Transworld Systems, Inc.
Documents in this case
- Consent order · · 32 p.
- Stipulation · · 4 p.
Case summary
On September 18, 2017, the Bureau issued a consent order against Transworld Systems (TSI), the debt collector for several National Collegiate Student Loan Trusts, for filing false or misleading affidavits, providing false or misleading testimony, and filing debt collection lawsuits when the companies could not prove the debt was owed. The Bureau’s order requires injunctive relief and for TSI to pay a $2.5 million civil penalty. On the same day, the Bureau filed a complaint and proposed consent judgment against National Collegiate Student Loan Trusts.
Consent order ()
PDF of this document (32 pages)
Page 2
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 1 of 32
UNITED STATES OF AMERICA CONSUMER FINANCIAL PROTECTION BUREAU
ADMINISTRATIVE PROCEEDING File 2017-CFPB-0018
In the Matter of: CONSENT ORDER
TRANSWORLD SYSTEMS, INC.
I e Overview
The Consumer Financial Protection Bureau (Bureau) has reviewed the debt collections litigation practices of the Attorney Network business unit of Transworld Systems, Inc. (“TSI”) (“Respondent”), the agent and Service Provider for fifteen (15) Delaware statutory trusts referred to as the National Collegiate Student Loan Trusts (“NCSLTs”, or “the Trusts”, which are the National Collegiate Master Student Loan Trust, NCSLT 2003-1, NCSLT 2004-1, NCSLT 2004-2, NCSLT 2005-1, NCSLT 2005-2, NCSLT 2005-3, NCSLT 2006-1, NCSLT 2006-2, NCSLT 2006-3, NCSLT 2006-4, NCSLT 2007-1, NCSLT 2007-2, NCSLT 2007-3, and NCSLT 2007-4), and has identified violations of sections 1031(a) and 1036(a)(1) of the Consumer Financial Protection Act of 2010 (CFPA). Under sections 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, the
Bureau issues this Consent Order (Consent Order).
To collect on defaulted private student loans, Law Firms engaged by
Respondent’s Attorney Network business unit filed debt Collections Lawsuits in state
Page 3
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 2 of 32
courts across the country on behalf of the Trusts. In support of many of these lawsuits, Respondent executed affidavits that falsely claimed personal knowledge of the account records and the consumer’s debt, and in many cases, personal knowledge of the chain of assignments establishing ownership of the loans. In addition, since November 1, 2014, Law Firms hired by Respondent filed hundreds of debt Collections Lawsuits without the
documentation necessary to prove Trust ownership of the loans. II Jurisdiction
i The Bureau has jurisdiction over this matter under sections 1053 and 1055
of the CFPA, 12 U.S.C. 8§ 5563, 5565.
III Stipulation
2. Respondent has executed a “Stipulation and Consent to the Issuance of a Consent Order,” dated September 14, 2017 (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 sections 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
Page 4
d.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 3 of 32
The following definitions apply to this Consent Order:
“Affiant” means any signatory to an Affidavit, signing in his or her capacity as an employee or agent of Respondent, but excluding one signing solely as a notary or witness to the act of signing.
“Affidavit” means any sworn statement filed with a court in connection with a Collections Lawsuit.
“Board” means TSI’s duly elected and acting Board of Directors.
“Clearly and Prominently” means:
i. as to written information: written in a type size and location sufficient for an ordinary consumer to read and comprehend it, and disclosed in a manner that would be easily recognizable and understandable in language and syntax to an ordinary consumer; if the information is contained in a multi-page print document, the disclosure appears on the first page.
ii. as to information presented orally: spoken and disclosed in a volume, cadence, and syntax sufficient for an ordinary consumer to hear and comprehend.
“Collections Lawsuits” means attempts by a Law Firm engaged by Respondent’s Attorney Network business unit, for an account owned or alleged to be owned by a Trust, through judicial processes in the United States of America, to collect or establish a Consumer’s liability for a Debt.
“Consumer” means any natural person obligated or allegedly obligated to pay
any Debt.
Page 5
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 4 of 32
. “Debt” means any obligation or alleged obligation of a Consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
. “Effective Date” means the date on which the Consent Order is issued. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his/her delegate.
“Law Firm” means a law firm engaged by Respondent’s Attorney Network business unit to collect student loan Debt on behalf of the National Collegiate Student Loan Trusts.
. “Regional Director” means the Regional Director for the Northeast Region for the Office of Supervision for the Consumer Financial Protection Bureau, or his/her delegate.
“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.
. “Relevant Period” includes the period from November 1, 2014 to April 25, 2016.
. “Respondent” means Transworld Systems, Inc., and its successors and
assigns.
Page 6
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 5 of 32
o. “Service Providers” means any service provider, as defined in section 1002(26) of the CFPA, 12 U.S.C. § 5481, that provides or provided services with respect to the servicing of the student loans owned by a NCSLT.
V.
Bureau Findings and Conclusions
The Bureau finds the following:
4. The National Collegiate Student Loan Trusts (“NCSLTs” or “the Trusts”) comprise fifteen (15) Delaware statutory trusts created between 2001 and 2007. The basic purpose of each Trust is to acquire a pool of student loans, enter into the so-called trust-related agreements, and provide for the administration of the Trusts and the servicing of student loans.
5. The Trusts do not have any employees and all actions taken by the Trusts in connection with loan servicing and collecting Debt are carried out by third parties.
6. Debt-collection activities on behalf of the Trusts are carried out by the successor special servicer’s sub-servicer pursuant to servicing agreements with the successor special servicer.
a, Sub-servicers that executed and notarized the deceptive affidavits did so as Service Providers and agents of the Trusts.
8. Law Firms that filed lawsuits on behalf of the Trusts did so as Service
Providers and agents of the Trusts.
Page 7
10.
1;
12.
13.
14.
16.
17.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 6 of 32
Respondent Transworld Systems, Inc. (TSI) is incorporated under the laws of the State of California and maintains a principal place of business in Ft. Washington, Pennsylvania.
TSI maintains an office in Peachtree Corners, Georgia, where its employees execute and notarize affidavits for Collections Lawsuits brought on behalf of the Trusts.
A national network of Law Firms engaged by Respondent file and prosecute Collections Lawsuits on behalf of the Trusts in courts across the country. TSI has operated as the successor sub-servicer to the successor special servicer of the Trusts since November 1, 2014.
TSI is a “covered person” under 12 U.S.C. § 5481(6) because it is engaged in the collection of debt and is a Service Provider. 12 U.S.C. § 5481(15)(A)(x), (26).
TSI is an agent and Service Provider of the Trusts.
FALSE AND MISLEADING AFFIDAVITS AND TESTIMONY
In connection with collecting or attempting to collect Debt from Consumers, between November 1, 2014 and April 25, 2016, Law Firms hired by Respondent on behalf of the Trusts initiated 37,689 Collections Lawsuits in courts across the country on behalf of the Trusts.
In support of the Collections Lawsuits, Law Firms submitted Affidavits executed by Respondent and documents in support of the Trusts’ claims that Consumers owed Debts to a Trust.
Respondent executed and notarized Affidavits—often with attached
exhibits—that were used by Law Firms in many of the Collections Lawsuits
Page 8
18.
19.
20.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 7 of 32
brought on behalf of the Trusts between November 1, 2014 and April 25, 2016.
In these Affidavits, the Affiants swore that they had personal knowledge of the education loan records evidencing the Debt. In fact, in numerous instances, Affiants lacked personal knowledge of the education loan records evidencing the Debt when they executed the Affidavits.
The Affiants also asserted that they were authorized and competent to testify about the Consumers’ Debts through review of and “personal knowledge” of the business records, including electronic data in their possession. In fact, in certain instances, Affiants lacked personal knowledge of the business records, including the electronic data, showing that Consumers owed Debts to the Trusts. Affiants were instructed to review certain data on a computer screen as part of an effort to verify some information in the Affidavits about the Debts. Affiants, however, did not always know the source of the data on that screen, how the data was obtained or maintained, whether it was accurate, or whether that data meant that the Debt was in fact owed to the Trusts.
Each Affiant also swore that he/she had “personal knowledge of the record management practices and procedures of Plaintiff [the Trust] and the practices and procedures Plaintiff requires of its loan servicers and other agents.” In fact, certain Affiants lacked personal knowledge of the record management practices and procedures of the Trusts and the practices and
procedures the Trusts required of its loan servicers and other agents.
Page 9
Zils
wis
23.
24.
25.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 8 of 32
In many Affidavits, the Affiants also stated that “I have reviewed the chain of title records as business records” regarding the relevant account. In some cases, Affiants did not possess the chain of title records but reviewed “chain of title” records that were found online on a government portal maintained by the Securities and Exchange Commission. In numerous instances, Affiants did not review the chain of title records prior to executing the Affidavits.
In certain Affidavits, the Affiants asserted that they had personal knowledge that the loans were transferred, sold, and assigned to the plaintiff Trusts on dates certain. In fact, in numerous instances, Affiants lacked personal knowledge of the chain of assignment records necessary to prove that the relevant Trust owned the subject loans.
In some instances, certain Affiants complained to supervisors that they did not have personal knowledge of the representations made in the Affidavits. These affiants continued to execute Affidavits, however, for fear of losing their jobs.
Affiants also provided live testimony in court, purportedly based on personal knowledge, similar to the statements made in the Affidavits as described in Paragraphs 18-22.
FILING LAWSUITS WITHOUT THE INTENT OR ABILITY TO PROVE THE CLAIMS, IF CONTESTED
From November 1, 2014 to April 25, 2016, on behalf of the Trusts, Law
Firms filed numerous Collections Lawsuits against Consumers even though
Page 10
26.
27).
28,
29.
30.
ai.
32.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 9 of 32
the complete documentation needed to prove that the Trusts owned the loans did not exist.
In these lawsuits, documentation of a complete chain of assignment evidencing that the subject loan was transferred to and owned by the Trust was lacking.
In addition, Law Firms hired by Respondent on behalf of the Trusts filed numerous Collections Lawsuits where the loans in question were disbursed to the Consumers after the loans allegedly were transferred to the Trusts according to the chain of assignment documents. On numerous occasions, Law Firms hired by Respondent filed Collections Lawsuits even though the promissory note to prove that a Debt was owed did not exist.
For each Collections Lawsuit described in Paragraphs 25-28, Law Firms hired by Respondent could not prove that a Debt was owed to the Trusts, if contested.
Violations of the Consumer Financial Protection Act Covered persons are prohibited from engaging “in any unfair, deceptive, or abusive act or practice” in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
An act or practice is deceptive under the CFPA if it involves a material representation or omission that misleads, or is likely to mislead, a consumer acting reasonably under the circumstances.
An act or practice is unfair if “(A) the act or practice causes or is likely to
cause substantial injury to consumers which is not reasonably avoidable by
Page 11
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 10 of 32
consumers; and (B) such substantial injury is not outweighed by countervailing benefits to consumers or competition.” 12 U.S.C.
§ 5531(c)(1).
FALSE AND MISLEADING COLLECTION AFFIDAVITS AND TESTIMONY
33. In numerous instances, in connection with collecting or attempting to collect Debt from Consumers, Respondent executed Affidavits that were used by Law Firms with many of the Collections Lawsuits filed by Law Firms on behalf of the Trusts in courts across the country, and in live testimony, Respondent represented, directly or indirectly, expressly or by implication, that:
a. Affiants had personal knowledge of the account records and the Debt;
b. Affiants had personal knowledge of the chain of assignment records evidencing Trust ownership of the subject loan; and
c. Affiants had personal knowledge of the record management practices and procedures of the Trusts and all prior servicers.
34. In fact, as described in Paragraphs 18 to 24, in numerous instances, these representations were either false or the Affiant did not have a basis for making the representation.
35. The representations are material because they are likely to affect a Consumer’s choice or conduct regarding how to respond to a Collections Lawsuit and are likely to mislead a Consumer acting reasonably under the
circumstances.
Page 12
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 11 of 32
36. Thus, representations by Respondent, as described in Paragraphs 18-24, constitute deceptive acts or practices in violation of sections 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
FILING LAWSUITS WITHOUT THE INTENT OR ABILITY TO PROVE THE CLAIMS, IF CONTESTED
37. Innumerous instances, in connection with collecting or attempting to collect Debt from Consumers, Respondent, acting through the Law Firms hired by Respondent on behalf of the Trusts, represented, directly or indirectly, expressly or by implication, that it could be proven in the Collections Lawsuits that the Trusts owned the loans in question and that the Consumers in question owed Debts to the Trusts, if contested.
38. In fact, in numerous instances, Respondent lacked the complete chain of assignment documentation needed to prove Trust ownership of the subject loans and the promissory note needed to prove the existence of certain loans.
39. The representations are material because they are likely to affect a Consumer’s choice or conduct regarding how to respond to a lawsuit and are likely to mislead a Consumer acting reasonably under the circumstances.
40. Thus, Respondent’s representations, as described in Paragraphs 25-29, constitute deceptive acts or practices in violation of sections 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. 8§ 5531(a), 5536(a)(1)(B).
41. Inaddition, Respondent’s acts and practices, caused or were likely to cause
substantial injuries to consumers.
Page 13
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 12 of 32
42. The injuries to consumers included, but were not limited to, all payments made, including garnishments of wages and bank accounts, to settle Debts not enforceable.
43. The injuries to consumers were not reasonably avoidable by consumers and were not outweighed by any countervailing benefits to consumers or to competition.
44. Thus, Respondent’s conduct, as described in Paragraph 25-29, constitutes unfair acts or practices in violation of sections 1031(c) and 1036(a)(1)(B ) of
the CFPA, 12 U.S.C. §§ 5531(c)(1), 5536(a)(1)(B).
ORDER VI Conduct Provisions
IT IS ORDERED, under sections 1053 and 1055 of the CFPA, that:
45. Respondent and its officers, Service Providers, agents, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, may not violate sections 1031 and 1036 of the CFPA, 12 U.S.C. 88 5531, 5536, and must take the following affirmative actions:
a. Respondent shall take all actions necessary to comply with the terms of the Consent Order.
b. Respondent must require that any Law Firm it retains in connection with the collection of student loans owned by the Trusts agree to abide by the terms and conditions of the Consent Order.
c. Within ninety (90) days of the Effective Date, Respondent must identify all Collections Lawsuits that were filed between November 1,
Page 14
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 13 of 32
2014 and the Effective Date and that are missing the documentation
described in subsection (f)(i)and (ii) of this Paragraph.
d. Within ninety (90) days of the Effective Date, Respondent must identify all Collections Lawsuits that were filed seeking Debt outside the statute of limitations and provide this information to the successor special servicer or any other Service Provider of the Trusts.
e. Within one-hundred twenty (120) days of the Effective Date, Respondent must provide to the successor special servicer and to the Bureau for each Consumer named in the suits identified in Paragraph 45c and 45d: the Consumer’s name, all available contact information for the Consumer (including information in the possession of the attorneys who filed the suit), and the total amount of all payments made by the Consumer on or after the date on which the suit was filed.
f. Respondent and its officers, agents, Service Providers, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, may not initiate a Collections Lawsuit to collect Debt unless Respondent possesses:
i. the documentation necessary to prove that a Trust owns the loan, including but not limited to, documentation reflecting the complete chain of assignment from the Debt’s originator to the specific Trust claiming ownership; and
ii. a document signed by the Consumer, such as a promissory note, evidencing the agreement to pay the loan forming the basis of the
Debt.
Page 15
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 14 of 32
g. Respondent and its officers, agents, Service Providers, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, may not cause Law Firms hired by Respondent on behalf of the Trusts to initiate a Collections Lawsuit to collect on a loan for which the applicable statute of limitations has expired.
h. Respondent shall establish written policies requiring Law Firms to confirm that the applicable statute of limitations has not expired at the time of the filing of the Collections Lawsuit;
i. Respondent shall require Law Firms to provide a quarterly report to Respondent that includes, for each Collections Lawsuit, any data relevant to determining the applicable statute of limitations, such as date of lawsuit, date of default, and date of last payment, as well as identifies any lawsuits in which a consumer alleges in his pleadings that the lawsuit was filed outside the statute of limitations.
j. Respondent shall not collect any Debt through a Collections Lawsuit that Respondent knows or learns was filed outside the statute of limitations, and if any such cases are pending, Respondent shall seek the immediate withdrawal or dismissal of the lawsuit.
k. Respondent and its officers, agents, Service Providers, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, may not cause Law Firms hired by
Respondent on behalf of the Trusts to collect any Debt through
Page 16
46.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 15 of 32
Collections Lawsuits that Respondent or its agents have any reason to
believe may be unenforceable.
]. Respondent, its officers, agents, Service Providers, servants,
employees, and attorneys, and all other persons in active concert or
participation with any of them, who receive actual notice of this
Consent Order, whether acting directly or indirectly, are permanently
restrained and prohibited from, in connection with the collection of a
Debt, executing any Affidavit containing any misrepresentations,
including false statements that:
i.
il.
ili.
iv.
Vv.
Vi.
the Affiant is familiar with or has personal knowledge of the Consumer’s education loan records or the maintenance of those records;
the Affiant has personal knowledge of the Consumer’s debt;
the Affiant has personal knowledge of the loan’s chain of assignment or ownership;
the Affiant has personal knowledge of the documents relating to the loan’s chain of assignment or ownership;
the Affidavit has been properly notarized if the Affidavit was not executed in the presence of a notary or if the notarization was otherwise not compliant with applicable notary laws; or
certain documents or records concerning the Debt forming the
basis of the Collections Lawsuit have been reviewed by the Affiant.
Respondent, its officers, agents, Service Providers, servants, employees, and
attorneys, and all other persons in active concert or participation with any
Page 17
47.
48.
49.
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 16 of 32
of them, who receive actual notice of this Consent Order, whether acting directly or indirectly, are permanently restrained and prohibited from, in connection with the collection of a Debt, providing any testimony that contains any misrepresentations, including false statements that the witness:
a. is familiar with or has personal knowledge of the Consumer’s education loan records or the maintenance of those records; b. has personal knowledge of the Consumer’s debt; c. has personal knowledge of the loan’s chain of assignment or ownership; or d. has personal knowledge of the documents relating to the loan’s chain of assignment or ownership.
If Respondent determines that it engages in any conduct prohibited by this Order, including but not limited to Paragraphs 45-46 of this Order, Respondent promptly will take the necessary steps to ensure that it ceases any and all practices that violate this Order. Within ten (10) days of making the determination described in Paragraph 47 Respondent must submit to the Regional Director a report detailing (a) the practices that violate the Order, (b) the specific agents engaged in the practices in question, and (c) a plan to ensure that the practices cease and to remediate any harm resulting from the practices. With regard to pending Collections Lawsuits filed by a Law Firm in which Respondent executed an Affidavit that was filed in support of the pending
Collection Lawsuit and that contains any misrepresentations—including but
Page 18
50.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 17 of 32
not limited to false statements that the Affiant: (1) is familiar with or has personal knowledge of the Consumer’s education loan records or the maintenance of those records, (2) has personal knowledge of the consumer’s indebtedness, (3) has personal knowledge of the loan’s chain of assignment or ownership, (4) has personal knowledge about the maintenance of documents relating to the loan’s chain of assignment or ownership, or (5) has attached as an exhibit a true and correct copy of a document—Respondent shall take the steps necessary, including getting permission from the successor special servicer, to direct Law Firms acting on behalf of the Trusts to withdraw such Affidavit unless the Trusts dismiss the suit in which the Affidavit was filed. Respondent shall take the steps necessary, including getting permission from the successor special servicer, to direct Law Firms acting on behalf of the Trusts to notify the court of the following in writing and must also simultaneously provide the court with a copy of the Consent Order entered into between the Bureau and the Respondent: “Plaintiff withdraws the affidavit of [insert name of Affiant] pursuant to Consent Order entered into by the Consumer Financial Protection Bureau and Transworld Systems, Inc.”
With regard to Collections Lawsuits that were filed in which Respondent executed an Affidavit that was filed with a court or in arbitration, and a judgment was entered, that contained any misrepresentations—including but not limited to false statements that the Affiant: (1) is familiar with or has personal knowledge of the Consumer’s education loan records or the
maintenance of those records, (2) has personal knowledge of the
Page 19
51.
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 18 of 32
Consumer’s indebtedness, (3) has personal knowledge of the loan’s chain of assignment or ownership, (4) has personal knowledge about the maintenance of documents relating to the loan’s chain of assignment or ownership, or (5) has attached as an exhibit a true and correct copy of a document—Respondent must instruct the Law Firms to cease postjudgment enforcement activities and Respondent will take the steps necessary, including getting permission from the successor special servicer, to instruct the Law Firms acting on behalf of the Trusts to seek to remove, withdraw, or terminate any active wage garnishment, bank levies, and similar means of enforcing those judgments or settlements as well as cease accepting settlement payments related to any such Collections Lawsuits. Respondents must cooperate in all respects with any directive from the successor special servicer acting on behalf of the Trusts to: a. Make certain disclosures in connection with the collection of Debt owned by the Trusts;
b. Withdraw any Affidavit or Collection Lawsuit; or c. Provide loan information or documents to the successor special servicer, including but not limited to, information and documents related to:
i. Whether certain loans owned by the Trusts are no longer legally enforceable because the applicable statute of limitations has expired;
ii. Whether Collections Lawsuits have been filed on any loans where
sufficient documentation, including signed promissory notes and
Page 20
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 19 of 32
documentation reflecting the complete chain of assignment from the Debt’s originator to the Collection Lawsuit’s named plaintiff, is not in the possession, custody or control of the Collection Lawsuit’s named plaintiff to prove the existence of the Debt owed to the named plaintiff, or where the applicable statute of limitations has
expired; and
iii. Whether judgments were obtained in Collections Lawsuits described in Paragraph 51(c)(ii) and the identity of Consumers from whom the Trusts obtained payments in response to those Collections Lawsuits, and the specific amounts collected from these
Consumers.
Vil Compliance Plan
IT IS FURTHER ORDERED that:
52. Within ninety (90) days of the Effective Date, Respondent must submit to the Regional Director for review and determination of non-objection a compliance plan designed to ensure that the Attorney Network business unit of Respondent complies with all applicable Federal consumer financial laws with respect to Collections Lawsuits and the terms of this Consent Order (Compliance Plan). The Compliance Plan must include, at a minimum:
a. Detailed steps for addressing each action required by this Consent
Order;
Page 21
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 20 of 32
b. Comprehensive, written policies and procedures designed to prevent violations of Federal consumer financial laws and associated risks of harm to Consumers with respect to Collections Lawsuits;
c. An effective employee training program required for all employees with any involvement in Collections Lawsuits, including but not limited to Affiants, whose duties include reviewing, executing, preparing, processing, verifying, , or notarizing of Affidavits that includes regular, specific, comprehensive training in Federal consumer financial laws commensurate with individual job functions and duties;
d. Implementation of reasonable and appropriate written policies and procedures to ensure the proper notarization processes for Affidavits, including that notaries place the Affiants under oath and witness their signatures;
e. Implementation of reasonable and appropriate written policies and procedures to ensure that Affiants verify the accuracy of each statement made in an Affidavit before executing the Affidavit;
f. Comprehensive, written policies and procedures designed to ensure that any Law Firms engaged by Respondent to collect Debt do not violate any Federal consumer financial laws, which must include at a minimum:
i. the Law Firm’s duty to maintain adequate internal controls to ensure compliance with Federal consumer financial laws; ii. the Law Firm’s duty to provide adequate training on compliance
with all applicable Federal consumer financial laws and
Page 22
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 21 of 32
Respondent’s policies and procedures related to Collections Lawsuits;
iii. Respondent’s authority to conduct periodic onsite reviews of the Law Firm’s controls, performance, and information systems related to Collections Lawsuits; and
iv. periodic review by Respondent of the Law Firm’s controls, performance, and information systems related to Collections Lawsuits; and
g. Specific timeframes and deadlines for implementation of the steps described above.
53. The Regional Director will have the discretion to make a determination of non-objection to the Compliance Plan or direct Respondent to revise it. If the Regional Director directs Respondent to revise the Compliance Plan, Respondent must make the revisions and resubmit the Compliance Plan to the Regional Director within thirty (30) days.
54. After receiving notification that the Regional Director has made a determination of non-objection to the Compliance Plan or any amendments thereto, Respondent must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan.
VIII Role of the Board
IT IS FURTHER ORDERED that:
au
Page 23
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 22 of 32
55. Respondent’s Board must review all submissions (including plans, reports, programs, policies, and procedures) required by this Consent Order prior to submission to the Bureau.
56. Although this Consent Order requires Respondent to submit certain documents for the review or non-objection by the Regional Director, the Board will have the ultimate responsibility for proper and sound management of Respondent and for ensuring that Respondent complies with Federal consumer financial law and this Consent Order.
57. Ineach instance that this Consent Order requires the Board to ensure adherence to or perform certain obligations of Respondent, the Board must:
a. Authorize whatever actions are necessary for Respondent to fully comply with the Consent 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.
IX Order to Pay Civil Money Penalties
IT IS FURTHER ORDERED that:
58. Under section 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
22.
Page 24
59.
60.
61.
62.
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 23 of 32
into account the factors in 12 U.S.C. § 5565(c)(3), Respondent must pay a
civil money penalty of $2.5 million to the Bureau.
Within ten (10) days of the Effective Date, Respondent must pay $1.5
million of the civil money penalty by wire transfer to the Bureau or to the
Bureau’s agent in compliance with the Bureau’s wiring instructions. The
remainder of the civil money penalty shall be paid in one installment within
sixty (60) days of the Effective Date.
The civil money penalty paid under this Consent Order will be deposited in
the Civil Penalty Fund of the Bureau as required by section 1017(d) of the
CFPA, 12 U.S.C. § 5497(d).
Respondent must treat the civil money penalty paid under this Consent
Order as a penalty paid to the government for all purposes. 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.
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
Page 25
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 24 of 32
payment that the Bureau makes from the Civil Penalty Fund (Penalty Offset). If the court in any Related Consumer Action grants such a Penalty Offset, Respondent must, within thirty (30) days after entry of a final order granting the Penalty Offset, notify the Bureau, and pay the amount of the Penalty Offset 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.
xX
Additional Monetary Provisions
IT IS FURTHER ORDERED that:
63.
64.
65.
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 default to the date of payment, and will immediately become due and payable.
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.
Under 31 U.S.C. § 7701, Respondent, 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 Consent Order.
Page 26
66.
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 25 of 32
Within thirty (30) days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Respondent must notify the Regional 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.
XI
Reporting Requirements
IT IS FURTHER ORDERED that:
67.
68.
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 thirty (30) days before the development, but in any case no later than fourteen (14) days after the development.
Within ninety (90) days of the Effective Date, and again one year after the
Effective Date, Respondent must submit to the Regional Director an
Page 27
accurate written compliance progress report (Compliance Report) that has been approved by the Board, which, at a minimum: a. Describes in detail the manner and form in which Respondent has complied with this Consent Order; and b. 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, 69.
Within thirty (30) days of the Effective Date, Respondent must deliver a copy of this Consent Order to each of its board members 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.
70.
For five (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 or 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.
71.
Respondent must secure a signed and dated statement acknowledging receipt of a copy of this Consent Order, ensuring that any electronic 2017-CFPB-0018 Document 1 Filed 09/18/2017 Page 26 of 32
Page 28
signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001-7031, within thirty (30) days of delivery, from all persons receiving a copy of this Consent Order under this Section. XIII Recordkeeping IT IS FURTHER ORDERED that 72.
Respondent must create, or if already created, must retain for at least five (5) years from the Effective Date, 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.
73.
Respondent must retain the documents identified in Paragraph 72 for the duration of the Consent Order.
74.
Respondent must make the documents identified in Paragraph 72 available to the Bureau upon the Bureau’s request.
XIV Notices IT IS FURTHER ORDERED that:
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 Transworld Systems, Inc., File No. Year-CFPB- ,” and send them either:
D By overnight courier (not the U.S. Postal Service), as follows: 2017-CFPB-0018 Document 1 Filed 09/18/2017 Page 27 of 32
Page 29
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 28 of 32
Regional Director, Bureau Northeast Region Consumer Financial Protection Bureau
140 East 45th Street, 4th Floor
New York, NY 10017]
or b. By first-class mail to the below address and contemporaneously by email to [email protected]:
Regional Director, Bureau Northeast Region Consumer Financial Protection Bureau
140 East 45th Street, 4th Floor
New York, NY 10017
XV Cooperation with the Bureau
IT IS FURTHER ORDERED that:
76.
Respondent must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in Section V. Respondent must provide truthful and complete information, evidence, and testimony and Respondent must cause its officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon ten (10) days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory
process.
XVI
Compliance Monitoring
Page 30
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 29 of 32
IT IS FORTHER ORDERED that, to monitor Respondent’s compliance with this Consent Order:
77. Within fourteen (14) days of receipt of a written request from the Bureau, Respondent must submit additional Compliance Reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents.
78. Respondent must permit Bureau representatives to interview any employee or other person affiliated with Respondent who has agreed to such an interview. The person interviewed may have counsel present.
79. 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.
XVII Modifications to Non-Material Requirements
IT IS FURTHER ORDERED that:
80. 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 Regional Director.
81. The Regional Director may, in his/her discretion, modify any non-material requirements of this Consent Order (e.g., reasonable extensions of time and changes to reporting requirements) if he/she determines good cause justifies the modification. Any such modification by the Regional Director
must be in writing.
Page 31
82.
83.
84.
85.
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 30 of 32
XVIII
Administrative Provisions The provisions of this Consent Order do not bar, estop, or otherwise prevent the Bureau, or any other governmental agency, from taking any other action against Respondent, except as described in Paragraph 83. 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 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. This Consent Order is intended to be, and will be construed as, a final Consent Order issued under section 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.
This Consent Order will terminate five (5) years from the Effective Date or five (5) years from the most recent date that the Bureau initiates an action alleging any violation of the Consent Order by Respondent. If such action is
dismissed or the relevant adjudicative body rules that Respondent did not
Page 32
86.
87.
88.
89.
2017-CFPB-0018 Document1 Filed 09/18/2017 Page 31 of 32
violate any provision of the Consent Order, and the dismissal or ruling is either not appealed or upheld on appeal, then the Consent Order will terminate as though the action had never been filed. The Consent Order will remain effective and enforceable until such time, 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. Calculation of time limitations will run from the Effective Date and be based on calendar days, unless otherwise noted.
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.
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 section 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.
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
Page 33
2017-CFPB-0018 Document’ Filed 09/18/2017 Page 32 of 32
accompanying Stipulation supersede any prior oral or written communications, discussions, or understandings.
90. Nothing in this Consent Order or the accompanying Stipulation may be construed as allowing the Respondent, its Board, officers, or employees to
violate any law, rule, or regulation.
IT IS SO ORDERED, this [§ “lay of September, 2017.
Kewhadd CorBhn
Richard Cordray Director Consumer Financial Protection Bureau
Stipulation ()
PDF of this document (4 pages)
Page 34
2017-CFPB-0018 Document2 Filed 09/18/2017 Page 1 of 4
UNITED STATES OF AMERICA CONSUMER FINANCIAL PROTECTION BUREAU
2017-CFPB-0018
STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER
In the matter of:
TRANSWORLD SYSTEMS, INC.
The Consumer Financial Protection Bureau (Bureau) intends to initiate an administrative proceeding against Transworld Systems, Inc. (Respondent), under 12 U.S.C. 8§ 5563 and 5565, for its unfair and deceptive practices with regard to Collections
Lawsuits in violation of the CFPA’s prohibition on unfair and deceptive acts or practices,
12 U.S.C. §§ 5531, 5536.
Respondent, in the interest of compliance and resolution of the matter, and without admitting or denying any wrongdoing, consents to the issuance of a Consent Order substantially in the form of the one to which this Stipulation and Consent to the Issuance of a Consent Order is attached (Consent Order), 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 sections 1053 and 1055 of the
Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. 88 5563, 5565.
Page 35
2017-CFPB-0018 Document2_ Filed 09/18/2017 Page 2 of 4
Consent
. 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.
. 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)(4) and 5565.
. Respondent voluntarily enters into this Stipulation and Consent to the Issuance of a Consent Order.
. 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.
. 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.
Page 36
2017-CFPB-0018 Document2_ Filed 09/18/2017 Page 3 of 4
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.
Waivers 9g. 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 the Respondent of its terms and conditions;
b. Any objection to the jurisdiction of the Bureau, including, without limitation, under section 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 section 1053 of the CFPA, 12 U.S.C.
§ 5563, or 12 C.F.R. pt. 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
Page 37
2017-CFPB-0018 Document2_ Filed 09/18/2017 Page 4 of 4
limited to the Equal Access to Justice Act and the Small Business Regulatory Enforcement Fairness Act of 1996; for these purposes, Respondent agrees that Respondent is not the prevailing party in this 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 of law 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.
TRANSWORLD SYSTEMS, INC. BY:
wack & CJanght—
eErremaen, /¥, 2017
Laughlin Date Chief Executive Officer