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IN THE MATTER OF: 1ST AMERICAN LAW CENTER, INC. ("Respondent") * * * * * * * * * * * * * * * * * * * |
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TEMPORARY ORDER TO NOTICE OF INTENT TO IMPOSE AND NOTICE OF RIGHT TO HEARING |
I. LEGAL AUTHORITY AND JURISDICTION
The Banking Commissioner (“Commissioner”) is charged with the administration of Sections 36a-671 to 36a-671d, inclusive, of the Connecticut General Statutes contained in Part II of Chapter 669 of the Connecticut General Statutes, “Debt Adjusters and Debt Negotiation”.
Pursuant to the authority granted by Section 36a-17(a) of the Connecticut General Statutes, the Commissioner, through the Consumer Credit Division of the Department of Banking (“Department”), has investigated the activities of Respondent to determine if it has violated, is violating or is about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner.
Section 36a-17(a) of the Connecticut General Statutes provides:
The commissioner, in the commissioner’s discretion, may make such public or private investigations or examinations within or outside this state, concerning any person subject to the jurisdiction of the commissioner, as the commissioner deems necessary to carry out the duties of the commissioner.
Section 36a-52 of the Connecticut General Statutes provides, in pertinent part, that:
(a) Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. The notice shall be deemed received by the person on the earlier of the date of actual receipt, or seven days after mailing or sending. Any such notice shall include: (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the general statutes . . . alleged to have been violated; (4) a short and plain statement of the matters asserted; and (5) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice. If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice, unless the person fails to appear at the hearing. After the hearing, the commissioner shall determine whether an order to cease and desist should be issued against the person named in the notice. If the person does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner shall issue an order to cease and desist against the person. No such order shall be issued except in accordance with the provisions of chapter 54.
(b) If the commissioner finds that the public welfare requires immediate action, the commissioner may incorporate a finding to that effect in the notice sent in accordance with subsection (a) of this section and issue a temporary order requiring the person to cease and desist from the activity which constitutes such alleged violation and to take or refrain from taking such action as in the opinion of the commissioner will effectuate the purposes of this section. Such temporary order shall become effective on receipt and, unless set aside or modified by a court, shall remain in effect until the effective date of a permanent order or dismissal of the matters asserted in the notice.
Section 36a-50(a) of the Connecticut General Statutes provides, in pertinent part, that:
(1) Whenever the commissioner finds as the result of an investigation that any person has violated any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. The notice shall be deemed received by the person on the earlier of the date of actual receipt or seven days after mailing or sending. Any such notice shall include: (A) A statement of the time, place, and nature of the hearing; (B) a statement of the legal authority and jurisdiction under which the hearing is to be held; (C) a reference to the particular sections of the general statutes . . . alleged to have been violated; (D) a short and plain statement of the matters asserted; (E) the maximum penalty that may be imposed for such violation; and (F) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.
(2) If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice unless such person fails to appear at the hearing. After the hearing, if the commissioner finds that the person has violated any such provision, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by law, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person does not request a hearing within the time specified in the notice or fails to appear at the hearing, the commissioner may, as the facts require, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person.
(3) Each action undertaken by the commissioner under this subsection shall be in accordance with the provisions of chapter 54.
Section 36a-671a(c) of the Connecticut General Statutes provides, in pertinent part, that:
Upon complaint, the Banking Commissioner may review any fees or charges assessed by a person offering debt negotiation services and order the reduction of such fees or charges or repayment of such amount of the fees or charges that the commissioner deems excessive, taking into consideration the fees that other persons performing similar debt negotiation services charge for such services and the benefit to the consumer of such services. . . .
II. MATTERS ASSERTED
| 1. |
Respondent is a California corporation with a place of business at 615 Mission Avenue, Oceanside, California. |
| 2. |
During the period of at least November 11, 2009 through June 2010, at least eight (8) Connecticut residents executed and returned to Respondent by mail, while physically present in this state, a “Privileged Attorney/Client Agreement” detailing Respondent’s services to assist such Connecticut residents to negotiate the terms of each of such Connecticut resident’s mortgage debt on property located in Connecticut (“Agreement”). Each Agreement states that Respondent “understand[s] that you are currently engaging us to advise you solely in connection with negotiating a possible mitigation of your current home loan situation”. |
| 3. |
From November 2009 through June 2010, each of the Connecticut residents remitted payments to Respondent for such debt negotiation services in excess of amounts that debt negotiators may charge for services pursuant to the Schedule of Maximum Fees established by the Commissioner on or about October 1, 2009 and prior to Respondent’s fully performing the debt negotiation services. |
| 4. |
On or about April 27, 2010, Respondent refunded the fees to at least one of the Connecticut residents.
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| 5. |
At no time relevant hereto was Respondent licensed to engage or offer to engage in debt negotiation in this state, nor did Respondent qualify for an exemption from licensure. |
| 6. | At no time relevant hereto did Respondent perform or successfully complete the services specified in the Agreement. |
| 7. |
Each of the Connecticut residents filed a complaint against Respondent concerning the fees paid to Respondent for debt negotiation services.
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III. STATUTORY BASIS FOR ORDER TO CEASE
AND DESIST AND IMPOSITION OF CIVIL PENALTY
Section 36a-671 of the Connecticut General Statutes provides, in pertinent part, that:
(a) As used in this section and sections 36a-671a to 36a-671d, inclusive, (1) “debt negotiation” means, for or with the expectation of a fee, commission or other valuable consideration, assisting a debtor in negotiating or attempting to negotiate on behalf of a debtor the terms of a debtor’s obligations with one or more mortgagees or creditors of the debtor, including the negotiation of short sales of residential property or foreclosure rescue services; (2) “debtor” means any individual who has incurred indebtedness or owes a debt for personal, family or household purposes; (3) “mortgagee” means the original lender under a mortgage loan secured by residential property or its agents, successors or assigns; (4) “mortgagor” means a debtor who is an owner of residential property, including, but not limited to, a single-family unit in a common interest community, who is also the borrower under a mortgage encumbering such residential property; (5) “short sale” means the sale of residential property by a mortgagor for an amount less than the outstanding balance owed on the loan secured by such property where, prior to the sale, the mortgagee or an assignee of the mortgagee agrees to accept less than the outstanding loan balance in full or partial satisfaction of the mortgage debt and the proceeds of the sale are paid to the mortgagee or an assignee of the mortgagee; (6) “foreclosure rescue services” means services related to or promising assistance in connection with (A) avoiding or delaying actual or anticipated foreclosure proceedings concerning residential property, or (B) curing or otherwise addressing a default or failure to timely pay with respect to a mortgage loan secured by residential property, and includes, but is not limited to, the offer, arrangement or placement of a mortgage loan secured by residential property or other extension of credit when those services are advertised, offered or promoted in the context of foreclosure related services; and (7) “residential property” means one-to-four family owner-occupied real property.
(b) No person shall engage or offer to engage in debt negotiation in this state without a license issued under this section for each location where debt negotiation will be conducted. . . . A person is engaging in debt negotiation in this state if such person: . . . (2) has a place of business located outside of this state and the debtor is a resident of this state who negotiates or agrees to the terms of the services contract in person, by mail, by telephone or via the Internet while physically present in this state; or (3) has its place of business located outside of this state and the contract concerns a debt that is secured by property located within this state.
Section 36a-671a(b) of the Connecticut General Statutes provides, in pertinent part, that:
Whenever it appears to the commissioner that any person has violated, is violating or is about to violate the provisions of sections 36a-671 to 36a-671d, inclusive, . . . the commissioner may take action against such person . . . in accordance with sections 36a-50 and 36a-52.
Section 36a-671b(b) of the Connecticut General Statutes provides:
No person offering debt negotiation services may receive a fee, commission or other valuable consideration for the performance of any service the person offering debt negotiation services has agreed to perform for any consumer until the person offering debt negotiation services has fully performed such service. A person offering debt negotiation services may receive reasonable periodic payments as services are rendered, provided such payments are clearly stated in the contract. The commissioner may establish a schedule of maximum fees that a debt negotiator may charge for specific services.
The Schedule of Maximum Fees established by the Commissioner provides, in pertinent part, that:
A debt negotiator of secured debt, including Short Sales and Foreclosure Rescue Services, may impose a fee upon the mortgagor or debtor for performing debt negotiation services not to exceed five hundred dollars ($500). Such fee shall only be collectable upon the successful completion of all services stated in the debt negotiation service contract. Nothing herein shall prohibit any person from receiving compensation from the mortgagee or its assignees.
| 1. |
Respondent’s engaging in debt negotiation in this state without obtaining the required license, as more fully described in paragraphs 1 through 7, inclusive, of the Matters Asserted, constitutes a violation of Section 36a-671(b) of the Connecticut General Statutes. Such violation forms the basis to issue an order to cease and desist pursuant to Sections 36a-671a(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-671a(b) and 36a-50(a) of the Connecticut General Statutes. Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation. The Commissioner intends to impose a civil penalty upon Respondent not to exceed Ten Thousand Dollars ($10,000), subject to Respondent’s right to a hearing on the allegations set forth above. |
| 2. |
Respondent’s engaging in debt negotiation services on and after October 1, 2009, with at least eight (8) Connecticut residents and collecting fees under terms which did not comply with Section 36a-671b(b) of the Connecticut General Statutes and the Schedule of Maximum Fees established by the Commissioner pursuant to said section, as more fully described in paragraphs 1 through 7, inclusive, of the Matters Asserted, constitutes eight (8) violations of Section 36a-671b(b) of the Connecticut General Statutes. Such violations form the basis to issue an order to cease and desist pursuant to Sections 36a-671a(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-671a(b) and 36a-50(a) of the Connecticut General Statutes. Section 36a-50(a) of the Connecticut General Statutes authorizes the Commissioner to impose a civil penalty upon Respondent in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation. The Commissioner intends to impose a civil penalty upon Respondent not to exceed Eighty Thousand Dollars ($80,000), subject to Respondent’s right to a hearing on the allegations set forth above.
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IV. FINDING AND STATUTORY BASIS FOR
TEMPORARY ORDER TO CEASE AND DESIST
The Commissioner finds that public welfare requires immediate action to issue a temporary order requiring Respondent to cease and desist from violating Sections 36a-671(b) and 36a-671b(b) of the Connecticut General Statutes and to take such other action as set forth herein to effectuate the purposes of Section 36a-52(b) of the Connecticut General Statutes, in that the interests of Connecticut residents are being materially prejudiced by Respondent’s receipt of fees in excess of the Schedule of Maximum Fees from at least eight (8) Connecticut residents and failure to perform the contracted services, and that the interests of additional Connecticut residents also may be materially prejudiced. The Commissioner also finds the payment of fees by the Connecticut residents to be excessive, upon consideration of the fact that the Schedule of Maximum Fees only permits a fee of $500 to be collected upon successful completion of the debt negotiation services contract, the debt negotiation services contracts were not successfully completed and the Connecticut residents received no benefit from such contracts.
V. TEMPORARY ORDER TO CEASE AND DESIST, NOTICE OF INTENT
TO ISSUE ORDER TO CEASE AND DESIST, NOTICE OF INTENT
TO IMPOSE CIVIL PENALTY AND NOTICE OF RIGHT TO HEARING
WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct which forms the basis to issue an order to cease and desist pursuant to Sections 36a-671a(b) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty pursuant to Sections 36a-671a(b) and 36a-50(a) of the Connecticut General Statutes;
AND WHEREAS, the Commissioner has made the finding required under Section 36a-52(b) of the Connecticut General Statutes.
THE COMMISSIONER THEREFORE ORDERS, pursuant to Section 36a-52(b) of the Connecticut General Statutes, that 1st American Law Center, Inc., immediately CEASE AND DESIST from violating Sections 36a-671(b) and 36a-671b(b) of the Connecticut General Statutes. This Temporary Order shall become effective upon receipt by 1st American Law Center, Inc., and, unless set aside or modified by a court, shall remain in effect until the effective date of a permanent order or dismissal of the matters asserted in this Temporary Order.
THE COMMISSIONER FURTHER ORDERS, pursuant to Sections 36a-52(b) and 36a-671a(c) of the Connecticut General Statutes, that: Not later than 10 days from receipt of this Order, 1st American Law Center, Inc. shall:
| 1. |
Provide repayment of excessive fees to the Connecticut residents in the amounts identified in Exhibit A by cashier’s check, certified check or money order; and |
| 2. |
Provide to Marlene M. Mannix, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or marlene.mannix@ct.gov, evidence of such repayment and a list of all Connecticut residents with whom it has entered into agreements for debt negotiation services to date where such agreements were entered into on or after October 1, 2009. Such submission shall include: (a) a copy of each agreement, and (b) a list of each debtor’s name and address and full itemization of each debtor’s payments made pursuant to the agreement, specifying the dates, amounts and recipients of such payments. |
NOW THEREFORE, notice is hereby given to Respondent that the Commissioner intends to issue an order requiring Respondent to CEASE AND DESIST from violating Sections 36a-671(b) and 36a-671b(b) of the Connecticut General Statutes, and impose a CIVIL PENALTY upon Respondent as set forth herein, subject to Respondent’s right to a hearing on the allegations set forth above.
A hearing will be granted to Respondent if a written request for a hearing is received by the Department of Banking, Consumer Credit Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following its receipt of this Temporary Order to Cease and Desist, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing as set forth in Sections 36a-52(a) and 36a-50(a) of the Connecticut General Statutes. This Temporary Order to Cease and Desist, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing shall be deemed received on the earlier of the date of actual receipt, or seven days after mailing or sending. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a hearing officer and sets the date of the hearing in accordance with Section 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on June 28, 2011, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the Connecticut General Statutes, unless Respondent fails to appear at the requested hearing. At such hearing, Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
If Respondent does not request a hearing within the time prescribed, the Commissioner will issue an order that Respondent cease and desist from violating Sections 36a-671(b) and 36a-671b(b) of the Connecticut General Statutes, issue an order for repayment of fees or charges to the Connecticut residents identified in Exhibit A, and may order a civil penalty in an amount not to exceed Ninety Thousand Dollars ($90,000) be imposed upon Respondent.
So ordered at Hartford, Connecticut
this 23rd of May 2011. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 24th day of May 2011, the foregoing Temporary Order to Cease and Desist, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing was sent by registered mail, return receipt requested to 1st American Law Center, Inc., Attention: Dean Gregory Chandler, Agent, 615 Mission Avenue, Oceanside, California 92054, registered mail no. RB028020115US.
________/s/_________
Doniel Kitt
Prosecuting Attorney