Sterling Infosystems, Inc.
Documents in this case
- Complaint · · 10 p.
- Stipulation · · 20 p.
Case summary
On November 22, 2019, the Consumer Financial Protection Bureau (Bureau) filed a proposed stipulated judgment with Sterling Infosystems, Inc. (Sterling), a privately-held Delaware corporation headquartered in New York. Sterling’s primary business is to prepare background screening reports on individual job applicants to assist employers in employment-making decisions. In its complaint, the Bureau alleged that Sterling violated the Fair Credit Reporting Act by (1) failing to employ reasonable procedures to ensure the maximum possible accuracy of the information about consumers it included in the consumer reports it prepared; (2) failing to maintain strict procedures to ensure that public record information about consumers that it included in consumer reports it prepared was complete and up to date or notify consumers, at the time that such information was reported, of the fact that public record information was being reported; and (3) reporting criminal history information and other adverse information about consumers outside of the reporting period allowed by the FCRA.
The stipulated final judgment and order was entered by the court on November 26, 2019 and requires Sterling to pay $6 million in monetary relief to affected consumers and a $2.5 million civil money penalty to the Bureau. The stipulated judgment also includes injunctive relief to prevent the claimed illegal conduct from recurring.
Complaint ()
PDF of this document (10 pages)
Page 2
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
Bureau of Consumer Financial Protection, Plaintiff,
v.
Sterling Infosystems, Inc., Defendant.
Case No. 1:19-cv-10824
COMPLAINT
The Bureau of Consumer Financial Protection (the “Bureau”) brings this action against Sterling Infosystems, Inc. (“Defendant”) under §§ 1054 and 1055 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5564 and 5565, and § 621(b)(1)(H) of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s(b)(1)(H), to obtain permanent injunctive relief, civil money penalties, consumer redress, and other relief for violations of §§ 605(a), 607(b), and 613(a) of the FCRA, 15 U.S.C. §§ 1681c(a), 1681e(b) and 1681k(a).
Jurisdiction and Venue 1.
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.
Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 1 of 10
Page 3
2.
Venue is proper in this district pursuant to 12 U.S.C. § 5564(f) because Defendant is located, resides, or does business in this District. Parties 3.
The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer financial products or services under Federal consumer financial laws. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority to enforce Federal consumer financial laws, including the FCRA. 12 U.S.C. §§ 5481(12)(F) and (14), 5564(a) and (b).
4.
Defendant is a privately held corporation headquartered in New York and incorporated in Delaware. At all times relevant to this Complaint, Defendant has done business in this District. Defendant conducts searches of public records in this District and prepares background reports on consumer applicants living and working in this District. It also does business throughout the United States. 5.
At all times relevant to this Complaint, Defendant has been a “consumer reporting agency” under § 603(f) of the FCRA, 15 U.S.C. § 1681a(f). Defendant has been engaged primarily in the business of generating and providing background-screening reports to clients throughout the United States with respect to consumers who applied for an employment opportunity with a client and who were the subject of the background-screening report generated by Defendant (“Applicant”). At all times relevant to this Complaint, the background-screening reports that Defendant has prepared are generally “consumer reports” under § 603(d) of the FCRA, 15 U.S.C. § 1681(d).
Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 2 of 10
Page 4
Factual Allegations 6.
When a client orders a consumer report from Defendant, Defendant obtains from either the client or the Applicant various personal identifiers of the Applicant—which may include name (first and last), date of birth, physical address, social security number, driver’s license number, and middle name—and uses such information to search public-record sources, including criminal records, civil court records, and driving records, depending on the information ordered by the client. When Defendant locates a public record on an individual that may relate to the Applicant, Defendant compares the information in the public record with the information it obtained on the Applicant. If Defendant determines that the public record matches the Applicant based on the information available to it, Defendant compiles that record, together with all other public records that are determined to be matches for the Applicant, into a consumer report, which is then provided to the client. Failure to Employ Reasonable Procedures to Assure Maximum Possible Accuracy
7.
Section 607(b) of the FCRA provides that whenever a consumer reporting agency prepares a consumer report, it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates. 15 U.S.C. § 1681e(b).
8.
In numerous instances between December 16, 2012 and July 31, 2016, Defendant failed to follow reasonable procedures to assure maximum possible accuracy of the criminal-record information in its consumer reports. Until October 2014, Defendant matched criminal records with Applicants based only on two personal identifiers, which could include first and last name (which together counted as one Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 3 of 10
Page 5
identifier) and date of birth. This policy and practice created a heightened risk of false positives because many commonly named individuals (e.g., John Smith) share the same first and last name and date of birth.
9.
In October 2014, Defendant adopted its first company-wide recordmatching policy specifically for Applicants with common names, which required that a public criminal record match an Applicant on the basis of at least three personal identifiers before that record was attributed to an Applicant. But even after October 2014 and continuing through July 31, 2016, Defendant continued in instances to erroneously match criminal records with common-name Applicants. 10.
These continuing errors resulted, in part, from insufficient training on the implementation of Defendant’s new common-name policy. The common-name policy itself underwent several clarification revisions after October 2014. 11.
Other instances of reporting errors involving both common and uncommon names were a result of another policy and practice followed by Defendant. This policy permitted matching criminal records with male Applicants based solely on a matching first and last name and matching address. This policy continued until October 2014 for Applicants with common names (when the third identifier requirement was implemented for common-name Applicants) and until June 2015 for Applicants with uncommon names (when Defendant stopped reporting criminal records based on only a name and address match). This created a heightened risk of false positives because some males with the same first and last name (i.e., a junior and senior) live at the same address.
12.
In other instances, on one of its platforms, Defendant included in the Social Security Trace portion of its reports the notation “*** HIGH RISK INDICATOR” Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 4 of 10
Page 6
next to an address, followed by a modifying descriptor placing the address into a particular category. These category descriptors included PSYCHIATRIC HOSPITAL, NURSING AND PERSONAL CARE FACILITY, CORRECTIONAL INSTITUTION, and SOCIAL SERVICES FACILITY, among others. The information was accompanied by a message that read: “END-USER IS NOTIFIED THAT FOR LEGAL AND PRACTICAL REASONS INFORMATION OBTAINED THROUGH A SOCIAL SECURITY NUMBER TRACE SHOULD BE USED ONLY TO VERIFY THE INFORMATION PROVIDED BY THE CONSUMER ON HIS/HER EMPLOYMENT APPLICATION. INFORMATION OBTAINED THROUGH A SOCIAL SECURITY NUMBER TRACE SHOULD NOT BE USED ALONE OR IN CONJUNCTION WITH ANY OTHER INFORMATION TO MAKE AN EMPLOYMENT DECISION.” Moreover, in some instances Defendant required clients to certify that they “shall not use Social Security Number trace results in any way, directly or indirectly, for the purpose of making employment decisions” or to “confirm[] that information obtained through a Social Security Number trace will not be used to disqualify applicants from employment or employees from continued employment.” The source for this “High Risk Indicator” information was a third party, who compiled it from publicly available sources. But Defendant did not implement or follow any procedures to verify the accuracy of these high-risk designations. 13.
Defendant’s procedures, failure to follow its procedures, or lack of procedures, as described above, led Defendant to report erroneous adverse items of information about Applicants in their consumer reports. These errors had the potential to result in the denial of employment, missed economic opportunities, and reputational harm to Applicants.
Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 5 of 10
Page 7
14.
Defendant maintains a disputes department where Applicants could dispute information on their consumer reports. When, as the result of a dispute, Defendant determined that criminal-record information did not in fact relate to an Applicant, Defendant would issue an amended consumer report without the record at issue. But some of these corrections may have come too late for the Applicant to be considered for the job. Applicants sometimes may have had to take lower-paying jobs as a result. Even when errors were corrected before the hiring process was complete, some Applicants may have lost wages during the time it took to resolve these errors. Failure to Maintain Strict Procedures to Ensure That Adverse Public Record Information Contained in its Consumer Reports Was Complete and Up to Date
15.
The FCRA contains special requirements for consumer reporting agencies like Defendant that furnish consumer reports containing public record information for employment purposes if that information is likely to have an adverse effect upon a consumer’s ability to obtain employment. Section 613(a) of the FCRA requires that a consumer reporting agency must either (1) notify the consumer, at the time such information is reported, of the fact that public record information is being reported, or (2) maintain “strict procedures” designed to ensure the reported public record information is “complete and up to date.” 15 U.S.C. § 1681k(a)(1) and (2). 16.
Defendant has not, in many instances, notified Applicants of the fact that it was reporting public-record information about the Applicant at the time that information was being reported, as required to satisfy § 613(a)(1). 17.
From December 2012 through July 31, 2016, for the same reasons that Defendant’s procedures were not reasonably designed to assure maximum possible Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 6 of 10
Page 8
accuracy, they also did not constitute “strict procedures” to ensure that public record information in its Consumer Reports complied with § 613(a)(2). Reporting of Outdated Adverse Information 18.
Unless an exemption in § 605(b) of FCRA applies, § 605(a) of the FCRA precludes a consumer reporting agency from including in a consumer report (1) records of arrest that from the date of entry antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is longer, and (2) any other adverse item of information (other than records of convictions of crimes) that antedates the report by more than seven years. 15 U.S.C. § 1681c(a)(2), (5). 19.
In numerous instances as described below, Defendant produced consumer reports containing adverse information that was more than seven years older than the report. In some instances, on one of its platforms, Defendant included in the Social Security Trace portion of its reports the notation “*** HIGH RISK INDICATOR” next to an address at which the Applicant lived and was “last seen” more than seven years before the report was generated. In some cases, such a designation may be an adverse item of information because it could cast the consumer in a negative or unfavorable light. Beginning in May 2012 and continuing through February 2013, Defendant’s policies required use of the “disposition” date as the start date for the seven-year reporting period for records of arrest and other non-conviction criminal-record information, rather than the “date of entry” for records of arrest or the date of the criminal charge for other non-conviction criminal-record information, as required under § 605(a) of the FCRA.
20.
The disposition date of a record of arrest or other non-conviction criminalrecord information is typically the date the final order of the court is entered with Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 7 of 10
Page 9
respect to that arrest or the associated criminal charge. The disposition date will almost always be later than the date of entry of the arrest or the date of the charge, sometimes many years later.
Violations of the Fair Credit Reporting Act Count I 21.
The FCRA requires consumer reporting agencies to follow reasonable procedures to assure maximum possible accuracy of the information contained in consumer reports. 15 U.S.C. § 1681e(b).
22.
By and through the acts and practices described in Paragraphs 6 through 14, Defendant violated § 607(b) of the FCRA, 15 U.S.C. § 1681e(b). Count II 23.
The FCRA provides that consumer reporting agencies that furnish a consumer report for employment purposes which includes items of information on consumers that are matters of public record and which are likely to have an adverse effect upon a consumer’s ability to obtain employment shall either: (1) notify the consumer, at the time that such information is reported, of the fact that public-record information is being reported, or (2) maintain “strict procedures designed to insure” that such information is “complete and up to date.” 15 U.S.C. § 1681k(a). 24.
By and through the acts and practices described in Paragraphs 6 through 17, Defendant violated § 613(a) of the FCRA, 15 U.S.C. § 1681k(a). Count III 25.
The FCRA prohibits consumer reporting agencies from including the following information in consumer reports: (a) records of arrest that from the date of entry antedate the report by more than seven years or until the governing statute of Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 8 of 10
Page 10
limitations has expired, whichever is longer; and (b) any other adverse item of information (other than records of conviction of crimes) which antedates the report by more than seven years. 15 U.S.C. § 1681c(a)(2) and (5). 26.
By and through the acts and practices described in Paragraphs 18 through 20, Defendant violated § 605(a)(2) and (5) of the FCRA, 15 U.S.C. § 1681c(a)(2) & (5). Demand for Relief The Bureau requests that the Court:
a.
permanently enjoin Defendant from committing future violations of the FCRA and enter such other injunctive relief as appropriate; b.
impose civil money penalties against Defendant; c.
award such relief as the Court finds necessary to redress injury to consumers resulting from Defendant’s violations of the FCRA, including but not limited to refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, and payment of damages;
d.
order Defendant to pay the Bureau’s costs incurred in connection with proceeding with this action; and e.
award additional relief as the Court may determine to be just and proper. Dated: November 22, 2019
Respectfully submitted,
Cara Petersen
Acting Enforcement Director
David Rubenstein Deputy Enforcement Director
Thomas Kim Assistant Deputy Enforcement Director Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 9 of 10
Page 11
_______S/ _____________ Ebony Sunala Johnson (VA 76890) Reid B. Horwitz (DC 440612) Enforcement Attorneys Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Telephone (Johnson): 202-435-7245 Telephone (Horwitz): 202-435-7752 Email: [email protected] Email: [email protected]
Attorneys for Bureau of Consumer Financial Protection
Case 1:19-cv-10824 Document 1 Filed 11/22/19 Page 10 of 10
Stipulation ()
PDF of this document (20 pages)
Page 12
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 1 of 20
, |
IN THE UNITED STATES DISTRICT COURT ens: | | FOR THE SOUTHERN DISTRICT OF NEW YORK ; \ { meee | lA 6 | Bureau of Consumer Financial Protection, Be NOV 2019 3 al Plaintiff, Case No. 1:19-cv-10824 V. =-RROPOSEDPSTIPULATED FINAL
JUDGMENT AND ORDER
Sterling Infosystems, Inc., Defendant.
The Bureau of Consumer Financial Protection (the “Bureau”) commenced this civil action on November 22, 2019, to obtain injunctive and monetary relief and civil penalties from Defendant Sterling Infosystems, Inc. The Complaint alleges violations of §§ 605(a), 607(b), and 613(a) of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. 88 1681c(a), 1681e(b) and 1681k(a), in connection with Defendant’s preparation and sale of background-screening reports.
The Bureau and Defendant agree to 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.
Page 13
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 2 of 20
THEREFORE, it is ORDERED:
FINDINGS 1. This Court has jurisdiction over the parties and the subject matter of this action.
2. Defendant neither admits nor denies any 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 it 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: a. “Affected Consumers” means the approximately 7,100 Applicants: i. Who, based on Defendant’s Salesforce disputes data, between December 16, 2012 and July 31, 2016, disputed a criminal record on their Consumer Report prepared by Defendant resulting in a Qualifying Dispute; and ii. Whose amended Consumer Report did not contain any criminal
records.
Page 14
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 3 of 20
b. “Applicant” means a consumer who applied for an Employment Opportunity with a Client and who was the subject of a Consumer Report generated by Defendant between December 16, 2012 and July 31, 2016.
c. “Board” means Defendant’s duly-elected and acting Board of Directors.
d. “Consumer Report” has the meaning provided in the FCRA, 15 U.S.C. § 1681 et seqg., and any amendments thereto. As of the date of entry of this Order, “Consumer Report” is defined under the FCRA as any written, oral, or other communication of any information by a Consumer Reporting Agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for (A) credit or insurance to be used primarily for personal, family, or household purposes; (B) employment purposes; or (C) any other purpose authorized under § 604, 15 U.S.C. § 1681b.
e. “Consumer Reporting Agency” or “CRA” has the meaning provided in the FCRA, 15 U.S.C. § 1681 et seq., and any amendments thereto. As of the date of entry of this Order, “Consumer Reporting Agency” is defined under the FCRA as any person which, for monetary
fees, dues, or on a cooperative nonprofit basis, regularly engages in
Page 15
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 4 of 20
whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing Consumer Reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing Consumer Reports.
f. “Defendant” means Sterling Infosystems, Inc., doing business as Sterling, and its successors and assigns.
g. “Effective Date” means the date on which this Order is issued.
h. “Client” means a client of Defendant that obtains a Consumer Report on an Applicant from Defendant.
i. “Employment Opportunity” means an employment opportunity that resulted in a Client ordering one or more Consumer Reports from Defendant for the Client’s use in considering Applicant(s) for the employment opportunity. The employment opportunity could represent, among other things, a different position or promotion for an Applicant.
j. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Bureau of Consumer Financial Protection, or his or her delegate.
k. “HRI Designations” means High Risk Indicator Designations or other similar characterization of an address that an Applicant may have lived at as high risk as applied by an independent third party to certain
consumer address information.
Page 16
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 5 of 20
l. “Qualifying Dispute” means a dispute submitted between December 16, 2012 and July 31, 2016 that was resolved with the determination that a criminal record on the Consumer Report did not belong to the Applicant.
mn. “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 RELIEF I Conduct Requirements IT IS FURTHER 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, may not violate 88 605(a)(2) and (5), 607(b), and 613(a) of the FCRA, 15 U.S.C. §§ 1681c(a)(2) and (5), 1681e(b), 1681k(a), and must take the following affirmative actions:
a. Whenever Defendant prepares a Consumer Report, follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the Consumer Report relates as required by § 607(b) of the FCRA, 15 U.S.C. § 1681e(b);
b. Whenever Defendant furnishes a Consumer Report for employment
purposes for which it compiles and reports items of information on
Page 17
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 6 of 20
consumers which are matters of public record and are likely to have an adverse effect upon a consumer's ability to obtain employment, either (1) notify consumers in accordance with § 613(a)(1) of the FCRA, 15 U.S.C. § 1681k(a)(1); or (2) maintain strict procedures designed to ensure that whenever public record information which is likely to have an adverse effect on a consumer’s ability to obtain employment is reported it is complete and up-to-date as required by § 613(a)(2) of the FCRA, 15 U.S.C. § 1681k(a)(2);
c. Follow procedures to prevent the reporting of outdated non-conviction adverse items of information, as proscribed by 8 605(a)(2) and (5) of the FCRA, 15 U.S.C. § 1681¢;
d. For five (5) years from the Effective Date, remain registered on the Bureau’s Company Portal to the extent that such registration does not entail material changes to a registrant’s obligations from those currently in place. Defendant, in connection with responding to consumer complaints and inquiries submitted through the Portal, whether acting directly or indirectly, shall comply with the substantive requirements of § 1034(b) and (c) of the CFPA, 12 U.S.C. 88 5534(b) and (c); and
e. For five (5) years from the Effective Date, not provide HRI
Designations to its clients.
Page 18
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 7 of 20
II Compliance Committee IT IS FURTHER ORDERED that:
7. Defendant must establish a Compliance Committee. Within fourteen (14) days of the Effective Date, Defendant must provide in writing to the Enforcement Director the name of each member of the Compliance Committee. If there is a change of membership to the Compliance Committee in the five (5) years following the Effective Date, Defendant must submit the name of any new member in writing to the Enforcement Director.
8. For five (5) years, the Compliance Committee will be responsible for monitoring and coordinating Defendant’s adherence to the provisions of this Order. During that time, the Compliance Committee must meet at least once every two months and must maintain minutes of its meetings. Defendant must include a summary of the Compliance Committee’s work in the annual Compliance Reports submitted by Defendant, as discussed in Section VII. The Board must oversee the Compliance
Committee.
Page 19
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 8 of 20
iil Role of the Board IT IS FURTHER ORDERED that:
9. The Board, or a committee thereof, must review all submissions (including
plans, reports, programs, policies, and procedures) required by this Order prior to submission to the Bureau.
10. Although this Order requires Defendant to submit certain documents for the review or non-objection by the Enforcement Director, the Board will have the ultimate responsibility for proper and sound management of Defendant and for ensuring that Defendant complies with Federal consumer financial law and this Order.
11. Ineach instance that this Order requires the Board to ensure adherence to, or perform certain obligations of Defendant, the Board must:
a. Authorize whatever actions are necessary for Defendant to fully comply with the Order;
b. Require timely reporting by management to the Board on the status of compliance obligations; and
c. Require timely and appropriate corrective action to remedy any material non-compliance with any failures to comply with Board
directives related to this Section.
Page 20
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 9 of 20
MONETARY PROVISIONS IV Order to Pay Redress IT IS FURTHER ORDERED that:
12. Within ten (10) days of the Effective Date, Defendant must reserve or deposit into a segregated deposit account $6 million for the purpose of providing redress to Affected Consumers as required by this Section (“Redress Fund”).
13. Within forty-five (45) days of the Effective Date, Defendant must submit to the Enforcement Director for review and non-objection a comprehensive written plan for providing redress to Affected Consumers 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 direct Defendant to revise it. If the Enforcement Director directs Defendant to revise the Redress Plan, Defendant must make the revisions and resubmit the Redress Plan to the Enforcement Director within thirty (30) 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.
14. The Redress Plan must:
a. Specify the methodology for identifying the Affected Consumers, including through Defendant’s Salesforce dispute database and any
other records that identify Applicants who disputed the accuracy of
Page 21
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 10 of 20
Defendant’s Consumer Reports based on the inclusion of criminal records that did not belong to them;
b. Describe the notification Defendant will mail to all Affected Consumers with each redress payment (“Redress Notice”);
c. Require Defendant to compensate by check each Affected Consumer on a pro rata basis, with each Affected Consumer receiving a share of the Redress Fund that is proportionate to the number of Qualifying Disputes involving each Affected Consumer;
d. Describe how Defendant will contact Affected Consumers for the purpose of providing redress, and the steps Defendant will take with respect to Affected Consumers whose mailed Redress Notice may be returned to Defendant as undeliverable for any reason, including, at a minimum, using the National Change of Address System to attempt to obtain a current physical address for any Affected Consumer and to promptly re-mail all returned letters to current physical addresses;
e. Require that if a redress check for any Affected Consumer is returned to Defendant, or if a current mailing address cannot be identified using the National Change of Address System, Defendant must retain the redress amount of such consumer for a period of one hundred eighty (180) days from the date the check was originally mailed, during which period such amount may be claimed by such consumer upon
appropriate proof of identity;
Page 22
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 11 of 20
f. Provide that Defendant shall pay all costs of administering the Redress Plan as required by this Section; and
g. Consistent with the terms of this Order, set forth all procedures, deadlines, and timeframes for completing each step of the plan.
15. Theredress payments described herein constitute compensation for damage or harm that was or may have been caused by a violation or potential violation of law.
16. After completing the Redress Plan, if the amount of redress provided to Affected Consumers is less than the Redress Fund, within thirty (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 the Redress Fund.
17. 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 no right to challenge any actions that the Bureau or its representatives may take under this paragraph.
18. Defendant may not condition the payment of any redress to any Affected
Consumer under this Order on that Affected Consumer waiving any right.
Page 23
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 12 of 20
V Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
19. Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant must pay a civil money penalty of $2.5 million to the Bureau.
50. Within ten (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.
21. 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).
02. 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.
23. 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
Page 24
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 13 of 20
Defendant benefit by, any offset or reduction of any compensatory monetary remedies imposed in a 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 thirty (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.
VI
Additional Monetary Provisions IT IS FURTHER ORDERED that:
24. Inthe 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.
25. 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.
26. The facts alleged in the Complaint will be taken as true and be given
collateral estoppel effect, without further proof, in any subsequent civil litigation by or
Page 25
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 14 of 20
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.
27, 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.
28. Under 31 U.S.C. § 7701, Defendant, unless it already has done so, must furnish to the Bureau its taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
29. For ten (10) years from the Effective Date, within thirty (30) days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendant rust 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 consumers or classes of
consumers to whom that redress has been or will be paid.
Page 26
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 15 of 20
COMPLIANCE PROVISIONS Vil Reporting Requirements IT IS FURTHER ORDERED that:
30. For ten (10) years from the Effective Date, 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, if practicable, at least thirty (30) days before the development, but in any case no later than fourteen (14) days after the development.
31. Within 7 days of the Effective Date, Defendant must designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with Defendant.
32. For ten (10) years from the Effective Date, Defendant must report any change in the information required to be submitted under Paragraph 31 at least thirty (30) days before the change or as soon as practicable after learning about the change, whichever is sooner.
33. Within one hundred twenty (120) days of the Effective Date, and again on each of the first through fifth anniversaries of the Effective Date, Defendant must
submit to the Enforcement Director an accurate written compliance progress report
Page 27
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 16 of 20
(“Compliance Report”) that has been approved by the Board, or a committee thereof, 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 VILL, unless previously submitted to the Bureau.
Vill Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
34. Within seven (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.
35. Within thirty (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, or other agents and representatives who have responsibilities related to the subject matter of the Order.
36. For five (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 VIL, any future board members and executive officers, as well as to any
Page 28
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 17 of 20
managers, employees, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities.
37. 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 et seq., within thirty (30) days of
delivery, from all persons receiving a copy of this Order under this Section.
IX Recordkeeping IT IS FURTHER ORDERED that:
38. Defendant must create, or if already created, retain, for at least five (5) years from the Effective Date, the following business records: 4. All documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau.
b. All documents and records pertaining to the Redress Plan, described in Section IV above.
39. Defendant must retain the documents identified in Paragraph 38 for at least five (5) years from the Effective Date. 40. Defendant must make the documents identified in Paragraph 38 available
to the Bureau upon the Bureau’s request.
Page 29
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 18 of 20
xX Notices IT IS FURTHER ORDERED that:
41. 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. Sterling Infosystems, Inc., Case No. 1:19-cv-10824,” 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 NW
Washington DC 20552
xI Cooperation with the Bureau IT IS FURTHER ORDERED that:
42. Defendant must cooperate fully to help the Bureau determine the identity and address of, and the amount of injury sustained by, each Affected Consumer based on information in Sterling’s or its agents’ possession or control. Defendant must provide
such information within thirty (30) days of receiving a written request from the Bureau.
Page 30
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 19 of 20
XII Compliance Monitoring IT IS FURTHER ORDERED that, to monitor Defendant’s compliance with this Order:
43. Within fourteen (14) days of receipt of a written request from the Bureau, Defendant must submit additional compliance reports or other requested nonprivileged information, related to requirements of this Order, which mist be sworn under penalty of perjury; provide sworn testimony related to requirements of this Order and Defendant’s compliance with those requirements; or produce non-privileged documents related to requirements of this Order and Defendant's compliance with those requirements.
44. Defendant must permit Bureau representatives to interview about the requirements of this Order and Defendant's compliance with those requirements any employee or other person affiliated with Defendant who has agreed to such an interview. The person interviewed may have counsel present.
45. Nothing in this Order will limit the Bureau’s lawful use of compulsory
process, under 12 C.F.R. § 1080.6.
Page 31
Case 1:19-cv-10824-AJN Document 7 Filed 11/26/19 Page 20 of 20
XII Retention of Jurisdiction IT IS FURTHER ORDERED that:
46. The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
IT IS SO ORDERED.
nN DATED this day of OF
,20.\"| k MT
United Grats District Court Judge