SettleIt, Inc.
Documents in this case
- Complaint · · 14 p.
- Stipulation · · 14 p.
Case summary
On April 13, 2021, the Bureau filed a proposed stipulated final judgment and order in the United States District Court for the Central District of California to resolve allegations that SettleIt, Inc., a California-based debt-settlement company, violated the Telemarketing Sales Rule and engaged in abusive acts and practices under the Consumer Financial Protection Act. In its complaint, the Bureau alleged that SettleIt failed to disclose to consumers its relationship to certain creditors and then regularly prioritized those creditors in settlements; claimed that its programs could be completed without borrowing more money, while steering consumers into high-cost loans to pay off third-party creditors; failed to clearly and conspicuously disclose the costs of its services; and required consumers to pre-authorize settlements so that SettleIt could settle consumers’ debts without their express consent. The order, which the court entered on July 2, 2021, requires SettleIt to return at least $646,769.43 in performance fees to consumers and to pay a $750,000 civil money penalty.
Complaint ()
PDF of this document (14 pages)
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COMPLAINT
CHRISTINA S. COLL (CA Bar #250712) [email protected] CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 Telephone: (202) 309-9704 Facsimile: (415) 844-9788
Attorney for Plaintiff Consumer Financial Protection Bureau
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
SETTLEIT, INC.,
Defendant.
CASE NO.:
COMPLAINT
INTRODUCTION 1.
SettleIt, Inc. is a California-based debt-settlement business that harms consumers in a number of ways, including by (1) failing to disclose its relationship to certain creditors and then regularly prioritizing those creditors in settlements of consumers’ debts; (2) claiming that its programs could be completed without consumers having to borrow more money but then steering consumers into high-cost loans to pay off third-party creditors; (3) failing to clearly and conspicuously disclose the costs of its Case 8:21-cv-00674 Document 1 Filed 04/13/21 Page 1 of 14 Page ID #:1
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services; and (4) requiring consumers to pre-authorize settlements so that SettleIt could resolve consumers’ debts without their express consent. 2.
The Consumer Financial Protection Bureau brings this action under §§ 1031, 1036(a), 1054, and 1055 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, and under the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310, to stop SettleIt’s unlawful conduct, obtain relief for harmed consumers, and impose a civil money penalty on SettleIt for its unlawful actions. JURISDICTION AND VENUE 3.
This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
4.
Venue is proper here because Defendant SettleIt, Inc. is located, resides, or does business in this district. 12 U.S.C. § 5564(f). PARTIES 5.
The Bureau is an independent agency charged with enforcing violations of “Federal consumer financial laws.” 12 U.S.C. § 5491(a). The Bureau has independent litigating authority, 12 U.S.C. § 5564(a)-(b), including the authority to enforce the CFPA’s prohibitions on unfair, deceptive, and abusive acts or practices, 12 U.S.C. §§ 1031, 1036, and the TSR as it applies to persons subject to the CFPA, 15 U.S.C. §§6102(c), 6105(d).
6.
SettleIt is a privately held debt-settlement company. At all times relevant to this Complaint, SettleIt has done business in this district. SettleIt offers a debt-settlement program, primarily through telemarketing and online sales, throughout the country; it sold its services to 17,500 customers between December 2016 and April 2019. SettleIt offers debt-management or debt-settlement services and is therefore a “covered person” Case 8:21-cv-00674 Document 1 Filed 04/13/21 Page 2 of 14 Page ID #:2
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COMPLAINT
under the CFPA, 12 U.S.C. § 5481(15)(A)(viii), and a “telemarketer” and “seller” under the TSR, 16 C.F.R. §§ 310.3, 310.4.
FACTS SettleIt’s Program 7.
According to its website, SettleIt “negotiate[s] with your creditors to get a reduction of your outstanding, unsecured debt.”
8.
SettleIt claims that its “skilled negotiators work to get your creditors to agree to discounted lump sum payoff amounts and the creditors forgive the rest of your balance.” SettleIt collects its performance fee upon settlement of the first debt. 9.
SettleIt’s sales scripts state: “We DO NOT begin negotiating your debt immediately after your first payment clears. We send a power of attorney to your creditors to plant the seed for future negotiations. The negotiation process normally starts once you have made three payments into the program. Under certain circumstances, we may begin negotiating immediately but that is an exception to the standard process.” 10.
Consumers who enroll in SettleIt’s program typically sign a series of documents totaling nineteen pages, the first page of which is a Program Overview. 11.
The Program Overview states: “Although settlement policies differ from Creditor to Creditor, our general policy is to begin the negotiation process once you have saved twenty percent (20.00%) of the debt not including any fees that would be owed to SettleIt.”
12.
The Program Overview includes the program start date, the monthly draft amount, the program length, the enrolled debt amount, and the estimated settlement amount.
13.
The Program Overview juxtaposes the total enrolled debt and estimated settlement amount next to each other, but it does not include SettleIt’s fee, which is 25% of the enrolled debt.
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COMPLAINT
14.
SettleIt discloses its fee five pages after the Program Overview, in the middle of a section titled Compensation: “We do not collect any compensation until one of your Debts is settled. When we reach a settlement of a Debt and you make a payment to the Creditor to satisfy the terms of that settlement we charge and collect 25% of the enrollment amount of that Debt as listed in Exhibit A.” 15.
SettleIt’s sales associates, during their sales pitches, deemphasize the cost to consumers of SettleIt’s services.
16.
SettleIt instructs sales associates to be vague about the fee by saying that the program’s cost and consumers’ savings would be determined when its negotiations with creditors were finished.
17.
In fact, SettleIt’s performance fee is based on the amount of consumers’ total enrolled debt, so it is determined at the time consumers enroll in the program and could easily have been disclosed to them.
18.
SettleIt also discloses its fee in the middle of a long, recorded disclosure at the conclusion of each sales call.
19.
SettleIt’s enrollment paperwork states: “You must approve all settlement offers prior to our acceptance of any form of compensation from your Reserve Account and reserve the sole discretion to accept or reject a settlement offer, unless you have executed the attached Pre-authorization form.” 20.
SettleIt’s Pre-Authorization Form includes the following or substantially similar statement for consumer signature:
[I/we] authorize SettleIt, Inc. to settle any accounts with an offer less than or equal to sixty five (65.00%) percent of the enrolled balance without separate written approval and/or recorded settlement authorization. In the event such a settlement is reached, this authorization also directs DPG to forward payment for such settlement from my/our trust account to my/our creditor without Case 8:21-cv-00674 Document 1 Filed 04/13/21 Page 4 of 14 Page ID #:4
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separate written approval and/or recorded settlement authorization. Any settlement offers made above sixty five (65.00%) percent must receive my/our written and/or recorded authorization. 21.
This preauthorization form is a standard part of the SettleIt paperwork that consumers signed.
22.
SettleIt relied on consumers’ pre-authorization form to settle debts without obtaining specific agreements between consumers and their creditors to settle the debt. SettleIt’s Relationship with CashCall and LoanMe 23.
Though it presents itself as an independent debt-settlement company, SettleIt is affiliated with certain creditors, including CashCall and LoanMe, with which it purports to negotiate.
24.
SettleIt, CashCall, and LoanMe, as well as LoanMe’s subsidiary, Redo Lending, all do business from the same building in Orange, California. 25.
The same individual, J. Paul Reddam, owns and controls both SettleIt and CashCall.
26.
Reddam also has a relationship with LoanMe: Reddam indirectly has loaned money to the company and previously owned an option to purchase the company, but sold most of it, retaining an option to purchase a 9.9% stake. 27.
LoanMe is wholly owned by Bliksum, LLC, of which Jonathan Williams— formerly CashCall’s treasurer and Reddam’s employee—is the sole owner. 28.
CashCall’s website provides a link to SettleIt’s website. 29.
CashCall and LoanMe employees transfer consumers as debt-settlement leads directly to SettleIt’s sales associates. 30.
SettleIt trains its sales associates to treat consumers who have debts to CashCall and LoanMe differently than other consumers. Case 8:21-cv-00674 Document 1 Filed 04/13/21 Page 5 of 14 Page ID #:5
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31.
SettleIt’s program-enrollment guidelines require a minimum enrolled debt of $7,500, with just one exception: “Less than $7,500 OK if LoanMe/CashCall account is being enrolled and at least two total accounts are enrolled.” 32.
SettleIt enrolled in its program some consumers with significant debts to CashCall and little other debt.
33.
CashCall and LoanMe also gave SettleIt contact information for consumers who were behind on their payments, in some cases by directly transferring those consumers’ phone calls to SettleIt.
34.
SettleIt favors repayment of debts owed to CashCall and LoanMe over debts owed to other lenders who are not associated with SettleIt. 35.
About 12% of SettleIt’s consumers have debts to CashCall or LoanMe. 36.
Only 1.2% of all consumer debt enrolled with SettleIt is owed to CashCall, but 2.8% of consumers’ payments went to CashCall. 37.
Only 2.4% of all consumer debt enrolled with SettleIt is owed to LoanMe, but 4.5% of consumers’ payments went to LoanMe. 38.
SettleIt’s sales associates told consumers that SettleIt would be their advocate to creditors.
39.
The SettleIt sales script includes in its introduction, in a section specific to consumers with debts to CashCall or LoanMe: “Please be advised we are not owned or operated by any of your creditors.”
40.
The SettleIt sales script also states that it is acceptable to describe SettleIt’s relationship with CashCall and LoanMe as “strategic partner” or “does business with.” SettleIt’s Marketing of New Loans from CashCall and LoanMe 41.
SettleIt’s website advertised: “DON’T Borrow More Money.” 42.
But SettleIt did, in fact, market new loans—including from CashCall and LoanMe—to consumers who completed a certain portion of their debt-payment programs.
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43.
These new loans—called “Fresh Start” loans—are a key part of SettleIt’s business.
44.
The term of the Fresh Start loan is typically between 36 and 84 months, depending on the size of the loan.
45.
The Fresh Start loans offered by CashCall and LoanMe through the SettleIt program have a 24% APR.
46.
SettleIt advised consumers regarding the potential benefits of the loans: “Zero out balances of previous debt and establish a positive trade line with new loan.”
“Leverage to negotiate debts in a lump sum typically reduces the cost of getting out of debt.”
“Accounts are settled now versus over time.”
47.
If consumers ask how much money they would need to borrow with the Fresh Start loan, SettleIt’s sales associates are instructed to answer: “Typically, we are able to resolve your debts for 75% of your enrolled debt balance, including our fee….” 48.
Consumers do not always understand that the Fresh Start loan would be used to pay SettleIt’s fees in addition to the consumers’ debts, so consumers ultimately paid interest on a Fresh Start loan to pay SettleIt fees. 49.
SettleIt’s failure to make clear that the Fresh Start loan proceeds would pay SettleIt’s fee meant that consumers did not know how little it would actually take to resolve their enrolled debts, and consumers were in no position to then bargain over the fees.
50.
For at least some consumers, accepting a Fresh Start loan extended the duration of their payments.
51.
For consumers with enrolled debts to CashCall or LoanMe, the Fresh Start loan effectively refinanced their initial debts to CashCall or LoanMe, plus other unsecured debts, with a larger Fresh Start loan from CashCall or LoanMe. Case 8:21-cv-00674 Document 1 Filed 04/13/21 Page 7 of 14 Page ID #:7
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52.
SettleIt did not disclose to consumers that it was affiliated with CashCall and LoanMe.
LEGAL BACKGROUND The CFPA 53.
Sections 1031 and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531, 5536(a)(1)(B), prohibit “covered person[s]” from engaging in any “abusive act or practice.”
54.
SettleIt is a “covered person” under the CFPA because it offered or provided consumer-financial products or services, including financial-advisory services, such as assisting consumers with debt-management or debt-settlement and modifying the terms of any extension of credit. 12 U.S.C. § 5481(5), (6), (15)(A)(viii). The TSR 55.
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).
56.
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). 57.
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).
58.
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 Case 8:21-cv-00674 Document 1 Filed 04/13/21 Page 8 of 14 Page ID #:8
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one or more telephones and which involves more than one interstate telephone call.” 16 C.F.R. § 310.2(gg).
59.
SettleIt offers services to renegotiate, settle, or alter the terms of payments of consumers’ personal debts.
60.
SettleIt offers and provides these services to consumers nationwide using the telephones and employs more than one interstate telephone call. 61.
SettleIt offers and provides these services to consumers in exchange for payment of performance fees in connection with a telemarketing transaction. 62.
SettleIt is a “telemarketer” or “seller” offering a “debt relief service” under the TSR.
VIOLATIONS OF LAW Count I Abusive Acts or Practices Under the CFPA 63.
The allegations in paragraphs 1–62 are incorporated by reference. 64.
Under the CFPA, a practice is abusive if it takes unreasonable advantage of the reasonable reliance by a consumer on the person to protect the consumer’s interests in selecting or using a consumer-financial product or service. 12 U.S.C. § 5531(d)(2)(C). 65.
SettleIt told consumers that it would work in their interests only, and consumers reasonably relied on SettleIt to protect their interests in negotiating their debts. 66.
SettleIt had financial connections to CashCall and LoanMe, two companies that were creditors for some consumers’ enrolled debt and lenders for some consumers’ Fresh Start loans.
67.
Consumers did not know that SettleIt had financial connections to CashCall and LoanMe.
68.
SettleIt did not tell consumers that it had financial connections to CashCall and LoanMe; in fact, SettleIt told consumers that it was not owned or operated by any of consumers’ creditors.
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69.
SettleIt prioritized the settlement of debts owed to CashCall and LoanMe over debts owed to unaffiliated creditors.
70.
SettleIt “settled” debts with CashCall and LoanMe ahead of—or instead of—other debts.
71.
Settling debts with CashCall and LoanMe allowed SettleIt to collect its “performance” fee for those settlements.
72.
SettleIt offered consumers new Fresh Start loans from CashCall and LoanMe.
73.
Consumers used the proceeds from the Fresh Start loans to pay SettleIt’s fees.
74.
SettleIt took unreasonable advantage of consumers’ reasonable reliance that SettleIt would protect their interests in negotiating their debts by engaging in a form of self-dealing that benefitted SettleIt, CashCall, and LoanMe at consumers’ expense. 75.
SettleIt therefore engaged in abusive acts or practices that violated §§ 1031 and 1036 of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Count II Failing to Clearly and Conspicuously Disclose Total Cost Under the TSR 76.
The allegations in paragraphs 1–62 are incorporated by reference. 77.
The TSR requires sellers and telemarketers, before a customer consents to pay, “to disclose truthfully, in a clear and conspicuous manner . . . [t]he total costs to purchase, receive, or use . . . any goods or services that are the subject of the sales offer.” 16 C.F.R. § 310.3(a)(1)(i).
78.
On the first page of the documents consumers sign, SettleIt juxtaposes the amounts of their enrolled debt and estimated settlements, but it does not include its estimated fee, which is 25% of the enrolled debt, in this comparison. 79.
SettleIt’s performance fee is based on the amount of consumers’ total enrolled debt, so it is determined at the time consumers enroll in the program. Case 8:21-cv-00674 Document 1 Filed 04/13/21 Page 10 of 14 Page ID #:10
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80.
SettleIt’s sales associates obscure the cost of SettleIt’s program during the sign-up process: SettleIt’s sales associates, during their sales pitches, deemphasize the cost to consumers of SettleIt’s services; and SettleIt instructs sales associates to be vague about the fee by saying that the program’s cost and consumers’ savings would be determined when its negotiations with creditors were finished. 81.
SettleIt therefore violated the TSR’s requirement to truthfully disclose the cost of its program. 16 C.F.R. § 310.3(a)(1)(i). Count III Misrepresentation of Total Cost Under the TSR 82.
The allegations in paragraphs 1–62 are incorporated by reference. 83.
The TSR prohibits misrepresenting any material aspect of any debt-relief service, which specifically applies to misrepresentations concerning “the amount of money or the percentage of the debt amount that a consumer may save.” 16 C.F.R. § 310.3(a)(2)(x).
84.
On the first page of the documents consumers sign, SettleIt juxtaposes the amounts of their enrolled debt and estimated settlements, but it does not include its estimated fee, which is 25% of the enrolled debt, in this comparison. 85.
Many consumers would have reasonably relied on the cost comparison provided upfront and understood the difference between the enrolled debt and the estimated settlements to be the amount of money the consumers could save. 86.
SettleIt’s sales associates obscure the cost of SettleIt’s program during the sign-up process: SettleIt’s sales associates, during their sales pitches, deemphasize the cost to consumers of SettleIt’s services; and SettleIt instructs sales associates to be vague about the fee by saying that the program’s cost and consumers’ savings would be determined when its negotiations with creditors were finished. 87.
The written and oral presentation of SettleIt’s cost are likely to mislead consumers about the total cost of its program.
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88.
SettleIt therefore violated the TSR’s prohibition on misrepresenting any material aspect of any debt-relief service, including the cost of the program. 16 C.F.R. § 310.3(a)(2)(x).
Count IV Failure to Obtain Consent Before Accepting Fees Under the TSR. 89.
The allegations in paragraphs 1–62 are incorporated by reference. 90.
The TSR prohibits SettleIt 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).
91.
In the preamble to the debt relief amendments to the TSR, the rulemakers clarified 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.” 75 Fed. Reg. 48489 (Aug. 10, 2010). 92.
Nevertheless, SettleIt had consumers sign pre-authorization forms in their enrollment paperwork.
93.
SettleIt relied on these pre-signed forms as authority to settle any accounts with an offer less than or equal to a specific percent of the enrolled balance without separate written approval or a recorded settlement authorization. 94.
SettleIt’s collection of fees based on consumers’ pre-authorizations to accept settlement offers did not comply with the TSR. 95.
SettleIt therefore violated 16 C.F.R. § 310.4(a)(5)(i)(A).
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Count V SettleIt’s Violations of the TSR Are Violations of the CFPA 96.
The allegations in paragraphs 1–62 are incorporated by reference. 97.
Under the CPFA, it is unlawful for covered persons to commit any act or omission in violation of Federal consumer financial laws. 12 U.S.C. § 5536(a)(1)(A). 98.
A violation of the TSR is treated as a violation of a rule under § 1031 of the CFPA. 15 U.S.C. § 6102(c)(2).
99.
SettleIt violated the TSR when it failed to truthfully disclose in a clear and conspicuous way the total cost of its debt-settlement program. 100. SettleIt violated the TSR when it misrepresented the total cost of its debtsettlement program.
101. SettleIt violated the TSR when it relied on pre-authorization forms to settle consumers’ debts.
102. SettleIt’s TSR violations are violations of § 1036(a)(1)(A) of the CFPA. Demand for Relief The Bureau requests that the Court:
a.
enjoin SettleIt from committing violations of the CFPA and TSR; b.
order SettleIt to pay damages, restitution, or other monetary relief to consumers;
c.
order SettleIt to pay disgorgement or compensation for unjust enrichment;
d.
impose a civil money penalty under 12 U.S.C. § 5564(a) of the CFPA; e.
order SettleIt to pay the costs incurred in connection with prosecuting this action; and
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f.
award additional relief as the Court may determine to be just and proper.
Respectfully submitted,
Cara M. Petersen
Acting Enforcement Director
Jeffrey Paul Ehrlich Deputy Enforcement Director
Owen P. Martikan
Assistant Litigation Deputy
/s/ Christina S. Coll
Christina S. Coll (CA Bar #250712) Telephone: (202) 309-9704
E-mail: [email protected]
Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Facsimile: (415) 844-9788
Attorney for Plaintiff Consumer
Financial Protection Bureau
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Stipulation ()
PDF of this document (14 pages)
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 CHRISTINA S. COLL (CA Bar #250712) [email protected] CONSUMER FINANCIAL PROTECTION BUREAU 1700 G Street NW Washington, DC 20552 Telephone: (202) 309-9704 Facsimile: (415) 844-9788 Attorney for Plaintiff Consumer Financial Protection Bureau SCOTT M. PEARSON (CA Bar #173880) [email protected] JOHN A. KIMBLE (CA Bar #316613) [email protected]
MANATT, PHELPS & PHILLIPS, LLP 2049 Century Park East, Suite 1700 Los Angeles, CA 90067 Telephone: (310) 312-4000 Facsimile: (310) 312-4224 Attorneys for Defendant SettleIt, Inc.
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff, v.
SETTLEIT, INC., Defendant.
CASE NO.: 8:21-cv-00674-DOC [PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER JS-6 Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 1 of 14 Page ID #:43
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 The Consumer Financial Protection Bureau commenced this civil action on April 13, 2021 to obtain injunctive and monetary relief and a civil penalty from SettleIt, Inc. The Complaint alleges violations of §§ 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1)(A) and (B), and violations of the Telemarketing Sales Rule (TSR), 16 C.F.R. §§ 310.3(a)(1)(i), 310.3(a)(2)(x), and 310.4(a)(5)(i)(A), in connection with Defendant’s debt-settlement practices.
The Bureau and Defendant agree to the Court’s entry of this Stipulated Final Judgment and Order (Order), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint. FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action.
2.
Defendant neither admits nor denies the allegations in the Complaint, except as specified in this Order. For purposes of this Order, Defendant admits the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.
3.
Defendant waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.
4.
Entry of this Order is in the public interest.
DEFINITIONS 5.
The following definitions apply to this Order:
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 a. “Affected Consumers” are any consumers who paid performance fees to SettleIt for settling the consumer’s CashCall, Inc. or LoanMe Inc. debt on or after May 1, 2018.
b. “Debt Relief Product or 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 between a consumer and one or more creditors or debt collectors, including but not limited to a reduction in the balance, interest rate, or fees owed by a person to a creditor or debt collector.
c. “Defendant” means SettleIt, Inc. and its successors and assigns. d. “Effective Date” means the date on which the Order is entered on the docket by the Court.
e. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau or his or her delegate.
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 Defendant based on substantially the same facts as described in the Complaint. CONDUCT PROVISIONS I.
Prohibitions IT IS ORDERED that:
6.
Defendant 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, Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 3 of 14 Page ID #:45
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 marketing, promotion, offering for sale, sale, or performance of any Debt Relief Product or Service, may not take unreasonable advantage of the reasonable reliance by a consumer on Defendant to protect the consumer’s interests, including but not limited to: a. Defendant must not settle debts owed to CashCall, Inc., LoanMe, Inc., or any company with which it shares direct or indirect ownership; b. for all “Fresh Start” loans, Defendant must disclose to consumers its affiliation with any provider of these loans; and c. for all Affected Consumers with currently enrolled debts to CashCall, Inc. or LoanMe, Inc., Defendants must inform them that it will no longer seek to settle those debts.
7.
Defendant 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 Product or Service, must comply with the Telemarketing Sales Rule, including by: a. for all “Fresh Start” loans, disclosing to consumers the amount to be disbursed to SettleIt out of the loan proceeds and the amount to be disbursed on behalf of the consumer to any third parties; b. not charging settlement-performance fees unless a consumer has first authorized a particular settlement;
c. clearly and conspicuously disclosing to consumers the estimated cost of its services in proximity to its disclosure of the estimated settlement amount; and d. not misrepresenting any fact material to consumers, such as the total costs and any material restrictions, limitations, or conditions. Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 4 of 14 Page ID #:46
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674
MONETARY PROVISIONS II.
Order to Pay Redress IT IS FURTHER ORDERED that:
8.
Within 10 days of the Effective Date, Defendant must reserve or deposit into a segregated deposit account not less than $646,769.43, which represents the amount of performance fees collected by SettleIt for settling debts owed to CashCall, Inc. and LoanMe, Inc. on or after May 1, 2018, for the purpose of providing redress to Affected Consumers as required by this Section.
9.
Within 30 days of the Effective Date, Defendant must submit to the Enforcement Director for review and non-objection a comprehensive written plan for providing redress consistent with this Order (Redress Plan). The Enforcement Director will have the discretion to make a determination of non-objection to the Redress Plan or to direct Defendant to revise it. If the Enforcement Director directs Defendant to revise the Redress Plan, Defendant must revise and resubmit the Redress Plan to the Enforcement Director within 15 days. After receiving notification that the Enforcement Director has made a determination of non-objection to the Redress Plan, Defendant must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Redress Plan.
10.
The Redress Plan must apply to all Affected Consumers and, at a minimum: a. specify how Defendant identified the Affected Consumers and specify the names of the Affected Consumers;
b. allocate not less than $646,769.43 to the consumers who paid performance fees to SettleIt for settling their CashCall, Inc. or LoanMe Inc. debt on or after May 1, 2018, as a full refund of those performance fees;
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 c. detail a methodology for calculating the performance fee refunds for the Affected Consumers;
d. detail the manner in which redress will be provided to all Affected Consumers, including detailing how payments will be made to probate or bankruptcy estates in accordance with applicable law; and e. detail the reasonable efforts that Defendant will undertake to locate consumers to whom redress should be provided and verify their addresses before providing redress.
11.
The Redress Plan must include: (1) the form of the letter (Redress Notification Letter) to be sent notifying Affected Consumers of the redress; and (2) the form of the envelope that will contain the Redress Notification Letter. The letter must include language explaining how the amount of redress was calculated and a statement that the provision of refund payment complies with the terms of this Consent Order. Respondents may not include in any envelope containing a Redress Notification Letter any materials other than the approved letters and redress checks. 12.
After completing the Redress Plan, if the amount of redress provided to Affected Consumers is less than $646,769.43, within 30 days of the completion of the Redress Plan, Defendant must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, the difference between the amount of redress provided to Affected Consumers and $646,769.43. 13.
The Bureau may use these remaining funds to pay additional redress to Affected Consumers. If the Bureau determines, in its sole discretion, that additional redress to Affected Consumers is wholly or partially impracticable or otherwise inappropriate, or if funds remain after the additional redress is completed, the Bureau will deposit any remaining funds in the U.S. Treasury as disgorgement. Defendant will have Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 6 of 14 Page ID #:48
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674
no right to challenge any actions that the Bureau or its representatives may take under this Section.
14.
Defendant may not condition the payment of any redress to any Affected Consumer under this Order on that Affected Consumer waiving any right. III.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
15.
Under § 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), Defendant must pay a civil money penalty of $750,000 to the Bureau.
16.
Within 10 days of the Effective Date, Defendant must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.
17.
The civil money penalty paid under this 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). 18.
Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendant may not:
a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 IV.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
19.
In the event of any default on Defendant’s obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment and will immediately become due and payable.
20.
Defendant relinquishes all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendant.
21.
The facts alleged in the Complaint will be taken as true and 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. 22.
The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under § 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and for such purposes this Order will have collateral estoppel effect against Defendant, even in Defendant’s capacity as debtor-in-possession. 23.
Under 31 U.S.C. § 7701, Defendant, 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 Order. 24.
Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendant must notify the Enforcement Director of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 8 of 14 Page ID #:50
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674
consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendant based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendant must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action.
COMPLIANCE PROVISIONS V.
Reporting Requirements IT IS FURTHER ORDERED that:
25.
Defendant 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 Defendant; or a change in Defendant’s name or address. Defendant must provide this notice at least 30 days before the development or as soon as practicable after the learning about the development, whichever is sooner. 26.
Within 7 days of the Effective Date, Defendant must:
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 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 Defendant;
b. identify all businesses for which Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and c. describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales. 27.
Defendant must report any change in the information required to be submitted under Paragraph 26 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 28.
Within 90 days of the Effective Date, and again one year after the Effective Date, Defendant must submit to the Enforcement Director an accurate written compliance progress report sworn to under penalty of perjury (Compliance Report), which, at a minimum:
a. lists each applicable paragraph and subparagraph of the Order and describes in detail the manner and form in which Defendant has complied with each such paragraph and subparagraph of this Order; b. describes in detail the manner and form in which Defendant has complied with the Redress Plan; and c. attaches a copy of each Order Acknowledgment obtained under Section VI, unless previously submitted to the Bureau. Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 10 of 14 Page ID #:52
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674
VI.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
29.
Within 7 days of the Effective Date, Defendant must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
30.
Within 30 days of the Effective Date, Defendant 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. 31.
For 5 years from the Effective Date, Defendant must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section V, any future executive officers, as well as to any managers, employees, Service Providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities. 32.
Defendant must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001-7006, within 30 days of delivery, from all persons receiving a copy of this Order under this Section. 33.
Within 90 days of the Effective Date, Defendant must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that date under Paragraphs 30 and 31 and a copy of all signed and dated statements acknowledging of receipt of this Order under Paragraph 32.
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 VII.
Recordkeeping IT IS FURTHER ORDERED that:
34.
Defendant must create, for at least 5 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau. Defendant must retain these documents for at least 5 years after creation and make them available to the Bureau upon the Bureau’s request.
35.
Defendant must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer:
a. copies of all sales scripts; training materials; advertisements; websites; and other marketing materials, including any such materials used by a third party on Defendant’s behalf;
b. 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;
c. records showing, for each employee providing services, that person’s name; telephone number; email, physical, and postal address; job title or position; dates of service; and, if applicable, the reason for termination; and d. records showing, for each service provider providing services, the name of a point of contact and that person’s telephone number; email, physical, and postal address; job title or position; dates of service; and, if applicable, the reason for termination.
Defendant must make these materials available to the Bureau upon the Bureau’s request.
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 VIII.
Notices IT IS FURTHER ORDERED that:
36.
Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. SettleIt, Inc., Central District of California Case No. 8:21-cv-00674,” and send them by overnight courier or first-class mail to the below address:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 and contemporaneously by email to:
The Enforcement Director may, in his or her discretion, modify any nonmaterial requirements of this Order (e.g., reasonable extensions of time and changes to reporting requirements) if he or she determines good cause justifies the modification. Any such modification by the Enforcement Director must be in writing. IX.
Cooperation with the Bureau IT IS FURTHER ORDERED that:
38.
Defendant must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendant must provide such information in its or its agents’ possession or control within 14 days of receiving a written request from the Bureau. Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 13 of 14 Page ID #:55
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[PROPOSED] STIPULATED FINAL JUDGEMENT AND ORDER CASE NO.: 8:21-CV-00674 X.
Compliance Monitoring IT IS FURTHER ORDERED that:
39.
Within 14 days of receipt of a written request from the Bureau, Defendant must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents. 40.
Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated with the conduct described the Complaint; and (c) compliance with this Order. The person interviewed may have counsel present.
41.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6.
XI.
Retention of Jurisdiction IT IS FURTHER ORDERED that:
42.
The Court will retain jurisdiction over this matter for the purpose of enforcing this Order.
IT IS SO ORDERED.
DATED this ___ day of ______________, 2021.
_______________________________
Hon. _______________________ United States District Court Judge 2nd July David O.Carter Case 8:21-cv-00674-DOC-DFM Document 7 Filed 07/02/21 Page 14 of 14 Page ID #:56