PHLoans.com, Inc.
Documents in this case
- Consent order · · 39 p.
- Stipulation · · 5 p.
Case summary
On August 26, 2020, the Consumer Financial Protection Bureau (Bureau) issued a consent order against PHLoans.com, Inc. (PHLoans), a California corporation that is licensed as a mortgage broker or lender in about 11 states. PHLoans offers and provides mortgage loans guaranteed by the United States Department of Veterans Affairs (VA). PHLoans’s principal means of advertising VA-guaranteed loans is through direct-mail campaigns sent primarily to United States military servicemembers and veterans. The Bureau found that PHLoans sent consumers millions of mailers for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or that lacked required disclosures, in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices, the Mortgage Acts and Practices—Advertising Rule (MAP Rule), and Regulation Z. Specifically, PHLoans sent consumers numerous advertisements for VA-guaranteed mortgages that, among other things, misrepresented the credit terms of the advertised mortgage and failed to include disclosures required by Regulation Z. The consent order requires PHLoans to pay a $260,000 civil money penalty and imposes requirements to prevent future violations.
This action stems from a Bureau sweep of investigations of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages.
On July 24, 2020, the Bureau issued consent orders against Sovereign Lending Group, Inc., and Prime Choice Funding, Inc., and on August 21, 2020, the Bureau announced a consent order against Go Direct Lenders, Inc., for similar violations.
Press release
Consumer Financial Protection Bureau Settles with Fourth Mortgage Company to Address Deceptive Loan Advertisements Sent to Servicemembers and Veterans
Important documents
Consent order
Stipulation
Case docket
View case filings
Consent order ()
PDF of this document (39 pages)
Page 2
UNITED STATES OF AMERICA BUREAU OF CONSUMER FINANCIAL PROTECTION ADMINISTRATIVE PROCEEDING File No. 2020-BCFP- 0009 In the Matter of:
CONSENT ORDER PHLoans.com, Inc.
The Bureau of Consumer Financial Protection (Bureau) has reviewed certain direct-mail mortgage advertising activities of PHLoans.com, Inc. (PHLoans or Respondent, as defined below) and identified violations of § 1026.24 of Regulation Z, 12 C.F.R. § 1026.24, the implementing regulation of the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601–1667f; § 1014.3 of the Mortgage Acts and Practices— Advertising Rule (MAP Rule or Regulation N), 12 C.F.R. § 1014.3; and §§ 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536. Under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, the Bureau issues this Consent Order.
2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 1 of 39
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I.
Overview 1.
PHLoans is a mortgage broker and lender that offers and provides mortgages guaranteed by the United States Department of Veterans Affairs (VA). Occasionally, it has acted as the creditor, providing loans itself; in other situations, it has acted as a broker, arranging for another creditor to provide loans.
2.
PHLoans advertises these mortgage products to consumers through directmail advertising campaigns targeted primarily at United States military servicemembers and veterans.
3.
PHLoans has sent consumers millions of advertisements that violate federal law because of misleading and deceptive statements and inadequate disclosures.
4.
The Bureau brings this action to stop PHLoans from distributing advertisements with misleading and deceptive statements and inadequate disclosures to servicemembers, veterans, and other consumers. II.
Jurisdiction 5.
The Bureau has jurisdiction over this matter under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565; § 108 of the Truth in Lending Act, 12 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 2 of 39
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U.S.C. § 1607; and § 626 of the Omnibus Appropriations Act of 2009, as amended by § 1097 of the CFPA, 12 U.S.C. § 5538. III.
Stipulation 6.
Respondent has executed a “Stipulation and Consent to the Issuance of a Consent Order,” dated August 14, 2020 (Stipulation), which is incorporated by reference and is accepted by the Bureau. By this Stipulation, Respondent has consented to the issuance of this Consent Order by the Bureau under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, without admitting or denying any of the findings of fact or conclusions of law, except that Respondent admits the facts necessary to establish the Bureau’s jurisdiction over Respondent and the subject matter of this action. IV.
Definitions 7.
The following definitions apply to this Consent Order: a.
“Advertising Compliance Official” means an individual designated by Respondent as the person responsible for performing the tasks and duties required under Paragraph 67. The Advertising Compliance Official must be a director or senior-level executive (e.g., president, 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 3 of 39
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chief executive officer, chief financial officer, chief operating officer, chief information officer, senior vice president, or managing member) of Respondent, or an individual who reports directly to the president, chief executive officer, managing member, or board of directors of Respondent.
b.
“Clearly and Prominently” means the disclosure must be in a font size of at least 10 points; on the same side of the page as the term, if any, that triggers the disclosure; in print that contrasts with the background on which it appears; presented before the consumer incurs any financial obligation; in an understandable language and syntax; and with nothing contrary to, inconsistent with, or in mitigation of the disclosures used in any communication with the consumer. c.
“Effective Date” means the date on which the Consent Order is issued.
d.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Bureau of Consumer Financial Protection, or his or her delegate.
e.
“Exemplar” means an example of an advertisement fully populated with the terms contained in the advertisement as sent, posted, published, or disseminated to a consumer.
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f.
“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 Respondent based on substantially the same facts as described in Section V of this Consent Order.
g.
“Relevant Period” includes from July 1, 2016, to the Effective Date. h.
“Respondent” means PHLoans.com, Inc., and its successors and assigns.
V.
Bureau Findings and Conclusions The Bureau finds the following:
8.
PHLoans is a California corporation with its principal place of business in Irvine, California. From 2012 through at least April 2019, PHLoans was known as Pacific Home Loans, Inc.
9.
PHLoans is licensed as a mortgage broker or lender in about 11 states. 10.
PHLoans is a “person,” as defined in the CFPA, 12 U.S.C. § 5481(19), Regulation Z, 12 C.F.R. § 1026.2(a)(22), and the MAP Rule, 12 C.F.R. § 1014.2, because it is a corporation.
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11.
During the Relevant Period, PHLoans has been a “covered person” under the CFPA, 12 U.S.C. § 5481(6)(A), because it is a person that engages in offering and providing residential-mortgage loans, which are “consumer financial product[s] or service[s]” under the CFPA. 12 U.S.C. § 5481(5), (6), (15)(A)(i).
12.
During the Relevant Period, PHLoans has been subject to the MAP Rule because it is a person over which the Federal Trade Commission has jurisdiction under the Federal Trade Commission Act, 15 U.S.C. §§ 41‒58. 12 C.F.R. § 1014.1. The MAP Rule is a Federal consumer financial law. 12 U.S.C. § 5481(14).
13.
PHLoans provides “mortgage credit product[s],” as that term is defined in the MAP Rule. 12 C.F.R. § 1014.2.
14.
PHLoans’s mortgage advertisements are “commercial communications” regarding a term of a “mortgage credit product,” as those terms are defined in 12 C.F.R. § 1014.2.
15.
During the Relevant Period, PHLoans has offered “closed-end credit” in the form of mortgage loans to “consumers,” as those terms are defined in Regulation Z. 12 C.F.R. § 1026.2(a)(10) & (11). 16.
PHLoans’s mortgage advertisements are advertisements for “closed-end credit,” as that term is defined in Regulation Z. 12 C.F.R. § 1026.2(a)(10). 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 6 of 39
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17.
PHLoans offers consumer mortgages, including mortgages guaranteed by the VA.
18.
PHLoans’s principal means of advertising VA-guaranteed mortgages is through direct-mail advertisements sent to consumers, including veterans and servicemembers.
19.
Since July 2016, PHLoans has mailed millions of mortgage advertisements to consumers in at least 13 states.
False, Misleading, and Inaccurate Representations
20.
Federal consumer financial law contains numerous provisions banning the use of misleading and deceptive statements in mortgage advertisements. 21.
Despite those prohibitions, PHLoans was responsible for both the content of, and the dissemination of, numerous mortgage advertisements during the Relevant Period that contained false, misleading, and inaccurate statements, as described below.
False, Misleading, and Inaccurate Representations About Cost and Other Credit Terms
22.
Most of PHLoans’s mortgage advertisements stated specific credit terms, such as an interest rate or a payment amount. 23.
By stating specific credit terms in its advertisements, PHLoans represented, expressly or by implication, that it arranged or offered a mortgage with those 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 7 of 39
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credit terms.
24.
In fact, PHLoans did not arrange or offer mortgages with the specific credit terms stated in many of those advertisements. 25.
In numerous instances, PHLoans misrepresented the actual credit terms applicable to the mortgages that it would arrange or offer. 26.
Numerous PHLoans mortgage advertisements misrepresented the payment amount applicable to the advertised mortgage or the existence, nature, or amount of cash available to the consumer in connection with the advertised mortgage.
27.
For example, PHLoans advertisements sent to 25 consumers from May 2018 through July 2018 stated that the consumer could “Take” a $20,000 cash-out amount for “ONLY $95.68 PER MONTH.” In fact, PHLoans did not offer a product with those terms. A cash-out amount was only available if the consumer had an existing mortgage and refinanced the entire amount owed on that mortgage as part of a cash-out refinance mortgage loan obtained from PHLoans, resulting in a total monthly payment greater than $95.68. 28.
Numerous PHLoans mortgage advertisements misrepresented the existence and amount of fees or costs to the consumer. 29.
Specifically, PHLoans advertisements sent to around 26,000 consumers from October 2016 to November 2016 stated “No Out of Pocket Expenses.” 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 8 of 39
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30.
All VA loans have closing costs. But for at least one of the products featured in these advertisements, consumers would need to directly pay out-of-pocket expenses at closing. Accordingly, in connection with the loan that PHLoans was advertising, the statement “No Out of Pocket Expenses” was false. 31.
Consumers who received the advertisements described in Paragraphs 26 to 30 were likely to be misled by them.
32.
The advertisements were also likely to affect consumers’ conduct or decisions with regard to obtaining a loan.
Inadequate Disclosures
33.
Many of PHLoans’s mortgage advertisements stated a payment amount or a simple annual rate of interest. Under certain sections of Regulation Z, including § 1026.24(d) and (f), the use of these terms triggers specific disclosure requirements. Many of the advertisements did not include the other disclosures that are required, or did not include them in the manner required.
34.
For example, numerous PHLoans mortgage advertisements stated a payment amount, but failed to state the terms of repayment reflecting the consumer’s repayment obligations over the full term of the loan. 35.
Specifically, PHLoans advertisements for a variable-rate mortgage sent to around 26,000 consumers from October 2016 to November 2016 stated a 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 9 of 39
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monthly payment amount of $1,394 that applied to the 3-year fixed rate period of the loan. After the first three years, the rate was adjustable by as much as 1% per year with a lifetime cap of 5%. While higher monthly payments would likely apply to the variable rate period of the loan, the advertisements did not state the amounts of those payments. 36.
Numerous PHLoans mortgage advertisements stated a simple annual rate of interest for a loan for which more than one interest rate would apply, but failed to state, for variable-rate transactions, a rate determined by adding an index and margin, based on a reasonably current index and margin. 37.
For example, PHLoans advertisements for a variable-rate mortgage sent to over 154,000 consumers in 2017 stated a simple annual rate of interest that applied to the fixed-rate period of the loan (such as the first five years), but for the variable-rate period of the loan, failed to state a rate determined by adding a reasonably current index and margin. 38.
Numerous PHLoans mortgage advertisements stated a payment amount, but failed to state the amount of each payment that would apply over the term of the loan (e.g., for adjustable-rate mortgages, payments based on the application of the sum of a reasonably current index and margin); or failed to state clearly and conspicuously that the actual payment obligation would be greater.
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39.
For example, PHLoans advertisements for a variable-rate mortgage sent to around 39,214 consumers in 2017 stated a payment amount that was based on an introductory, discount rate that applied only to the fixed-rate period of the loan. That payment was not calculated based on the index and margin that would be used to make subsequent payment adjustments over the remaining term of the loan, and the advertisements failed to state such a payment amount.
40.
In addition, PHLoans advertisements sent to around 50,900 consumers in 2017 stated a payment amount, but failed to state, clearly and conspicuously, that the actual payment obligation would be greater. VIOLATIONS OF REGULATION Z Unavailable Credit Terms, 12 C.F.R. § 1026.24(a) 41.
Under 12 C.F.R. § 1026.24(a), “[i]f an advertisement for credit states specific credit terms, it shall state only those terms that actually are or will be arranged or offered by the creditor.”
42.
PHLoans violated § 1026.24(a) because, as described in Paragraphs 22–30, numerous PHLoans advertisements for credit stated specific credit terms other than those terms that actually were or would be arranged or offered by the creditor.
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Terms of Repayment, 12 C.F.R. § 1026.24(d) 43.
Under 12 C.F.R. § 1026.24(d)(1), if an advertisement sets forth any of the four specified triggering terms (the amount or percentage of any downpayment, the number of payments or period of repayment, the amount of any payment, or the amount of any finance charge), the advertisement must also state, among other things, “[t]he terms of repayment, which reflect the repayment obligations over the full term of the loan, including any balloon payment.” 12 C.F.R. § 1026.24(d)(1), (2)(ii). 44.
PHLoans violated § 1026.24(d) because, as described in Paragraphs 27 and 34-35, numerous PHLoans mortgage advertisements set forth the period of repayment, which is a triggering term under § 1026.24(d)(1)(ii), but failed to state the repayment obligations over the full term of the loan, pursuant to § 1026.24(d)(2)(ii).
Inadequate Disclosure of Rates, 12 C.F.R. § 1026.24(f)(2)(i) 45.
Under 12 C.F.R. § 1026.24(f)(2)(i), if a direct-mail mortgage advertisement: states a simple annual rate of interest and more than one simple annual rate of interest will apply over the term of the advertised loan, the advertisement shall disclose in a clear and conspicuous manner:
(A) Each simple annual rate of interest that will apply. In variable-rate transactions, a rate determined by adding an index and margin shall be disclosed based on 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 12 of 39
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a reasonably current index and margin;
(B) The period of time during which each simple annual rate of interest will apply; and
(C) The [APR] for the loan. If such rate is variable, the [APR] shall comply with the accuracy standards in §§ 1026.17(c) and 1026.22.
46.
PHLoans violated § 1026.24(f)(2)(i) because, as described in Paragraphs 36- 37, numerous PHLoans direct-mail mortgage advertisements for a loan for which more than one interest rate would apply stated a simple annual rate of interest but did not include one or more of the disclosures required pursuant to § 1026.24(f)(2)(i)(A) through (C), or did not disclose them clearly and conspicuously, as defined in § 1026.24(f)(2)(ii). Inadequate Disclosure of Payment Terms, 12 C.F.R. § 1026.24(f)(3)(i) 47.
Under 12 C.F.R. § 1026.24(f)(3)(i), a direct-mail mortgage advertisement that “states the amount of any payment” must disclose, in a clear and conspicuous manner:
(A) The amount of each payment that will apply over the term of the loan, including any balloon payment. In variable-rate transactions, payments that will be determined based on the application of the sum of an index and margin shall be disclosed based on a reasonably current index and margin;
(B) The period of time during which each payment will apply; and
(C) In an advertisement for credit secured by a first lien on a 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 13 of 39
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dwelling, the fact that the payments do not include amounts for taxes and insurance premiums, if applicable, and that the actual payment obligation will be greater.
48.
PHLoans violated § 1026.24(f)(3)(i) because, as described in Paragraphs 38- 40 numerous PHLoans direct-mail mortgage advertisements stated the amount of a payment but did not include one or more of the disclosures required pursuant to § 1026.24(f)(3)(i)(A) through (C), or did not disclose them clearly and conspicuously, as defined in § 1026.24(f)(3)(ii). VIOLATIONS OF THE MAP RULE (REGULATION N)
Misrepresentations About Fees or Costs, 12 C.F.R. § 1014.3(c) 49.
Under 12 C.F.R. § 1014.3(c), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about “[t]he existence, nature, or amount of fees or costs to the consumer associated with the mortgage credit product, including but not limited to misrepresentations that no fees are charged.” Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material. 50.
PHLoans violated § 1014.3(c) because, as described in Paragraphs 28-30, numerous PHLoans mortgage advertisements contained misrepresentations about the existence, nature, or amount of fees or costs to the consumer associated with a mortgage credit product.
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Misrepresentations About Cash Available, 12 C.F.R. § 1014.3(j) 51.
Under 12 C.F.R. § 1014.3(j), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about “[t]he existence, nature, or amount of cash or credit available to the consumer in connection with the mortgage credit product, including but not limited to misrepresentations that the consumer will receive a certain amount of cash or credit as part of a mortgage credit transaction.” Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material. 52.
PHLoans violated § 1014.3(j) because, as described in Paragraphs 26-27, numerous PHLoans mortgage advertisements contained misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product.
Misrepresentations About Payments, 12 C.F.R. § 1014.3(k) 53.
Under 12 C.F.R. § 1014.3(k), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about “[t]he existence, number, amount, or timing of any minimum or required payments, including but not limited to misrepresentations about any payments or that no 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 15 of 39
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payments are required in a reverse mortgage or other mortgage credit product.” Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material.
54.
PHLoans violated § 1014.3(k) because, as described in Paragraphs 26-27, numerous PHLoans mortgage advertisements contained misrepresentations about the payments that would be required in connection with the advertised mortgage credit product.
VIOLATIONS OF THE CFPA
55.
Under the CFPA, 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(a), 5536(a)(1)(B). 56.
An act or practice is deceptive if it involves a material misrepresentation or omission that is likely to mislead consumers acting reasonably under the circumstances.
57.
Information that is likely to affect a consumer’s choice of, or conduct regarding, a product or service is material to consumers. Deceptive Representations About Credit Terms 58.
In numerous instances, as described in Paragraphs 22-32, PHLoans’s mortgage advertisements represented, expressly or by implication, that 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 16 of 39
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specific credit terms were available or would be arranged or offered by the creditor, including representations about payment amounts and loan costs, when in fact those specific credit terms were not available or were not terms that PHLoans was actually prepared to arrange or offer. 59.
PHLoans’s misrepresentations about the availability of the advertised credit terms of the advertised mortgage were likely to mislead consumers acting reasonably under the circumstances.
60.
PHLoans’s misrepresentations about the credit terms of the advertised mortgage were material because they were likely to affect the conduct or decisions of consumers.
61.
Therefore, PHLoans engaged in deceptive acts and practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Violations of the CFPA Based on Violations of Regulation Z and the MAP Rule 62.
Under the CFPA, a covered person’s violation of a Federal consumer financial law, which includes enumerated consumer laws and rules thereunder, violates the CFPA. 12 U.S.C. §§ 5536(a)(1)(A), 5481(14). 63.
Regulation Z and the MAP Rule are Federal consumer financial laws. 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 17 of 39
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64.
PHLoans’s violations of Regulation Z and the MAP Rule, described in Paragraphs 41-54, constitute violations of § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
CONDUCT PROVISIONS VI.
Mortgage Advertising Prohibitions and Disclosure Requirements
IT IS ORDERED, under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, that:
65.
Respondent and its officers, agents, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, may not violate 12 C.F.R. § 1014.3 and 12 C.F.R. § 1026.24, and in connection with the advertising, marketing, promotion, or offering for sale of any mortgage credit product, are restrained from : a.
Misrepresenting, or assisting others in misrepresenting, expressly or by implication:
1.
Any fact material to consumers regarding a mortgage credit product, including but not limited to the following: the total costs; any material restrictions, limitations, or conditions; or 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 18 of 39
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any material aspect of its performance, efficacy, nature, or central characteristics; or 2.
The availability of an advertised or offered mortgage to any consumer.
66.
Respondent and its officers, agents, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, in connection with the advertising, marketing, promotion, or offering for sale of any mortgage credit product, must take the following affirmative actions:
a.
Respondent must have prior substantiation for all express and implied claims made in Respondent’s mortgage advertisements. b.
In any direct-mail mortgage advertisement that states a cash-out amount for a cash-out refinance mortgage and a monthly payment amount only for the portion of that mortgage used to obtain that cashout amount, Respondent must disclose, Clearly and Prominently: (1) that obtaining the stated cash-out amount requires the consumer to refinance the entire amount of the consumer’s existing mortgage with a new loan purchased from Respondent, and (2) the total monthly payment amount(s) for such a refinanced mortgage. 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 19 of 39
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c.
If a mortgage advertisement includes the amount or percentage of any downpayment, the number of payments or period of repayment, the amount of any payment, or the amount of any finance charge, the advertisement must also include, at a minimum: 1.
The amount or percentage of the downpayment; 2.
The term of the loan in either months, years, or number of monthly payments;
3.
The amount of each payment that will apply over the term of the loan, including any balloon payment. In variable-rate transactions, payments that will be determined based on the application of the sum of an index and margin shall be disclosed based on a reasonably current index and margin; 4.
The period during which each payment will apply; 5.
The fact that the payments do not include amounts for taxes and insurance premiums, if applicable, and that the actual payment obligation will be greater;
6.
The loan amount upon which the disclosures are based, and 7.
The “annual percentage rate,” using that term, and, if the rate may be increased after consummation, that fact. 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 20 of 39
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d.
In any direct-mail advertisement for an adjustable rate mortgage, Respondent must:
1.
State, Clearly and Prominently, that the product is an “adjustable rate mortgage,” using those words. The advertisement may not use the term “hybrid” before the first use of the phrase “adjustable rate mortgage”; 2.
For each simple annual rate of interest disclosed that is based on an index and margin, base the rate on an index value in effect on the date of the advertisement or within 60 days prior, and disclose the index and margin; and 3.
State that more information about adjustable rate mortgages is available at https://files.consumerfinance.gov/f/201401_cfpb_ booklet_charm.pdf.
e.
Any disclosure in a direct-mail mortgage advertisement that must be made with “equal prominence and in close proximity” under Regulation Z, 12 C.F.R. § 1026.24, must be: 1.
In the same type size as the advertised rates or payments triggering the required disclosures;
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2.
Located immediately next to or directly above or below the advertised rates or payments triggering the required disclosures, without any intervening text or graphical displays; and 3.
Otherwise compliant with Regulation Z, as applicable. VII.
Advertising Review
IT IS FURTHER ORDERED that:
67.
Respondent, whether acting directly or indirectly, must take the following affirmative actions:
a.
Respondent’s Advertising Compliance Official must review each mortgage advertisement template before any advertisement based on that template is disseminated to a consumer to ensure that it is compliant with TILA, Regulation Z, the MAP Rule, the CFPA, and this Consent Order. This review must encompass any envelope or mailer and all enclosures. This review includes reviewing all claims made in the advertisement, expressly or by implication, to ensure that they are accurate and substantiated.
b.
Before any set of direct-mail advertisements based on a template is mailed to consumers, the Advertising Compliance Official must 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 22 of 39
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review an Exemplar of those advertisements—including any envelope, mailer, and enclosures—to ensure that it is compliant with TILA, Regulation Z, the MAP Rule, the CFPA, and this Consent Order. This includes reviewing all claims made in the advertisement, expressly or by implication, to ensure that they are accurate and substantiated. All specific credit terms stated in the Exemplar must be available and based on a reasonably current index rate, if applicable, at the time the advertisement is disseminated. This requirement applies whether the set is mailed as a single set or in multiple sets or subsets. It also applies whether the set is mailed out at a single time or over a period.
c.
The Advertising Compliance Official must document in writing his or her review of each advertisement template or Exemplar. That documentation must include a copy of the advertisement, the date of the review, and documents sufficient to substantiate all claims made in the advertisement, expressly or by implication. If the advertisement includes specific rates, that documentation must also include a rate sheet showing the availability of the advertised rate(s). If the advertisement states an APR, that documentation must include a copy of a worksheet showing the calculation of the APR, including all 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 23 of 39
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inputs assumed when calculating that number. If the advertisement states an amount of cash that a borrower might receive, the documentation must state the method of arriving at that number and include any materials used to determine the availability of that amount.
d.
The Advertising Compliance Official and any employees with responsibilities related to designing, developing, or approving the content of Respondent’s mortgage advertisements must participate in annual training on TILA, Regulation Z, the MAP Rule, and the CFPA, as those laws apply to mortgage advertising. VIII.
Compliance Plan
IT IS FURTHER ORDERED that:
68.
Within 30 days of the Effective Date, Respondent must submit to the Enforcement Director for review and determination of non-objection a comprehensive compliance plan designed to ensure that Respondent’s mortgage advertising complies with all applicable Federal consumer financial laws and the terms of this Consent Order (Compliance Plan). The Compliance Plan must include, at a minimum: 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 24 of 39
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a.
Detailed steps for addressing each action required by this Consent Order; and b.
Specific timeframes and deadlines for implementation of the steps described above.
69.
The Enforcement Director will have the discretion to make a determination of non-objection to the Compliance Plan or direct Respondent to revise it. If the Enforcement Director directs Respondent to revise the Compliance Plan, Respondent must make the revisions and resubmit the Compliance Plan to the Enforcement Director within 15 days.
70.
After receiving notification that the Enforcement Director has made a determination of non-objection to the Compliance Plan, Respondent must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan. MONETARY PROVISIONS IX.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
71.
Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law described in Section V of this Consent Order, and taking 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 25 of 39
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into account the factors in 12 U.S.C. § 5565(c)(3), Respondent must pay a civil money penalty of $260,000 to the Bureau. 72.
The Respondent must make the following payments by wire transfer to the Bureau or the Bureau’s agent, in compliance with the Bureau’s wiring instructions, to satisfy the penalty described in Paragraph 71. Within 10 days of the Effective Date, Respondent must pay $160,000. Within 60 days of the Effective Date, Respondent must pay an additional $100,000. 73.
The civil money penalty paid under this Consent Order will be deposited in the Civil Penalty Fund of the Bureau as required by § 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
74.
Respondent, for all purposes, must treat the civil money penalty paid under this Consent Order as a penalty paid to the government. Regardless of how the Bureau ultimately uses those funds, Respondent may not: a.
Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Consent 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 Consent Order. 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 26 of 39
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75.
To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Respondent may not argue that Respondent is entitled to, nor may Respondent benefit by, any offset or reduction of any compensatory 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 Respondent based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Respondent must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau, and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. X.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
76.
In the event of any default on Respondent’s obligations to make payment under this Consent Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 27 of 39
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default to the date of payment, and will immediately become due and payable.
77.
Respondent must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law and no part of the funds may be returned to Respondent.
78.
Under 31 U.S.C. § 7701, Respondent, unless it already has done so, must furnish to the Bureau its taxpayer-identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Consent Order.
79.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Respondent 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 Respondent paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. COMPLIANCE PROVISIONS XI.
Reporting Requirements
IT IS FURTHER ORDERED that:
2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 28 of 39
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80.
Respondent must notify the Bureau of any development that may affect compliance obligations arising under this Consent 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 Consent Order; the filing of any bankruptcy or insolvency proceeding by or against Respondent; or a change in Respondent’s name or address. Respondent 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.
81.
Within 7 days of the Effective Date, Respondent must: a.
Designate at least one telephone number and email, physical, and postal addresses as points of contact, that the Bureau may use to communicate with Respondent;
b.
Identify all businesses for which Respondent is the majority owner, or that Respondent directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 29 of 39
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c.
Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales.
82.
Respondent must report any change in the information required to be submitted under Paragraph 81 at least 30 days before the change or as soon as practicable after the learning about the change, whichever is sooner. 83.
Within 90 days of the Effective Date, and again one year after receiving notice of non-objection to the Compliance Plan, Respondent must submit to the Enforcement Director an accurate written compliance progress report (Compliance Report) that has been approved by Respondent’s executive officers, sworn to under penalty of perjury, which, at a minimum: a.
Lists each applicable paragraph and subparagraph of the Consent Order and describes in detail the manner and form in which Respondent has complied with each such paragraph and subparagraph of the Consent Order;
b.
Describes in detail the manner and form in which Respondent has complied with the Compliance Plan;
c.
Describes in detail any instances in which Respondent has not complied with the Consent Order or Compliance Plan, with an explanation of why any such instances occurred; and 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 30 of 39
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d.
Attaches a copy of each Order Acknowledgment obtained under Section XII, unless previously submitted to the Bureau. XII.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
84.
Within 7 days of the Effective Date, Respondent must submit to the Enforcement Director an acknowledgment of receipt of this Consent Order, sworn under penalty of perjury.
85.
Within 30 days of the Effective Date, Respondent must deliver a copy of this Consent Order to each of its board members (if any) 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 Consent Order.
86.
For 5 years from the Effective Date, Respondent must deliver a copy of this Consent Order to any business entity resulting from any change in structure referred to in Section XI, any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of the Consent Order before they assume their responsibilities. 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 31 of 39
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87.
Respondent must secure a signed and dated statement acknowledging receipt of a copy of this Consent Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Consent Order under this Section.
88.
Within 90 days of the Effective Date, Respondent must provide the Bureau with a list of all persons and their titles to whom this Consent Order was delivered through that date under Paragraphs 85-86 and a copy of all signed and dated statements acknowledging receipt of this Consent Order under Paragraph 87.
XIII.
Recordkeeping IT IS FURTHER ORDERED that:
89.
Respondent must comply with the recordkeeping requirements of 12 C.F.R. § 1014.5, including but not limited to keeping, for a period of twenty-four months from the last date Respondent made or disseminated the applicable commercial communication regarding any term of any mortgage credit product, the following evidence of compliance with the MAP Rule: a.
Copies of all materially different commercial communications as well as sales scripts, training materials, and marketing materials, regarding 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 32 of 39
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any term of any mortgage credit product, that Respondent made or disseminated during the relevant time period; b.
Documents describing or evidencing all mortgage credit products available to consumers during the time period in which Respondent made or disseminated each commercial communication regarding any term of any mortgage credit product, including but not limited to the names and terms of each such mortgage credit product available to consumers; and c.
Documents describing or evidencing all additional products or services (such as credit insurance or credit disability insurance) that are or may be offered or provided with the mortgage credit products available to consumers during the time period in which Respondent made or disseminated each commercial communication regarding any term of any mortgage credit product, including but not limited to the names and terms of each such additional product or service available to consumers.
90.
Respondent must retain its mailing lists for direct-mail mortgage advertisements disseminated within 5 years of the Effective Date for at least 5 years after dissemination of the advertisement. 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 33 of 39
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91.
Respondent must retain the documentation required by Paragraph 67(c) for at least 5 years after dissemination of the advertisement. 92.
Respondent must create or, if already created, must retain the following business records:
a.
All documents and records necessary to demonstrate full compliance with each provision of this Consent Order, including all submissions to the Bureau;
b.
Copies of all advertisements, websites, and other marketing materials, including any such materials used by a third party on Respondent’s behalf; and c.
All consumer complaints and refund requests (whether received directly or indirectly, such as through a third party), and any responses to those complaints or requests.
93.
Respondent must retain the documents identified in Paragraph 92 for at least 5 years after creation of the record.
94.
Respondent must make the documents identified in Paragraphs 89-93 available to the Bureau upon the Bureau’s request. XIV.
Notices IT IS FURTHER ORDERED that:
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95.
Unless otherwise directed in writing by the Bureau, Respondent must provide all submissions, requests, communications, or other documents relating to this Consent Order in writing, with the subject line, “In re PHLoans.com, Inc., File No. 2020-BCFP-0009,” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]: Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 XV.
Compliance Monitoring IT IS FURTHER ORDERED that:
96.
Within 14 days of receipt of a written request from the Bureau, Respondent must submit additional Compliance Reports or other requested nonprivileged information, related to requirements of this Consent Order, which must be made under penalty of perjury; provide sworn testimony related to requirements of this Consent Order and Respondents’ compliance with those requirements; or produce non-privileged documents related to requirements of this Consent Order and Respondents’ compliance with those requirements. 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 35 of 39
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97.
For purposes of this Section, the Bureau may communicate directly with Respondent, unless Respondent retains counsel related to these communications.
98.
Respondent must permit Bureau representatives to interview about the requirements of this Consent Order and Respondent’s compliance with those requirements any employee or other person affiliated with Respondent who has agreed to such an interview. The person interviewed may have counsel present.
99.
Nothing in this Consent Order will limit the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process.
XVI.
Modifications to Non-Material Requirements IT IS FURTHER ORDERED that:
100. Respondent may seek a modification to non-material requirements of this Consent Order (e.g., reasonable extensions of time and changes to reporting requirements) by submitting a written request to the Enforcement Director. 101. The Enforcement Director may, in his or her discretion, modify any nonmaterial requirements of this Consent Order (e.g., reasonable extensions of time and changes to reporting requirements) if he or she determines good 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 36 of 39
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cause justifies the modification. Any such modification by the Enforcement Director must be in writing.
XVII.
Administrative Provisions
IT IS FURTHER ORDERED that:
102. The provisions of this Consent Order do not bar, estop, or otherwise prevent the Bureau from taking any other action against Respondent, except as described in Paragraph 103. Further, for the avoidance of doubt, the provisions of this Consent Order do not bar, estop, or otherwise prevent any other person or governmental agency from taking any action against Respondent.
103. The Bureau releases and discharges Respondent from all potential liability for law violations that the Bureau has or might have asserted based on the practices described in Section V of this Consent Order, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. The Bureau may use the practices described in this Consent Order in future enforcement actions against Respondent and its affiliates, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect 2020-BCFP-0009 Document 1 Filed 08/26/2020 Page 37 of 39
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any right of the Bureau to determine and ensure compliance with the Consent Order, or to seek penalties for any violations of the Consent Order. 104. This Consent Order is intended to be, and will be construed as, a final Consent Order issued under § 1053 of the CFPA, 12 U.S.C. § 5563, and expressly does not form, and may not be construed to form, a contract binding the Bureau or the United States.
105. The requirements under Paragraphs 90-91 and 93-94 of this Consent Order will terminate when the specified recordkeeping periods have expired. All other requirements under this Consent Order will terminate 5 years from the Effective Date. The Consent Order will remain effective and enforceable until such times, except to the extent that any provisions of this Consent Order have been amended, suspended, waived, or terminated in writing by the Bureau or its designated agent.
106. Calculation of time limitations will run from the Effective Date and be based on calendar days, unless otherwise noted.
107. Should Respondent seek to transfer or assign all or part of its operations that are subject to this Consent Order, Respondent must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Consent Order.
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2020-BCFP-0009 Document’ Filed 08/26/2020 Page 39 of 39
108. The provisions of this Consent Order will be enforceable by the Bureau. For any violation of this Consent Order, the Bureau may impose the maximum amount of civil money penalties allowed under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c). In connection with any attempt by the Bureau to enforce this Consent Order in federal district court, the Bureau may serve Respondent wherever Respondent may be found and Respondent may not contest that court’s personal jurisdiction over Respondent.
109. This Consent Order and the accompanying Stipulation contain the complete agreement between the parties. The parties have made no promises, representations, or warranties other than what is contained in this Consent Order and the accompanying Stipulation. This Consent Order and the accompanying Stipulation supersede any prior oral or written communications, discussions, or understandings.
110. Nothing in this Consent Order or the accompanying Stipulation may be construed as allowing Respondent, its officers, or its employees to violate
any law, rule, or regulation.
acjtrh IT IS SOORDERED, this 2’ day of August, 2020.
Kathleen L. mone Director Bureau of Consumer Financial Protection
Stipulation ()
PDF of this document (5 pages)
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UNITED STATES OF AMERICA BUREAU OF CONSUMER FINANCIAL PROTECTION File No. 2020-BCFP-0009 In the matter of:
PHLoans.com, Inc.
STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER The Bureau of Consumer Financial Protection (Bureau) intends to initiate an administrative proceeding against PHLoans.com, Inc. (Respondent), under 12 U.S.C. §§ 5563 and 5565, for its direct-mail mortgage advertising activities in violation of Regulation Z, 12 C.F.R. Part 1026, the implementing regulation of the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601-1667f; the Mortgage Acts and Practices-Advertising Rule (MAP Rule or Regulation N), 12 C.F .R. Part 1014; and the prohibition on deceptive acts or practices in the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536. Respondent, in the interest of compliance and resolution of the matter, consents to the issuance of a Consent Order substantially in the form of the one to 2020-BCFP-0009 Document 2 Filed 08/26/2020 Page 1 of 5
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which this Stipulation and Consent to the Issuance of a Consent Order is attached ( Consent Order), and which is incorporated by reference. In consideration of the above premises, Respondent agrees to the following: Jurisdiction 1.
The Bureau has jurisdiction over this matter under§§ 1053 and 1055 of the Consumer Financial Protection Act of2010 (CFPA), 12 U.S.C. §§ 5563, 5565.
Consent 2.
Respondent agrees to the issuance of the Consent Order, without admitting or denying any of the findings of fact or conclusions of law, except that Respondent admits the facts necessary to establish the Bureau's jurisdiction over Respondent and the subject matter of this action. 3.
Respondent agrees that the Consent Order will be deemed an "order issued with the consent of the person concerned" under 12 U.S.C. § 5563(b)(4), and agrees that the Consent Order will become a final order, effective upon issuance, and will be fully enforceable by the Bureau under 12 U.S.C. §§ 5563(d)(l) and 5565.
4.
Respondent voluntarily enters into this Stipulation and Consent to the Issuance of a Consent Order.
2020-BCFP-0009 Document 2 Filed 08/26/2020 Page 2 of 5
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5.
The Consent Order resolves only Respondent's potential liability for law violations that the Bureau asserted or might have asserted based on the practices described in Section V of the Consent Order, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. Respondent acknowledges that no promise or representation has been made by the Bureau or any employee, agent, or representative of the Bureau, about any liability outside of this action that may have arisen or may arise from the facts underlying this action or immunity from any such liability.
6.
Respondent agrees that the facts described in Section V of the Consent Order will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding before the Bureau to enforce the Consent Order, or in any subsequent civil litigation by the Bureau to enforce the Consent Order or its rights to any payment or monetary judgment under the Consent Order.
7.
The terms and provisions of this Stipulation and the Consent Order will be binding upon, and inure to the benefit of, the parties hereto and their successors in interest.
8.
Respondent agrees that the Bureau may present the Consent Order to the Bureau Director for signature and entry without further notice. 2020-BCFP-0009 Document 2 Filed 08/26/2020 Page 3 of 5
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Waivers 9.
Respondent, by consenting to this Stipulation, waives: a.
Any right to service of the Consent Order, and agrees that issuance of the Consent Order will constitute notice to Respondent of its terms and conditions;
b.
Any objection to the jurisdiction of the Bureau, including, without limitation, under§ 1053 of the CFPA, 12 U.S.C. § 5563; c.
The rights to all hearings under the statutory provisions under which the proceeding is to be or has been instituted; the filing of proposed findings of fact and conclusions of law; proceedings before, and a recommended decision by, a hearing officer; all post-hearing procedures; and any other procedural right available under§ 1053 of the CFPA, 12 U.S.C. § 5563, or 12 C.F.R. Part 1081; d.
The right to seek any administrative or judicial review of the Consent Order;
e.
Any claim for fees, costs or expenses against the Bureau, or any of its agents or employees, and any other governmental entity, related in any way to this enforcement matter or the Consent Order, whether arising under common law or under the terms of any statute, including but not limited to the Equal Access to Justice Act and the Small 2020-BCFP-0009 Document 2 Filed 08/26/2020 Page 4 of 5
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Business Regulatory Enforcement Fairness Act of 1996; for these purposes, Respondent agrees that Respondent is not the prevailing party in trus action because the parties have reached a good faith settlement;
f.
Any other right to challenge or contest the validity of the Consent Order;
g.
Such provisions of the Bureau's rules or other requirements oflaw as may be construed to prevent any Bureau employee from participating in the preparation of, or advising the Director as to, any order, opinion, finding of fact, or conclusion of law to be entered in connection with this Stipulation or the Consent Order; and h.
Any right to claim bias or prejudgment by the Director based on the consideration of or discussions concerning settlement of all or any part of the proceeding.
PHLOANS.COM, INC. BY:
~~ Date President, PHLoans.com, Inc.
2020-BCFP-0009 Document 2 Filed 08/26/2020 Page 5 of 5