to making payments toward PSLC’s fee, Trust Plan Customers also were required to pay a monthly banking fee of $6 to the third-party administrator of the trust accounts. Some Trust Plan Customers paid additional amounts in banking fees and fees to the third-party trust administrator, such as when a payment was declined for insufficient funds. Trust Plan Customers paid at least $150,000 in such additional charges.

25.

PSLC’s practice has been to take the amounts accrued in a Trust Plan Customer’s trust account after the consolidation or other loan modification was approved by ED but before the Trust Plan Customer had made any payment under the consolidation or loan modification.

26.

PSLC did not provide Trust Plan Customers with any documentation that included a disclosure informing those customers that they owned the funds in their trust accounts and could withdraw them at any time without penalty. 27.

PSLC terminated the relationship with EAC in late 2017. But as of February 2020, nearly 1,300 Loan Customers were still obligated on their loans to EAC. 28.

From 2016 to 2019, PSLC enrolled more than 6,500 customers in multiple states. From 2016 to late 2019, Trust Plan Customers paid more than $4,300,000 in fees to PSLC. From 2016 to early 2020, Loan Customers paid more than $4,900,000 in loan principal and interest to EAC.

29.

PSLC ceased enrolling new consumers in 2019, although it continued to collect fees from Trust Plan Customers in 2019 and 2020. PSLC ceased operations in 2020.

30.

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COMPLAINT

communicated directly with the top management of EAC concerning loans to Loan Customers, payments from EAC to PSLC, and EAC’s financing model. Crenshaw provided the information for the application that initiated PSLC’s relationship with the third-party trust administrator, which enabled the Trust Plan Customers’ accounts to be established. He communicated directly with the manager of the trust administrator. 31.

As the sole owner and CEO of PSLC, Crenshaw exercised control over the company. He oversaw all managers at PSLC and participated in the company’s day-today business operations. He opened and was a signatory on the company’s bank accounts.

32.

Crenshaw knew about or was recklessly indifferent to the manner and timing in which fees were charged to customers. He knew or was recklessly indifferent to the fact that Loan Customers became obligated at enrollment to pay EAC. He knew or was recklessly indifferent to the fact that PSLC was requiring Trust Plan Customers to make monthly fee payments into trust accounts beginning at or just after enrollment. He reviewed payment reports and oversaw collections. Crenshaw reviewed customer complaints that discussed the fees and the EAC loans. 33.

In January 2016, at the very early stages of PSLC’s existence, PSLC’s legal counsel warned Crenshaw about the timing of the company’s fees. In an email to Crenshaw, he stated: “the consumer CAN’T owe or be obligated to anyone until the [student loan] debt is consolidated and a payment is made to the DOE [ED].”

PSettlement’s Business Practices 34.

PSettlement is a consumer debt-settlement company that Crenshaw formed and began operating in 2015. PSettlement charges a fee of 25% of a customer’s enrolled debt to negotiate settlements of the debt.

35.

PSettlement solicits and signs up consumers in multiple states by telephone, using lead referral services to transfer consumer phone calls to PSettlement’s sales staff. Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 7 of 21 Page ID #:7

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COMPLAINT

36.

One such lead referral company is OneLoanPlace.com (“OLP”), which has described itself as a “loan matching service” for consumers. OLP is not a lender and does not provide loans itself. As of 2019, based on records of PSettlement’s commission payments to its lead generators, at least 3,000 of PSettlement’s referrals came from OLP. 37.

Under its contract with PSettlement, OLP refers “Qualifying Customers” to PSettlement. “Qualifying Customers” are consumers residing in certain states “with greater than $10,000 in unsecured debt, who have been determined by [OLP] agents to be viable candidates for [PSettlement]’s debt resolution services in [OLP]’s sole discretion.” In return, PSettlement pays OLP a commission calculated as a percentage of any fee that PSettlement collects from a referred consumer who enrolls in PSettlement’s debt resolution program.

38.

One way OLP refers consumers to PSettlement is through an online questionnaire for consumers who are seeking a personal or debt consolidation loan. OLP’s questionnaire asks about the consumer’s credit score, the size of the loan that he or she is seeking, and other financial information. After certain consumers submit the questionnaire, OLP sends them an email stating “we matched you with our partner, Performance” – omitting the “Settlement” part of its name – and giving contact information for OLP and “Performance.” OLP also puts consumers in touch with PSettlement via live call transfers of consumers looking for a loan. 39.

Even though these consumers are seeking loans and PSettlement is not a lender, PSettlement’s sales pitch misleadingly discusses the prospect of a loan. 40.

After a referral by OLP, PSettlement first solicits the consumer to provide his or her personal and financial information by telling the consumer:

We know that the loan process can be a difficult one and I’m glad you called let [sic] me see what we can do for you. So, what I’m going to do is collect as much information as possible and send it over to my underwriting department and they’ll come back on the Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 8 of 21 Page ID #:8

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COMPLAINT

line with results and let you know what you ultimately may or may not qualify for.

41.

After this introduction, the PSettlement salesperson, referred to as a “debt specialist,” obtains information about the consumer’s debts, income, and any hardship conditions, and obtains the consumer’s permission to pull the consumer’s credit report. 42.

Then the salesperson states that he or she is transferring the consumer to an “underwriter” or “senior underwriter.” The “underwriter” that the salesperson transfers the consumer to is another employee of the sales department. There is no “underwriter” position at PSettlement.

43.

The “underwriter” tells the consumer that PSettlement will “underwrite” the consumer for three options: a loan, a debt-resolution program, or bankruptcy. Neither the “underwriter” nor PSettlement has any training or expertise in bankruptcy, nor does PSettlement provide any bankruptcy services.

44.

The next step is for the “underwriter” to put the consumer on mute for two minutes. After the two minutes, the “underwriter” takes the phone off mute to tell the consumer that the loan was declined:

Ok It looks like we weren’t approved for the loan because the debt to income ratio is too high. I even tried a smaller amount with [OLP] and still was declined, and remember they are like Lending Tree so they shopped this with all the unsecured lenders not just one and unfortunately this is not an option.

45.

PSettlement’s sales scripts contain no instructions for contacting OLP or anyone else to help the consumer obtain a loan. PSettlement’s sales scripts contain no scenario in which the consumer is approved for a loan. 46.

After telling the consumer that he or she was not approved for a loan, the PSettlement “underwriter” then states:

Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 9 of 21 Page ID #:9

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COMPLAINT

The good news is we did get a PREAPPROVAL for the debt resolution program due to a DTI over 60%. The GREAT news is IF we can get your [sic] approved for this program this is the right fit as the total pay back is roughly 65-75% of what you owe, which would save you thousands and give you the peace of mind that comes with being free of these debts.

47.

The “underwriter” moves on to pitch PSettlement’s services and persuade the consumer to electronically sign PSettlement’s service contract during the phone call. PSettlement uses the consumer’s personal and financial information that it collected as part of the purported loan qualification process to steer them to sign up for PSettlement’s services. PSettlement’s sales scripts also counsel the “underwriter” on how to “educate” the consumer if the consumer continues to press for a loan. 48.

Consumers have no way of knowing that PSettlement is not in fact assisting them to obtain a loan during the sales call.

49.

The Fresh Start program is definitely a powerful financial tool, but in order to be eligible to apply with our partner, you need to begin with our Debt Resolution Program first.

50.

PSettlement’s representation, after it has told consumers that they were not approved for a loan, that it was possible for them to become eligible to obtain a loan on the condition that they enrolled in PSettlement’s program and made certain payments, reinforce a reasonable belief by consumers that PSettlement could obtain a loan for them, but only if they first enrolled in PSettlement’s debt-resolution program. 51.

The scripts that contain these representations were in use from at least May 2019. Two versions of the script, dated May 2019 and August 2019 respectively, contain Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 10 of 21 Page ID #:10

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COMPLAINT

nearly identical language to that quoted above. In addition, it is likely that similar scripts were in use earlier than May 2019, as PSettlement had a marketing arrangement with OLP prior to May 2019 and the two versions of the script were labeled “v.7” and “v.9”, indicating that they were version 7 and version 9 of the same script. 52.

Crenshaw is the controlling owner and CEO of PSettlement. Crenshaw oversees all managers at PSettlement, was involved in creating PSettlement’s policies and procedures, and regularly monitored the company’s sales and customer trust accounts. He opened PSettlement’s bank accounts, is a signatory on the accounts, and approves disbursements from the accounts.

53.

Crenshaw has participated in PSettlement’s sales pitch for leads referred by OLP. He manages PSettlement’s relationships with lead referral services in general and signed PSettlement’s contract with OLP in particular. 54.

Crenshaw has overseen and is aware of the sales scripts and practices of the sales department at PSettlement. He has the authority to make and has made changes to scripts used in connection with leads generated by OLP. 55.

Crenshaw has known or has been recklessly indifferent to the fact that PSettlement’s sales practices include deceiving consumers by pretending to try to help them obtain a personal loan, when in reality PSettlement does nothing to help them obtain a loan at the point of sale or enrollment and instead uses their personal and financial information to steer them to sign up for PSettlement’s services. VIOLATIONS OF THE TSR BY PSLC AND CRENSHAW 56.

The Bureau is authorized to enforce the Telemarketing Act and the TSR with respect to the offering or provision of a consumer financial product or service subject to the CFPA. 15 U.S.C. § 6105(d). Among other things, a consumer financial product or service is defined by the CFPA to include “providing financial advisory services…including…providing services to assist a consumer with debt management or debt settlement [or] modifying the terms of any extension of credit….” 12 U.S.C. Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 11 of 21 Page ID #:11

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COMPLAINT

§ 5481(15)(viii)(II).

57.

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

58.

The TSR defines a “seller” as “any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the customer in exchange for consideration.” 16 C.F.R. § 310.2(dd). 59.

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

60.

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

61.

PSLC is a telemarketer within the meaning of the TSR that engaged in telemarketing of debt-relief services to consumers. PSLC’s marketing of its services was done via telephone by the company’s sales representatives. The use of the telephone was part of a “plan, program, or campaign” to sell PSLC’s services, and involved more than one phone and more than one interstate phone call. Consumers who spoke to sales representatives of PSLC were located in a number of different states outside of California, where PSLC is located.

62.

PSLC is a seller under the TSR because, in connection with its telemarketing, it offered to provide, and did provide, services related to federal studentloan debt in exchange for a fee. Those services were debt-relief services under the TSR Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 12 of 21 Page ID #:12

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COMPLAINT

because PSLC represented it would settle, renegotiate, or alter the terms of repayment or other terms of consumers’ federal student-loan debt. Count I Violations of the TSR by PSLC and Crenshaw (Requesting and Receiving Advance Fees) 63.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 8, 9-33, 56-62.

64.

It is a violation of the TSR for any seller or telemarketer in connection with the sale of any debt-relief service to request or receive payment of any fee or consideration for any debt-relief service until and unless: (1) the seller or telemarketer has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by the customer; and (2) the customer has made at least one payment pursuant to that settlement agreement, debt-management plan, or other valid contractual agreement between the customer and the creditor or debt collector. 16 C.F.R. § 310.4(a)(5)(i).

65.

PSLC is a seller and telemarketer that provided, offered to provide, or arranged for others to provide debt-relief services. 66.

With respect to Loan Customers, PSLC requested fees at the time of enrollment in its program by requiring Loan Customers to sign a loan agreement to finance payment of PSLC’s fee at enrollment, before their student loan debt was consolidated or otherwise modified or they had made one payment on that altered debt. 67.

With respect to Loan Customers, PSLC received a disbursement from EAC of a significant portion of its $1,450 fee within two weeks of their enrollment, before their student loan debt was consolidated or otherwise modified or they had made one payment on that altered debt.

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COMPLAINT

68.

With respect to Loan Customers who were required to deposit $200 in a trust account at enrollment as a down payment on PSLC’s services and financed the remainder of the fee, PSLC requested fees before those customers’ student loan debt was consolidated or otherwise modified or they had made one payment on that altered debt. 69.

With respect to Trust Plan Customers, PSLC required them to deposit monthly installment payments that were exclusively comprised of PSLC’s fee into a dedicated trust account beginning at or soon after enrollment, thus requesting or receiving fees before those customers’ student-loan debt was consolidated or otherwise modified or they had made one payment on that altered debt.

70.

PSLC took the fees from Trust Plan Customers’ dedicated accounts at the time the terms of their debts were altered, but before those customers had made one payment on that altered debt.

71.

By the methods described above in paragraphs 9-33, PSLC requested or received fees from its customers before PSLC had renegotiated, settled, reduced, or otherwise altered the terms of their debts pursuant to a settlement agreement, debtmanagement plan, or other such valid contractual agreement executed by the customers, and before its customers had made one payment pursuant to that settlement agreement, debt-management plan, or other valid contractual agreement between the customer and the creditor or debt collector.

72.

Crenshaw participated in PSLC’s requesting and receiving of fees in this way. He was responsible for the contract and relationship with EAC and set up the arrangement with the trust administrator to have PSLC’s customers pay fees into trusts. 73.

Crenshaw, as the CEO and sole owner of the company, had the authority to control PSLC’s use of telemarketing and the manner and timing of its requests for and receipt of fees.

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COMPLAINT

74.

Crenshaw knew about or was recklessly indifferent to the fact that PSLC was engaged in telemarketing and the manner and timing of its requests for and receipt of fees.

75.

Therefore, PSLC and Crenshaw have engaged in abusive telemarketing acts or practices in violation of 16 C.F.R. § 310.4(a)(5). Count II Violations of the TSR by Crenshaw (Substantial Assistance to PSLC in its Violations of the TSR) 76.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 8, 9-33, 56-62.

77.

The TSR prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that constitutes deceptive or abusive conduct under the TSR. 16 C.F.R. § 310.3(b). 78.

PSLC is a seller and telemarketer that provided, offered to provide, or arranged for others to provide debt-relief services. 79.

In the course of offering to provide or providing a debt-relief service to consumers, PSLC requested and received fees before PSLC had renegotiated, settled, reduced, or otherwise altered the terms of its customers’ debts pursuant to a settlement agreement, debt-management plan, or other such valid contractual agreement executed by the customers and before the customers had made one payment pursuant to that settlement agreement, debt-management plan, or other valid contractual agreement between the consumers and the creditor or debt collector. Thus, PSLC engaged in abusive acts or practices in violation of the TSR. 16 C.F.R. § 310.4(a)(5). 80.

Crenshaw, as sole owner and CEO of PSLC, provided substantial assistance or support to PSLC by, among other things, overseeing all managers at PSLC and participating in the company’s day-to-day business operations. For example, he was a signatory on the company’s bank accounts, managed its relationship with EAC, and Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 15 of 21 Page ID #:15

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participated in the process of setting up and managing the arrangement with the trust account administrator to provide trust accounts for Trust Account Customers. 81.

Crenshaw knew or consciously avoided knowing that PSLC was engaged in telemarketing and that PSLC was requesting and receiving fees from customers before it altered the terms of those consumers’ debt or they had made one payment on that altered debt.

82.

Crenshaw has violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b).

Count III Violations of the TSR by PSLC (Failure to Clearly and Conspicuously Disclose Consumers’ Rights to Funds) 83.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 9- 18, 22-26, and 28-29, 56-62.

84.

It is a violation of the TSR for any seller or telemarketer in connection with the sale of any debt-relief service requiring customers to place funds in an account at an insured financial institution to fail to disclose truthfully, in a clear and conspicuous manner, before customers consent to pay for those services, that customers own the funds held in the accounts, that customers may withdraw from the debt-relief service at any time without penalty, and that, if customers withdraw, they must receive all funds in the accounts other than funds earned by the debt-relief service. 16 C.F.R. § 310.3(a)(1)(viii)(D).

85.

PSLC required Trust Plan Customers to place funds in an account at an insured financial institution.

86.

PSLC did not clearly and conspicuously disclose that Trust Plan Customer owned the funds in their trust accounts and that if they withdrew from its program, the customer must receive all funds in the account, less fees earned by PSLC. 87.

PSLC’s failure to disclose in a clear and conspicuous manner that Trust Plan Customers owned the funds in their trust accounts and that those who cancelled their Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 16 of 21 Page ID #:16

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service contract with PSLC would receive all funds in their trust accounts was a deceptive act or practice in telemarketing, in violation of the TSR. 16 C.F.R. § 310.3(a)(1)(viii)(D).

DEFENDANTS’ VIOLATIONS OF THE CFPA 88.

Section 1036(a)(1)(A) of the CFPA provides that it is “unlawful for any covered person to offer or provide to a consumer a 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). 89.

Under the CFPA, a “related person” is a covered person. 12 U.S.C. § 5481(25)(B). Crenshaw is a related person with respect to both PSLC and PSettlement, as he is an “officer … charged with managerial responsibility for, or controlling shareholder of” both PSLC and PSettlement. 12 U.S.C. § 5481(25)(C)(i). Therefore, Crenshaw is a covered person.

Count IV Violations of the CFPA by PSettlement and Crenshaw (Deceptive Acts and Practices) 91.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 7-8, 34-55, and 88-90.

92.

It is unlawful for any covered person or service provider to engage in a deceptive act or practice in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 12 U.S.C. §§ 5531 and 5536(a)(1)(B).

Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 17 of 21 Page ID #:17

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COMPLAINT

93.

An act or practice is deceptive if it involves a material representation that is likely to mislead consumers acting reasonably under the circumstances. A representation is considered material if it involves information that is important to consumers and therefore is likely to affect their choice of, or conduct regarding, a product. 94.

Starting from at least May 2019, in connection with PSettlement’s telemarketing campaign of debt-resolution services to consumers referred by OLP, PSettlement has represented, expressly or by implication, to consumers that: a. OLP has referred the consumer to PSettlement because PSettlement may be able to help the consumer obtain a loan;

b. PSettlement is “underwriting” or “qualifying” the consumer for a loan; c. PSettlement is collecting the consumer’s personal and financial information to help the consumer obtain a loan; and d. the consumer was turned down for a loan (i) after PSettlement’s “underwriter” took the consumer’s personal and financial information and determined the consumer did not qualify for a loan, and/or (ii) after PSettlement “tried a smaller amount with” OLP. 95.

In truth and in fact:

a. OLP refers consumers to PSettlement after determining they are candidates for debt resolution;

b. PSettlement is not and has never been a lender, and there is not and has never been an “underwriter” position at PSettlement c. PSettlement uses the consumers’ personal and financial information that it has collected under the auspices of evaluating them for a loan to steer them to sign up for PSettlement’s services; and d. PSettlement does not, as a general practice, make any attempt to secure a loan for a consumer before telling the consumer the loan was declined and pitching the consumer to sign up for its debt-resolution program. Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 18 of 21 Page ID #:18

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COMPLAINT

96.

These misrepresentations are material and are likely to mislead consumers acting reasonably under the circumstances.

97.

Crenshaw, as controlling owner and CEO of PSettlement, has participated and engaged in the deceptive practices. He is primarily responsible for instituting and managing PSettlement’s marketing relationships, including with OLP. He has directly contributed to the development and approval of materials containing the deceptive statements by overseeing and making changes to the sales scripts that PSettlement used with consumers referred by OLP.

98.

Therefore, PSettlement and Crenshaw have engaged in deceptive acts or practices in connection with the offering of a consumer financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

Count V Violations of the CFPA by Crenshaw (Substantial Assistance to PSettlement) 99.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 7-8, 34-55, 88-98.

100. Under the CFPA, it is unlawful for any person to “knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of section 1031….” 12 U.S.C. § 5536(a)(3). 101. As described in Count IV, PSettlement has engaged in deceptive acts and practices in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

102. Crenshaw has provided substantial assistance to PSettlement in this conduct. 103. As the controlling shareholder and CEO of PSettlement, he has associated himself with the venture.

104. As controlling shareholder and CEO of PSettlement, Crenshaw has participated in PSettlement’s sales efforts as something that he wished to bring about and Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 19 of 21 Page ID #:19

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COMPLAINT

that he sought by his actions to make succeed. He is primarily responsible for instituting and managing PSettlement’s marketing relationships, including with OLP. He signed the lead referral contract with OLP.

105. Crenshaw has knowingly or recklessly provided substantial assistance to PSettlement’s deceptive sales practices. He has directly contributed to the development and approval of materials containing the deceptive statements by overseeing and making changes to the sales scripts that PSettlement used with consumers referred by OLP, and therefore he was aware of their contents and their deceptive nature. 106. Therefore, Crenshaw has substantially assisted PSettlement in engaging in deceptive acts and practices, in violation of the CFPA, 12 U.S.C. § 5536(a)(3). Count VI Violations of the CFPA by PSLC and Crenshaw (CFPA Violations Based on Violations of the TSR) 107. The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 8, 9-33, 56-90.

108. Any act or omission in violation of a federal consumer financial law by a covered person is a violation of the CFPA. 12 U.S.C. § 5536(a)(1)(A). 109. The TSR is a federal consumer financial law as defined by the CFPA. 12 U.S.C § 5481(14); 15 U.S.C § 6105(d).

110. Therefore, PSLC’s and Crenshaw’s violations of the TSR, described in Counts I through III, constitute violations of section 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

DEMAND FOR RELIEF WHEREFORE, the Bureau requests, under 12 U.S.C. § 5565, that the Court: a.

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

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COMPLAINT

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

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

award the Bureau civil money penalties; e.

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

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

Dated: November 5, 2020 Respectfully submitted,

THOMAS G. WARD Enforcement Director

DAVID RUBENSTEIN Deputy Enforcement Director

CYNTHIA LESSER Assistant Deputy Enforcement Director

/s/ Leanne E. Hartmann Leanne E. Hartmann Mary K. Warren (pro hac vice pending) Senior Litigation Counsel Bureau of Consumer Financial Protection 1700 G St., NW Washington, DC 20552

Telephone Hartmann: (415) 844-9787 Telephone Warren: (202) 435-7815 Email: [email protected] [email protected]

Attorneys for Plaintiff Bureau of Consumer Financial Protection Case 8:20-cv-02132 Document 1 Filed 11/05/20 Page 21 of 21 Page ID #:21

Amended complaint (July 2021)

PDF of this document (24 pages)

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FIRST AMENDED COMPLAINT MARY K. WARREN (NY Reg. #2557684)

(Pro Hac Vice) Email: [email protected] Phone: (202) 435-7815 Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Fax: (202) 435-7722 OWEN MARTIKAN, CA Bar #177104 - Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9790 Email: [email protected] Attorneys for Plaintiff Bureau of Consumer Financial Protection UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Bureau of Consumer Financial Protection, Plaintiff, v.

Performance SLC, LLC, Performance Settlement, LLC and Daniel Crenshaw, Defendants.

SACV 20-cv-02132-DOC(DFMx) FIRST AMENDED COMPLAINT FOR INJUNCTIVE RELIEF, RESTITUTION AND CIVIL MONEY PENALTIES Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 1 of 24 Page ID #:301

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Introduction 1.

The Bureau of Consumer Financial Protection (“Bureau”) brings this action against Performance SLC, LLC, Performance Settlement, LLC, and Daniel Crenshaw under the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6102(c), 6105(d); the Telemarketing Sales Rule (“TSR”), 16 C.F.R. pt. 310; and the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, in connection with the marketing and sale of debt-relief services by Defendants. 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.

The Bureau brings this action to stop Defendants’ unlawful conduct, obtain relief for harmed consumers, and impose civil money penalties on Defendants for their unlawful actions.

Venue 4.

Venue is proper in this district because each Defendant is located, resides, or does business in this District. 12 U.S.C. § 5564(f). Parties 5.

The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). It has independent litigating authority and may secure appropriate relief for violations of the CFPA, 12 U.S.C. § 5564(a)-(b), and for violations FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 2 of 24 Page ID #:302

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of the TSR with respect to consumer financial products or services subject to the CFPA, 15 U.S.C. §§ 6102(c), 6105(d).

Performance SLC, LLC (“PSLC”), a California limited liability company, has operated out of 3200 Park Center Dr., 15th Floor, Costa Mesa, CA, 92626; 3080 Bristol Street, Costa Mesa, CA, 92626; 17748 Sky Park Circle, Irvine, CA, 92614; 15310 Barranca Parkway, Irvine, CA, 92618; and 2445 McCabe Way, Irvine, CA, 92614. At all times material to this Complaint, PSLC has advertised, marketed, promoted, offered for sale, sold, and provided financial advisory services in the form of debt-settlement services, in particular student-loan debt-relief services, to consumers throughout the United States.

Daniel Crenshaw (“Crenshaw”) is the sole owner and CEO of PSLC, and is the CEO and controlling owner of PSettlement. Crenshaw resides in Newport Beach, California.

PSLC’s Business Practices 9.

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10.

Formed in late 2015, PSLC solicited and signed up consumers nationwide by telephone, using lead generators to transfer consumer phone calls to PSLC’s sales staff.

12.

14.

15.

During PSLC’s sales calls with a consumer to pitch enrollment in PSLC’s program, the PSLC sales agent would request the $1,450 fee and offer the consumer a loan from EAC to cover the fee if he or she met certain creditworthiness requirements. PSLC used an electronic portal connected to EAC to enter the consumer’s financial information and determine whether the consumer met EAC’s requirements. If the consumer agreed to the financing, the sales agent would electronically provide the consumer with the PSLC contract and the EAC loan agreement (or cause EAC to provide FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 4 of 24 Page ID #:304

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the loan agreement by means of the portal) and require the consumer to e-sign both documents while on the call.

16.

When they signed the EAC loan agreement, these consumers (“Loan Customers”) became obligated on the loan at the inception of their relationship with PSLC.

17.

Some Loan Customers were required to make a $200 cash deposit into a trust account as a down payment on PSLC’s fee, and to finance the remaining $1,250. 19.

21.

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23.

24.

25.

26.

PSLC terminated the relationship with EAC in late 2017. But as of February 2020, nearly 1,300 Loan Customers were still obligated on their loans to EAC. 28.

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29.

PSLC ceased enrolling new consumers in 2019, although it continued to collect fees from Trust Plan Customers in 2019 and 2020. PSLC ceased operations in 2020.

30.

Crenshaw, as the sole owner and CEO of PSLC, participated in decisions, policies, and practices relating to the manner and timing in which fees were charged to and collected from both Loan Customers and Trust Plan Customers. Crenshaw was responsible for the arrangement with EAC. He signed the contract with EAC and communicated directly with the top management of EAC concerning loans to Loan Customers, payments from EAC to PSLC, and EAC’s financing model. Crenshaw provided the information for the application that initiated PSLC’s relationship with the third-party trust administrator, which enabled the Trust Plan Customers’ accounts to be established. He communicated directly with the manager of the trust administrator. 31.

32.

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PSettlement’s Telemarketing Practices 34.

35.

PSettlement solicits and signs up consumers in multiple states by telephone, using lead referral services to transfer consumer phone calls to PSettlement’s sales staff. 36.

38.

Even though these consumers are seeking loans and PSettlement is not a lender, PSettlement’s sales pitch misleadingly discusses the prospect of a loan. FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 8 of 24 Page ID #:308

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FIRST AMENDED COMPLAINT 40.

After a referral by OLP, PSettlement first solicits the consumer to provide his or her personal and financial information by telling the consumer: We know that the loan process can be a difficult one and I’m glad you called let [sic] me see what we can do for you. So, what I’m going to do is collect as much information as possible and send it over to my underwriting department and they’ll come back on the line with results and let you know what you ultimately may or may not qualify for.

41.

43.

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45.

After telling the consumer that he or she was not approved for a loan, the PSettlement “underwriter” then states:

47.

Consumers have no way of knowing that PSettlement is not in fact assisting them to obtain a loan during the sales call. 49.

In addition, after telling consumers they were denied for a loan, the “underwriter” tells the consumer about the possibility of a “fresh start” loan from another company that they could “become eligible for” if they sign up for PSettlement’s program and make six consecutive deposits into their trust accounts. PSettlement tells consumers: The Fresh Start program is definitely a powerful financial tool, but in order to be eligible to apply with our partner, you need to begin with our Debt Resolution Program first. FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 10 of 24 Page ID #:310

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50.

The scripts that contain these representations were in use from at least May 2019. Two versions of the script, dated May 2019 and August 2019 respectively, contain nearly identical language to that quoted above. In addition, it is likely that similar scripts were in use earlier than May 2019, as PSettlement had a marketing arrangement with OLP prior to May 2019 and the two versions of the script were labeled “v.7” and “v.9”, indicating that they were version 7 and version 9 of the same script. 52.

53.

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PSettlement’s Settlement Preauthorization Form 56.

While on the phone with potential customers, PSettlement’s sales staff pitches PSettlement’s services and asks the consumer to e-sign PSettlement’s service contract and certain attached documents during the sales call. 57.

One of the documents attached to the service contract is entitled “Preauthorization Settlement Form.” It states: I/we, [consumer name], authorize Performance Settlement, LLC, to settle any accounts with an offer less than or equal to 60% of the enrolled balance. This authorizes Performance Settlement, LLC to arrange for payment from my/our trust account to creditor without written authorization and/or recorded settlement authorization. Any settlement offers made above 60% of the enrolled balance must receive my/our written and/or recorded authorization.

58.

To enroll with PSettlement, the consumer is required to sign this document along with PSettlement’s service contract. Therefore, consumers sign the Preauthorization Settlement Form at the outset of their business relationship with PSettlement and before PSettlement has renegotiated or settled any of the consumers’ debts.

59.

From 2015 through at least 2019, PSettlement has relied on the preauthorization form to agree, on consumers’ behalf, to settlements for 60 percent or less of the consumer’s enrolled balance without the consumer executing or authorizing the specific settlement agreements.

VIOLATIONS OF THE TSR BY PSLC, PSETTLEMENT AND CRENSHAW 60.

The Bureau is authorized to enforce the Telemarketing Act and the TSR with respect to the offering or provision of a consumer financial product or service subject to the CFPA. 15 U.S.C. § 6105(d). Among other things, a consumer financial product or service is defined by the CFPA to include “providing financial advisory FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 12 of 24 Page ID #:312

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services…including…providing services to assist a consumer with debt management or debt settlement [or] modifying the terms of any extension of credit….” 12 U.S.C. § 5481(15)(viii)(II).

61.

62.

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

64.

65.

PSLC and PSettlement are each a telemarketer within the meaning of the TSR that engaged in telemarketing of debt-relief services to consumers. Both PSLC’s and PSettlement’s marketing of their services was done via telephone by the company’s sales representatives. The use of the telephone was part of a “plan, program, or campaign” to sell both PSLC’s and PSettlement’s services, and involved more than one phone and more than one interstate phone call. Consumers who spoke to sales representatives of PSLC and PSettlement were located in a number of different states outside of California, where PSLC and PSettlement are located. FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 13 of 24 Page ID #:313

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FIRST AMENDED COMPLAINT 66.

PSLC is a seller under the TSR because, in connection with its telemarketing, it offered to provide, and did provide, services related to federal studentloan debt in exchange for a fee. Those services were debt-relief services under the TSR because PSLC represented it would settle, renegotiate, or alter the terms of repayment or other terms of consumers’ federal student-loan debt. 67.

PSettlement is a seller under the TSR because, in connection with its telemarketing, it offered to provide, and did provide, debt negotiation and debt settlement services in exchange for a fee. Those services were debt-relief services under the TSR because PSettlement represented it would settle, renegotiate, or alter the amount or terms of repayment of consumers’ unsecured debts.

Count I Violations of the TSR by PSLC and Crenshaw (Requesting and Receiving Advance Fees) 68.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 8, 9-33, and 60-66.

69.

70.

PSLC is a seller and telemarketer that provided, offered to provide, or arranged for others to provide debt-relief services. Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 14 of 24 Page ID #:314

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71.

73.

75.

PSLC took the fees from Trust Plan Customers’ dedicated accounts at the time the terms of their debts were altered, but before those customers had made one payment on that altered debt.

76.

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77.

Crenshaw, as the CEO and sole owner of the company, had the authority to control PSLC’s use of telemarketing and the manner and timing of its requests for and receipt of fees.

79.

Crenshaw knew about or was recklessly indifferent to the fact that PSLC was engaged in telemarketing and the manner and timing of its requests for and receipt of fees.

80.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 8, 9-33, and 60-66.

82.

PSLC is a seller and telemarketer that provided, offered to provide, or arranged for others to provide debt-relief services. 84.

In the course of offering to provide or providing a debt-relief service to consumers, PSLC requested and received fees before PSLC had renegotiated, settled, reduced, or otherwise altered the terms of its customers’ debts pursuant to a settlement agreement, debt-management plan, or other such valid contractual agreement executed by the customers and before the customers had made one payment pursuant to that settlement agreement, debt-management plan, or other valid contractual agreement FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 16 of 24 Page ID #:316

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between the consumers and the creditor or debt collector. Thus, PSLC engaged in abusive acts or practices in violation of the TSR. 16 C.F.R. § 310.4(a)(5). 85.

Crenshaw, as sole owner and CEO of PSLC, provided substantial assistance or support to PSLC by, among other things, overseeing all managers at PSLC and participating in the company’s day-to-day business operations. For example, he was a signatory on the company’s bank accounts, managed its relationship with EAC, and participated in the process of setting up and managing the arrangement with the trust account administrator to provide trust accounts for Trust Account Customers. 86.

87.

Crenshaw has violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b).

Count III Violations of the TSR by PSLC (Failure to Clearly and Conspicuously Disclose Consumers’ Rights to Funds) 88.

The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 9- 18, 22-26, and 28-29, and 60-66.

89.

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90.

PSLC required Trust Plan Customers to place funds in an account at an insured financial institution.

91.

PSLC’s failure to disclose in a clear and conspicuous manner that Trust Plan Customers owned the funds in their trust accounts and that those who cancelled their service contract with PSLC would receive all funds in their trust accounts was a deceptive act or practice in telemarketing, in violation of the TSR. 16 C.F.R. § 310.3(a)(1)(viii)(D).

Count IV Violations of the TSR by PSettlement (Failure to Comply with Requirement that Consumer Execute Settlement Agreement) 93.

The Bureau re-alleges and incorporates by reference the allegations in paragraphs 1-3, 5, 7, 34-35, 56-65, and 67.

94.

The TSR prohibits a seller or telemarketer of debt-relief services from “[r]equesting or receiving payment of any fee or consideration for any debt relief service unless: (A) The seller or telemarketer has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by the customer….” 16 C.F.R. § 310.4(a)(5)(i)(A) (emphasis added). 95.

In the preamble to the amendments to the TSR implementing the provisions relating to debt-relief services, the Federal Trade Commission stated that “[a] contract signed at the outset specifying, for example, that any offer that involves the payment of a certain amount will be deemed acceptable to the consumer is not sufficient to comply with the Rule.” Telemarketing Sales Rule, 75 Fed.Reg. 48458, 48489 (August 10, 2010) (emphasis added).

FIRST AMENDED COMPLAINT Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 18 of 24 Page ID #:318

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96.

PSettlement has relied on the preauthorization forms that it has caused consumers to sign at the outset of their retention of PSettlement as authority to settle any accounts with an offer less than or equal to 60 percent of the enrolled balance without review by the customer of the specific settlement agreement or proposal and without separate written approval or a recorded settlement authorization from the customer. 97.

Therefore, PSettlement has engaged in abusive telemarketing acts or practices in violation of 16 C.F.R. § 310.4(a)(5). DEFENDANTS’ VIOLATIONS OF THE CFPA 98.

PSLC and PSettlement are covered persons because they offer or provide consumer financial products or services, namely financial advisory services to assist consumers with modifying the terms of any extension of credit, including by debt settlement. 12 U.S.C. §§ 5481(6), (15)(A)(viii)(II). 100. Under the CFPA, a “related person” is a covered person. 12 U.S.C. § 5481(25)(B). Crenshaw is a related person with respect to both PSLC and PSettlement, as he is an “officer … charged with managerial responsibility for, or controlling shareholder of” both PSLC and PSettlement. 12 U.S.C. § 5481(25)(C)(i). Therefore, Crenshaw is a covered person.

Count V Violations of the CFPA by PSettlement and Crenshaw (Deceptive Acts and Practices) 101. The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 7-8, 34-55, and 98-100.

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FIRST AMENDED COMPLAINT 102. It is unlawful for any covered person or service provider to engage in a deceptive act or practice in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 12 U.S.C. §§ 5531 and 5536(a)(1)(B).

103. An act or practice is deceptive if it involves a material representation that is likely to mislead consumers acting reasonably under the circumstances. A representation is considered material if it involves information that is important to consumers and therefore is likely to affect their choice of, or conduct regarding, a product. 104. Starting from at least May 2019, in connection with PSettlement’s telemarketing campaign of debt-resolution services to consumers referred by OLP, PSettlement has represented, expressly or by implication, to consumers that: a. OLP has referred the consumer to PSettlement because PSettlement may be able to help the consumer obtain a loan;

a. OLP refers consumers to PSettlement after determining they are candidates for debt resolution;

b. PSettlement is not and has never been a lender, and there is not and has never been an “underwriter” position at PSettlement; Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 20 of 24 Page ID #:320

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FIRST AMENDED COMPLAINT c. PSettlement uses the consumers’ personal and financial information that it has collected under the auspices of evaluating them for a loan to steer them to sign up for PSettlement’s services; and d. PSettlement does not, as a general practice, make any attempt to secure a loan for a consumer before telling the consumer the loan was declined and pitching the consumer to sign up for its debt-resolution program. 106. These misrepresentations are material and are likely to mislead consumers acting reasonably under the circumstances.

107. Crenshaw, as controlling owner and CEO of PSettlement, has participated and engaged in the deceptive practices. He is primarily responsible for instituting and managing PSettlement’s marketing relationships, including with OLP. He has directly contributed to the development and approval of materials containing the deceptive statements by overseeing and making changes to the sales scripts that PSettlement used with consumers referred by OLP.

108. Therefore, PSettlement and Crenshaw have engaged in deceptive acts or practices in connection with the offering of a consumer financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

Count VI Violations of the CFPA by Crenshaw (Substantial Assistance to PSettlement) 109. The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 7-8, 34-55, and 98-108.

110. Under the CFPA, it is unlawful for any person to “knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of section 1031….” 12 U.S.C. § 5536(a)(3). Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 21 of 24 Page ID #:321

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FIRST AMENDED COMPLAINT 111. As described in Count V, PSettlement has engaged in deceptive acts and practices in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

112. Crenshaw has provided substantial assistance to PSettlement in this conduct. 113. As the controlling shareholder and CEO of PSettlement, he has associated himself with the venture.

114. As controlling shareholder and CEO of PSettlement, Crenshaw has participated in PSettlement’s sales efforts as something that he wished to bring about and that he sought by his actions to make succeed. He is primarily responsible for instituting and managing PSettlement’s marketing relationships, including with OLP. He signed the lead referral contract with OLP.

115. Crenshaw has knowingly or recklessly provided substantial assistance to PSettlement’s deceptive sales practices. He has directly contributed to the development and approval of materials containing the deceptive statements by overseeing and making changes to the sales scripts that PSettlement used with consumers referred by OLP, and therefore he was aware of their contents and their deceptive nature. 116. Therefore, Crenshaw has substantially assisted PSettlement in engaging in deceptive acts and practices, in violation of the CFPA, 12 U.S.C. § 5536(a)(3). Count VII Violations of the CFPA by PSLC, PSettlement and Crenshaw (CFPA Violations Based on Violations of the TSR) 117. The Bureau re-alleges and incorporates by reference paragraphs 1-3, 5, 6, 8, 9-33, and 56-97.

118. Any act or omission in violation of a federal consumer financial law by a covered person is a violation of the CFPA. 12 U.S.C. § 5536(a)(1)(A). 119. The TSR is a federal consumer financial law as defined by the CFPA. 12 U.S.C § 5481(14); 15 U.S.C § 6105(d).

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FIRST AMENDED COMPLAINT 120. Therefore, the violations of the TSR by PSLC, PSettlement, and Crenshaw described in Counts I through IV constitute violations of section 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

DEMAND FOR RELIEF WHEREFORE, the Bureau requests, under 12 U.S.C. § 5565, that the Court: a.

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

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

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

award the Bureau civil money penalties;

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

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

Dated: July 6, 2021 Respectfully submitted, /s/ Mary K. Warren Mary K. Warren (pro hac vice) Senior Litigation Counsel Bureau of Consumer Financial Protection 1700 G St., NW Washington, DC 20552 Owen Martikan Local Counsel Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 23 of 24 Page ID #:323

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FIRST AMENDED COMPLAINT Telephone Warren: (202) 435-7815 Email: [email protected] Telephone Martikan: (415) 844-9790 Email: [email protected] Attorneys for Plaintiff Bureau of Consumer Financial Protection Case 8:20-cv-02132-DOC-DFM Document 40 Filed 07/06/21 Page 24 of 24 Page ID #:324

Stipulation (May 2022)

PDF of this document (21 pages)

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Bureau of Consumer Financial Protection,

Plaintiff, v.

Performance SLC, LLC, Performance Settlement, LLC, and Daniel Crenshaw,

Defendants.

Case No. 8:20-cv-02132-DOC (DFMx) STIPULATED FINAL JUDGMENT AND ORDER AS TO ALL DEFENDANTS Plaintiff Bureau of Consumer Financial Protection (“Bureau”) commenced this civil action on November 5, 2020 with a Complaint to obtain injunctive and monetary relief and civil penalties from Performance SLC, LLC (“PSLC”), Performance Settlement, LLC (“PSettlement”), and Daniel Crenshaw (“Individual Defendant”) (collectively, “Defendants”). The Complaint alleges violations of the Telemarketing Sales Rule (“TSR”), 16 C.F.R. Part 310, and of sections 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531(a), 5536(a)(1)(A), in connection with Defendants’ telemarketing and offering and sales of debt-relief services. The Bureau and all Defendants stipulate to the entry of this Final Judgment and Order as to All Defendants (“Order”) to resolve all matters in dispute in this action between them.

THEREFORE, IT IS ORDERED as follows:

JS-6 Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 1 of 21 Page ID #:406

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FINDINGS 1.

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

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

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

The relief provided in this Order is appropriate and available pursuant to sections 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564 and 5565. 5.

Since January 2016, in the course of telemarketing and providing, offering to provide, or arranging for others to provide a debt-relief service, Defendant PSLC and Individual Defendant requested and received payment of fees or consideration before: (a) Defendant PSLC renegotiated, settled, reduced, or otherwise altered the terms of one debt for the consumer pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by the consumer; and (b) the consumer made at least one payment pursuant to that agreement. 6.

Since January 2016, in the course of telemarketing and providing, offering to provide, or arranging for others to provide a debt-relief service, Defendant PSLC has failed to clearly and conspicuously disclose to consumers required to place funds in trust accounts that they owned the funds and could withdraw them at any time without penalty. 7.

Since January 2016, in the course of telemarketing and providing, offering to provide, or arranging for others to provide a debt-relief service, Defendant PSettlement has asked consumers to sign and relied upon a pre-authorization form allowing Defendant PSettlement to agree on consumers’ behalf to settlements over a certain percentage of the consumer’s enrolled debt without further authorization from the consumer. 8.

Since August 2018, Defendant PSettlement and Individual Defendant, in the course of telemarketing and providing, offering to provide, or arranging for others to Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 2 of 21 Page ID #:407

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provide a debt-relief service, engaged in deceptive acts and practices in order to induce consumers referred by OneLoanPlace.com to enroll in Defendant PSettlement’s debtrelief program.

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

10.

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

DEFINITIONS 11.

The following definitions apply to this Order: a. “Affected Consumers” means all Affected PSLC Consumers and all Affected PSettlement Consumers.

b. “Affected PSLC Consumer” means a consumer who (i) paid all or a portion of PSLC’s fee into a dedicated trust account, or (ii) entered into a credit plan agreement to finance payment of PSLC’s fee. c. “Affected PSettlement Consumer” means a consumer who was referred to PSettlement by OneLoanPlace.com from August 27, 2018 to the present and paid a fee to PSettlement.

d. “Assist[ing] Others” includes, but is not limited to: i. consulting in any form whatsoever;

ii. providing paralegal or administrative support services; iii. performing customer service functions, including but not limited to, receiving or responding to consumer complaints; iv. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including but not limited to, any telephone sales script, direct mail solicitation, or Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 3 of 21 Page ID #:408

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the text of any Internet website, email, or other electronic communication or advertisement;

v. formulating or providing, or arranging for the formulation or provision of, any marketing support material or service, including but not limited to, web or Internet Protocol addresses or domain name registration for any Internet websites, affiliate marketing services, or media placement services;

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

vii. performing marketing, billing, or payment services of any kind; and viii. acting or serving as an owner, officer, director, manager, or principal of any entity that markets or provides Debt-Relief Services.

e. “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. engaging in deposit-taking activities, transmitting or exchanging funds, or otherwise acting as a custodian of funds or any financial instrument for use by or on behalf of a consumer; ii. providing payments or other financial data processing products or services to a consumer by any technological means, including processing or storing financial or banking data for any payment instrument, or through any payments systems or network used for processing payments data, including payments made through an online banking system or mobile telecommunications network; or Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 4 of 21 Page ID #:409

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iii. 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.

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

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

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

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

m. “PSettlement” means Performance Settlement, LLC, and its successors and assigns.

n. “PSLC” means Performance SLC, LLC, and its successors and assigns. Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 5 of 21 Page ID #:410

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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 Defendants based on substantially the same facts as described in the Complaint. CONDUCT PROVISIONS III.

BAN ON DEBT-RELIEF PRODUCTS AND SERVICES AS TO DEFENDANT PSLC AND INDIVIDUAL DEFENDANT IT IS ORDERED that:

12.

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

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

b. Assisting Others in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service; or c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any Person that is engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service. 13.

Individual Defendant, whether acting directly or indirectly, is restrained and enjoined for a period of five years from the Effective Date from: a. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service;

b. Assisting Others in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service; or c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 6 of 21 Page ID #:411

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for any Person that is engaged in advertising, marketing, promoting, offering for sale, selling, or providing any Debt-Relief Service. Nothing in this Order shall be read as an exception to Paragraphs 12 and 13. IV.

PROHIBITION ON CERTAIN MISREPRESENTATIONS, REFERRALS AND PRACTICES BY DEFENDANT PSETTLEMENT IT IS FURTHER ORDERED that:

14.

Defendant PSettlement and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, in connection with the advertising, marketing, promotion, offering for sale, sale, or performance of any Debt- Relief Service, shall not misrepresent, or Assist Others in misrepresenting, expressly or impliedly, the nature of the services it provides in any way, including but not limited to: a. Misrepresenting its identity;

b. Misrepresenting its ability to make loans; and c. Misrepresenting its ability to evaluate or qualify consumers for loans. 15.

Defendant PSettlement, whether acting directly or indirectly, shall not receive referrals from, or pay compensation for referring its customers to, any entity that purports to offer, provide, arrange or facilitate any loans for consumers. 16.

Defendant PSettlement, whether acting directly or indirectly, shall not use a preauthorization form to negotiate settlement of debts on behalf of customers, and instead must either obtain the signature of the customer on the specific proposed settlement agreement or offer of settlement, or a written authorization by the customer to sign or agree to the settlement agreement on the customer’s behalf obtained after the customer has reviewed the specific settlement agreement.

Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 7 of 21 Page ID #:412

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PROHIBITION ON DECEPTIVE PRACTICES AS TO INDIVIDUAL DEFENDANT IT IS FURTHER ORDERED that:

17.

Individual Defendant, whether acting directly or indirectly, in connection with the advertising, marketing, promotion, offering for sale, sale, or performance of Consumer Financial Products and Services, shall not misrepresent, or Assist Others in misrepresenting, expressly or impliedly:

a. The ability of Individual Defendant or any Person that Individual Defendant owns, controls, or performs managerial functions for to make loans;

b. The ability of Individual Defendant or any Person that Individual Defendant owns, controls, or performs managerial functions for to evaluate or qualify consumers for loans; or c. Any other fact material to consumers concerning Consumer Financial Products and Services offered by Individual Defendant or any Person that Individual Defendant owns, controls, or performs managerial functions for, such as the total costs or the purpose of fees paid by consumers. VI.

PROHIBITION ON REQUESTING OR RECEIVING ADVANCE FEES AS TO INDIVIDUAL DEFENDANT IT IS FURTHER ORDERED that:

18.

Individual Defendant, whether acting directly or indirectly, in connection with the advertising, marketing, promotion, offering for sale, sale, or performance of Debt-Relief Services, shall not request or receive payment of fees or consideration before: (i) any Person owned or controlled by Individual Defendant or for whom Individual Defendant performs managerial functions has renegotiated, settled, reduced, or otherwise altered the terms of one debt for the consumer pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 8 of 21 Page ID #:413

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the consumer; and (ii) the consumer has made at least one payment pursuant to that agreement.

VII. INJUNCTION AS TO DEFENDANT PSLC AND INDIVIDUAL DEFENDANT CONCERNING COLLECTING PAYMENTS FROM CONSUMERS IT IS FURTHER ORDERED that:

19.

As of the Effective Date, Defendant PSLC and Individual Defendant 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 causing any charges to be made to, or collecting, attempting to collect, causing collection or attempts to collect, selling, assigning, or otherwise transferring any right to collect, payment from any Affected PSLC Consumer.

VIII. PROHIBITED USE OF CONSUMER INFORMATION BY DEFENDANT PSLC AND INDIVIDUAL DEFENDANT IT IS FURTHER ORDERED that:

20.

Defendant PSLC and Individual Defendant and their officers, agents, servants, employees, and attorneys and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, may not:

disclose, use, or benefit from customer information, including names, addresses, telephone numbers, email addresses, social security numbers, other identifying information, or any data that enables access to a customer’s account (including a credit card, bank account, or other financial account), that the Defendant obtained before the Effective Date in connection with offering or providing Debt-Relief Services related to student loans;

Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 9 of 21 Page ID #:414

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attempt to collect, sell, assign, or otherwise transfer any right to collect payment from any consumer who purchased or agreed to purchase Debt-Relief Services related to student loans from Defendant PSLC.

However, customer information may be disclosed if requested by a government agency or required by law, regulation, or court order.

MONETARY PROVISIONS IX.

ORDER TO PAY REDRESS IT IS FURTHER ORDERED that:

21.

A judgment for monetary relief is entered in favor of the Bureau and against Defendant PSLC and Individual Defendant, jointly and severally, in the amount of $10,448,467.90 for the purpose of providing redress to Affected PSLC Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 24 of this Section, Paragraphs 32 and 33 of Section XI, Paragraphs 37 through 42 of Section XII, and subject to Section X of this Order. 22.

A judgment for monetary relief is entered in favor of the Bureau and against Defendant PSettlement and Individual Defendant, jointly and severally, in the amount of $704,350.30 for the purpose of providing redress to Affected PSettlement Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraphs 23 and 24 of this Section, Paragraphs 32 and 33 of Section XI, Paragraphs 37 through 42 of Section XII, and subject to Section X of this Order. 23.

If Defendant PSettlement or Defendant Crenshaw secures a tax credit with regard to any federal, state, or local tax, such Defendant must (a) immediately notify the Enforcement Director in writing, (b) provide the Bureau with documentation from the relevant tax authority showing the amount of the credit, and (c) within 10 days of receiving the funds or monetary benefit, transfer to the Bureau the full amount of such funds or monetary benefit, less the amount of $70,000.00 which the Bureau has agreed such Defendant may retain (“Adjusted Tax Benefit Payment”), according to the Bureau’s Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 10 of 21 Page ID #:415

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wiring instructions. After the Bureau receives the Adjusted Tax Benefit Payment, the amount of the suspended judgment referenced in Paragraph 22 will be reduced by the amount of the Adjusted Tax Benefit Payment and the Adjusted Tax Benefit Payment will be applied toward satisfaction of the monetary judgment entered in Paragraph 22. 24.

With regard to any redress ordered under this Section, if any Defendant receives, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if any Defendant secures a tax deduction or tax credit with regard to any federal, state, or local tax, such Defendant must: (a) immediately notify the Enforcement Director in writing, and (b) within 10 days of receiving the funds or monetary benefit, such Defendant must transfer to the Bureau the full amount of such funds or monetary benefit (“Additional Payment”) to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, the amount of the suspended judgment referenced in Paragraphs 21 or 22 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 Paragraphs 21 or 22. 25.

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

26.

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

Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 11 of 21 Page ID #:416

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27.

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

EFFECT OF MISREPRESENTATION OR OMISSION CONCERNING FINANCIAL CONDITION IT IS FURTHER ORDERED that:

28.

The suspension of the monetary judgment entered in Section IX of this Order is expressly premised on the truthfulness, accuracy, and completeness of Defendants’ financial statements and supporting documents submitted to the Bureau, which such Defendants assert are truthful, accurate, and complete, and which include: a. Financial Disclosure Statements of Individual Defendant, including the attachments, signed on February 1, 2022 and submitted to the Bureau on or about that date, and the supplemental affidavit of Individual Defendant, including the attachments, signed on March 18, 2022 and submitted to the Bureau on or about that date; b. Financial Disclosure Statements of Defendant PSLC, including the attachments, signed on February 1, 2022 and submitted to the Bureau on or about that date; and c. Financial Disclosure Statements of Defendant PSettlement, including the attachments, signed on February 1, 2022 and submitted to the Bureau on or about that date.

29.

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

Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 12 of 21 Page ID #:417

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30.

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

31.

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

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

32.

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 penalties is entered in favor of the Bureau and against the Corporate Defendants and the Individual Defendants in the following amounts: Individual Defendant must pay $30,000; Defendant PSLC must pay $1.00 and Defendant PSettlement must pay $1.00. These amounts are based on each Defendant’s limited ability to pay as attested to in his or its financial statements listed in Section X above. 33.

Within 15 days of the Effective Date, Defendants must pay the civil money penalties by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.

34.

The civil money penalties 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).

35.

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

Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 13 of 21 Page ID #:418

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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.

36.

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

37.

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

38.

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

39.

The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau, including in a proceeding to enforce its rights to any payment or monetary judgment under this Order, such as a nondischargeability complaint in any bankruptcy case. 40.

The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against each Defendant, even in such Defendant’s capacity as debtor-in-possession. Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 14 of 21 Page ID #:419

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41.

Under 31 U.S.C. § 7701, Defendants, unless they have already done so, must furnish to the Bureau their taxpayer identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 42.

Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled to, nor may Defendants benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendants based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendants must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the United States Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. 43.

Upon written request, any consumer reporting agency must furnish consumer reports to the Bureau concerning Individual Defendant under Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 15 of 21 Page ID #:420

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COMPLIANCE PROVISIONS XIII. REPORTING REQUIREMENTS IT IS FURTHER ORDERED that:

44.

Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including, but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Defendants’ name or address. Defendants must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development. 45.

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

b. Identify all businesses for which such Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email and Internet addresses; c. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales; d. For Individual Defendant, identify his telephone numbers and email, Internet, physical and postal addresses, including all residences; and e. For Individual Defendant, describe in detail his involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including his title, role, responsibilities, participation, authority, control, and ownership. Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 16 of 21 Page ID #:421

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46.

Defendants must report any change in the information required to be submitted under Paragraph 45 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 47.

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

a. Lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which such Defendant has complied with each such paragraph and subparagraph of this Order; and b. Attaches a copy of each Order Acknowledgment obtained under Section XIV, unless previously submitted to the Bureau. 48.

For the Corporate Defendants, the Compliance Report required in Paragraph 47 must be sworn to under penalty of perjury by the owner of each Corporate Defendant. For Individual Defendant, the Compliance Report required in Paragraph 47 must be sworn to, personally, under penalty of perjury. XIV. ORDER DISTRIBUTION AND ACKNOWLEDGEMENT IT IS FURTHER ORDERED that:

49.

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

50.

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

Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 17 of 21 Page ID #:422

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51.

For 5 years from the Effective Date, each of the Corporate Defendants and the Individual Defendant, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section XIII, any future board members and executive officers, before they assume their responsibilities. 52.

Each Defendant must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with all the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Order under this Section. 53.

Within 90 days of the Effective Date, Defendants must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that date under Paragraphs 50 and 51 and a copy of all signed and dated statements acknowledging of receipt of this Order under Paragraph 52. XV.

RECORDKEEPING IT IS FURTHER ORDERED that:

54.

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

55.

The Corporate Defendants each must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer: a. Financial records, including, but not limited to, tax returns and accounting records showing gross and net revenues, all costs incurred in generating revenues, and the resulting net profit or loss; Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 18 of 21 Page ID #:423

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b. For any Affected Consumer, records showing the person’s name, email and postal address, telephone number, dates and dollar amounts of payments made, and the quantity and description of goods and services purchased;

c. any and all documentation required to complete the Bureau’s individual and corporate financial disclosure forms; and d. All consumer complaints and refund requests (whether received directly or indirectly, such as through a third party), and any response to those complaints or requests.

56.

The Individual Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer, financial records, including, but not limited to, individual and corporate tax returns, credit reports, any and all documentation required to complete the Bureau’s individual and corporate financial disclosure forms, and accounting records showing gross and net revenues, all costs incurred in generating revenues, and the resulting net profit or loss. 57.

Defendants must make the documents identified in Paragraphs 54-56 available to the Bureau upon the Bureau’s request. XVI. NOTICES IT IS FURTHER ORDERED that:

58.

Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Performance SLC, LLC, Case No. 8:20cv-02132” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]: Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.

Washington, DC 20552 Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 19 of 21 Page ID #:424

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

59.

Defendants must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendants must provide such information in their or their agents’ possession or control within 14 days of receiving a written request from the Bureau. 60.

Defendants must cooperate fully with the Bureau in this matter and in any investigation or litigation related to or associated with the conduct described in the Complaint, including, but not limited to, providing information, documents, and testimony. Defendants must provide truthful and complete information, evidence, and testimony. The Individual Defendant must appear and each of the Corporate Defendants must cause its officers, employees or agents to appear, for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 10 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process. XVIII. COMPLIANCE MONITORING IT IS FURTHER ORDERED that, to monitor Defendants’ compliance with this Order, including the financial representations upon which the monetary judgment was partially suspended:

61.

Within 14 days of receipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents. 62.

For purposes of this Section, the Bureau may communicate directly with Defendants, unless Defendants retain counsel related to these communications. 63.

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

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64.

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

65.

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

XX.

RETENTION OF JURISDICTION IT IS FURTHER ORDERED that:

66.

All pending motions are denied as moot.

67.

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

68.

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

Dated: this ____ day of ________________, 2022. ____________________________________ HON. DAVID O. CARTER United States District Judge 29th April Case 8:20-cv-02132-DOC-DFM Document 46 Filed 04/29/22 Page 21 of 21 Page ID #:426