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IN THE MATTER OF: TRANSWORLD SYSTEMS INC. ("TSI") |
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CONSENT ORDER |
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Part XII of Chapter 669, Sections 36a-800 to 36a-814, inclusive, of the Connecticut General Statutes, “Consumer Collection Agencies”;
WHEREAS, TSI is a California corporation that is licensed as a consumer collection agency in Connecticut with a main office at 500 Virginia Drive, Suite 514, Fort Washington, Pennsylvania;
WHEREAS, the Commissioner, through the Consumer Credit Division (“Division”) of the Department of Banking, examined the activities of TSI pursuant to Sections 36a-17 and 36a-801(d) of the Connecticut General Statutes to determine if it had violated, was violating or was about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner;
WHEREAS, as a result of such examination, the Commissioner alleges that TSI failed to produce complete, accurate and timely responses to requests for information made by the Department concerning TSI’s consumer collection agency business, in violation of Section 36a-17 of the Connecticut General Statutes;
WHEREAS, as a result of the examination, the Commissioner further alleges that TSI failed to maintain and implement adequate policies and procedures pertaining to its National Collegiate Student Loan Trust (“NCSLT”, 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) consumer collection accounts, including verification of debtor charge-off dates from certain loan servicers, adequate management of its vendor relationships and remediation of internal audit findings, that would demonstrate that the financial responsibility, character, reputation, integrity and general fitness of TSI are sufficient to warrant the belief that the business will be operated soundly and efficiently, in the public interest and consistent with the purposes of Sections 36a-800 to 36a-812, inclusive, of the Connecticut General Statutes, as required pursuant to Section 36a-801(c) of the Connecticut General Statutes;
WHEREAS, TSI represents that, effective November 1, 2014, TSI assumed, among other items, the Attorney Network business unit of NCO Financial Systems, Inc. (“NCO”), including the NCSLT consumer collection account portfolio;
WHEREAS, as part of the examination, the Division reviewed numerous affidavits executed by TSI’s employees and filed by law firms retained by TSI on behalf of NCSLT in collection actions in Connecticut (“CT Affidavits”);
WHEREAS, TSI neither admits nor denies any of the Commissioner’s allegations stated herein;
WHEREAS, the Commissioner alleges that from November 2014 to February 2016, TSI engaged in unfair or deceptive acts or practices in connection with its execution of CT Affidavits, in violation of Sections 36a-806 and 36a-808 of the Connecticut General Statutes, and that the CT Affidavits contained false or misleading statements, in violation of Section 36a-53b(2) of the Connecticut General Statutes;
WHEREAS, the Commissioner believes that the allegations contained herein would support the initiation of enforcement proceedings against TSI, including proceedings to issue an order to cease and desist against TSI pursuant to Sections 36a-804 and 36a-52 of the Connecticut General Statutes, an order revoking TSI’s consumer collection agency license in Connecticut pursuant to Sections 36a-804 and 36a-51 of the Connecticut General Statutes, and an order imposing a civil penalty of up to one hundred thousand dollars ($100,000) per violation upon TSI pursuant to Sections 36a-804 and 36a-50 of the Connecticut General Statutes;
WHEREAS, initiation of such enforcement proceedings would constitute a “contested case” within the meaning of Section 4-166(4) of the Connecticut General Statutes;
WHEREAS, Section 4-177(c) of the Connecticut General Statutes and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;
WHEREAS, both the Commissioner and TSI acknowledge the possible consequences of formal administrative proceedings, and TSI voluntarily agrees to consent to the entry of the injunctive relief and monetary penalty imposed below without admitting or denying any allegation set forth herein and solely for the purpose of obviating the need for formal administrative proceedings concerning the allegations set forth herein;
WHEREAS, the Commissioner and TSI now desire to resolve the matters set forth herein;
WHEREAS, TSI specifically assures the Commissioner that the violations alleged herein shall not occur in the future;
WHEREAS, TSI represents that it has reviewed all charge-off dates of NCSLT loans actively placed with TSI for collection to ensure that such dates match the charge-off dates on the pre-default servicer’s system of record and has adjusted the amounts of interest owed by such borrowers on TSI’s system accordingly;
WHEREAS, TSI represents that it has implemented a process by which charge-off dates for NCSLT loan information is received upon default from the pre-default servicer’s system of record and then incorporated into TSI’s system of record;
WHEREAS, TSI represents that since November 2014, all TSI employees who have executed CT Affidavits have received the training set forth in TSI’s NCSLT Affiant Training Manual prior to execution of such CT Affidavits;
WHEREAS, TSI represents that to ensure uniformity of training and to facilitate the occurrence of effectiveness audits, the NCSLT affiant training process, which covers initial and on-going procedures, will be moved out of the business unit to TSI’s company-wide Learning Management System no later than six (6) months after the date of issuance of this Consent Order, although business-level training for affiants will continue to occur within the business unit, as necessary;
WHEREAS, TSI represents that since November 2014, the templates used in its CT Affidavits have been reviewed by external Connecticut counsel retained by TSI to ensure compliance with all applicable laws;
WHEREAS, TSI represents that it has made significant investments and enhancements to the administration of its vendor management program and in improving upon all Attorney Network policies and procedures to ensure, among other things, that TSI has a record of its related communications with law firms, those firms’ acknowledgements and related remediation efforts;
WHEREAS, TSI represents that it has implemented an enhanced remediation process to ensure that all internal audit findings relating to vendor or law firm compliance are timely remediated, including the termination of such vendor and law firm relationships when necessary;
WHEREAS, TSI acknowledges that this Consent Order is a public record and is a reportable event for purposes of the regulatory disclosure questions on the Nationwide Multistate Licensing System and Registry (“NMLS”), as applicable;
AND WHEREAS, TSI, through its execution of this Consent Order, voluntarily agrees to waive its procedural rights as they concern any aspect of this Consent Order, including a right to a notice and an opportunity for a hearing as it pertains to the allegations set forth herein, and voluntarily waives its right to seek judicial review or otherwise challenge or contest the validity of this Consent Order.
CONSENT TO ENTRY OF INJUNCTIVE RELIEF
AND MONETARY PENALTY
WHEREAS, TSI, through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing the following injunctive relief and monetary penalty:
| 1. | No later than the date this Consent Order is executed by TSI, it shall remit to the Department of Banking by wire transfer, cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut,” the sum of Two Hundred Thousand Dollars ($200,000) as a civil penalty; |
| 2. | TSI shall comply with Sections 36a-17, 36a-53b(2), 36a-806 and 36a-808 of the Connecticut General Statutes; |
| 3. | TSI shall implement policies and procedures to ensure that its NCSLT Affiant Training Manual and Attorney Network Standard Operating Procedure Manual, as amended from time to time, are adhered to and shall provide evidence of such implementation upon request by the Commissioner; |
| 4. | TSI shall ensure that its affidavit templates, which are executed by TSI for NCSLT collection proceedings and filed in Connecticut state court by external counsel retained by TSI on behalf of NCSLT, are reviewed by external counsel licensed in Connecticut at least annually for compliance with Connecticut Practice Book requirements and are timely updated to reflect Connecticut and federal laws at all times; |
| 5. | TSI shall implement policies and procedures to require that every future NCSLT Affidavit executed by TSI and filed by external counsel retained by TSI on behalf of NCSLT in a Connecticut collection proceeding: (a) complies with Connecticut laws, including Connecticut Practice Book requirements, (b) properly references the documents attached, and (c) accurately reflects the knowledge of the affiant and amount of student loan debt owed by the borrower, provided, however that NCSLT affidavits executed by TSI regarding Connecticut borrowers may seek an amount less than the amount owed by the borrower; |
| 6. | No later than forty-five (45) days after each calendar quarter beginning with the quarter ending December 31, 2017 (the first report to be due on or before February 14, 2018), for a period of eight calendar quarters, TSI shall provide to Carmine Costa, Division Director at carmine.costa@ct.gov, evidence of compliance with the following requirements: (a) accurate and complete monthly reconciliations of NCSLT debtor balances, last payment dates and open/closed inventory between all collection systems used to collect on NCSLT accounts of Connecticut debtors by TSI and its vendors, including law firms, (b) accurate and complete monthly reconciliations of all collection trust accounts used to deposit Connecticut debtor monies for the NCSLT portfolio by TSI and its active vendors, including law firms, and (c) timely remediation of all TSI internal audit findings relating to law firms and vendors used in the collection of NCSLT accounts of Connecticut debtors such that no high risk audit finding shall remain outstanding for more than six (6) months. TSI shall off-board any law firm or vendor which fails to comply with such requirement; and |
| 7. | TSI shall require that: (a) TSI and each of its vendors, including law firms, which collect on an NCSLT loan of a Connecticut debtor: (1) provide the validation notice required by Section 36a-809-13(a) of the Regulations of Connecticut State Agencies upon receipt of the account for collection; (2) designate at least one (1) employee as the NCSLT account representative, which individual shall be qualified and reasonably available to answer any questions of Connecticut debtors concerning the collection of NCSLT loans; and (3) within ninety (90) days from the effective date of this Consent Order, all validation notices sent to Connecticut debtors regarding NCSLT loans shall clearly identify the amount of debt and interest owed, the original and current creditor and a phone number of the vendor issuing the validation notice that a consumer may call in order to speak with a representative at that vendor who has reasonable knowledge about this portfolio and the consumer’s account(s), and (b) any law firm retained by TSI on behalf of NCSLT shall not initiate a lawsuit in Connecticut state court on an NCSLT loan of a Connecticut debtor for at least thirty (30) days after sending such validation notice. |
CONSENT ORDER
NOW THEREFORE, the Commissioner enters the following:
| 1. | The Injunctive Relief and Monetary Penalty set forth above be and are hereby entered; |
| 2. | Upon issuance of this Consent Order by the Commissioner, this matter will be resolved and the Commissioner will not take any future enforcement action against TSI, based upon the allegations set forth herein; provided that issuance of this Consent Order is without prejudice to the right of the Commissioner to take enforcement action against TSI based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representation made by TSI, and reflected herein is subsequently discovered to be untrue. Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against TSI based upon evidence indicating that TSI withheld information from, or made any misstatement or omission to the Commissioner in connection with this matter; |
| 3. | Subject to the foregoing, and so long as this Consent Order is promptly disclosed by TSI and its control persons on NMLS, as applicable, nothing in the issuance of this Consent Order shall adversely affect the ability of TSI to apply for or obtain licenses or renewal licenses under Part XII of Chapter 669, Sections 36a-800 et seq., of the Connecticut General Statutes, provided all applicable legal requirements for any such license are satisfied; |
| 4. | This Consent Order shall be binding upon TSI and its successors and assigns; and |
| 5. | This Consent Order shall become final when issued. |
Issued at Hartford, Connecticut
this 11th day of October 2017. ______/s/__________
Jorge L. Perez
Banking Commissioner
I, John E. Laughlin, state on behalf of Transworld Systems Inc., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Transworld Systems Inc.; that Transworld Systems Inc., agrees freely and without threat or coercion of any kind to comply with the injunctive relief and monetary penalty entered herein; and that Transworld Systems Inc., voluntarily agrees to enter into this Consent Order, expressly waiving the procedural rights set forth herein as to the matters described herein.
By: ________/s/___________
Name: Joseph E. Laughlin
Title: Chief Executive Officer
Transworld Systems Inc.
State of: Illinois
County of: Lake
On this the 2nd day of October 2017, before me, Stefanie Leaser, the undersigned officer, personally appeared Joseph E. Laughlin who acknowledged himself/herself to be the Chief Executive Officer of Transworld Systems Inc., a corporation, and that he/she as such Chief Executive Officer being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself/herself as Chief Executive Officer.
In witness whereof I hereunto set my hand.
__________/s/___________
Notary Public
Date Commission Expires: Apr 21, 2021