Consumer Financial Protection Bureau v. Global Client Solutions LLC et al, No. 2:2014cv06643 - Document 10 (C.D. Cal. 2014)
Court Description: STIPULATED FINAL JUDGMENT AND CONSENT ORDER by Judge Dean D. Pregerson in favor of Consumer Financial Protection Bureau against Global Client Solutions LLC, Global Holdings LLC, Michael Hendrix, Robert Merrick. Defendants, their officers, agents etc are permanently restrained and enjoined Against Processing Advance Fees or Otherwise Providing Substantial Assistance in Violation of the TSR. RE REDRESS: A judgment for equitable monetary relief is hereby entered in favor of the Bureau and against Defendants, jointly and severally, in the amount of $6,099,000.00. RE CIVIL MONEY PENALTY: Defendants, jointly and severally, shall pay a civil money penalty of $1,000,000.00 to the Bureau.(SEE DOCUMENT FOR OTHER SPECIFICS, REQUIREMENTS, INSTRUCTIONS AND DEADLINES ). Related to: Stipulation for Settlement, 3 . ( MD JS-6. Case Terminated ) (lc)
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Consumer Financial Protection Bureau v. Global Client Solutions LLC et al 1 2 3 4 5 6 7 8 9 10 11 12 Doc. 10 ANTHONY ALEXIS, DC Bar #384545 Email: anthony.alexis@cfpb.gov Phone: (202) 435-7999 LUCY E. MORRIS, WA Bar #16510 Email: lucy.morris@cfpb.gov Phone: (202) 435-7154 CARA PETERSEN, DC Bar #476990 Email: cara.petersen@cfpb.gov Phone: (202) 435-7493 ERIN MARY KELLY, DC Bar #479413 Email: Erin.Kelly@cfpb.gov Phone: (202) 435-7367 CRYSTAL R. SUMNER, CA Bar #261435 Email: crystal.sumner@cfpb.gov Phone: (415) 633-1329 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7329 Attorneys for Plaintiff Consumer Financial Protection Bureau 13 JS-6 14 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA 15 16 17 18 19 20 21 22 23 Consumer Financial Protection Bureau, Case No. 2:14-cv-06643-DDP-JPR Plaintiff, v. Global Client Solutions, LLC, an Oklahoma limited liability company; Global Holdings LLC, an Oklahoma limited liability company; 24 STIPULATED FINAL JUDGMENT AND CONSENT ORDER Robert Merrick, an individual; and 25 ________________ Michael Hendrix, an individual; 26 27 28 Defendants. 1 Dockets.Justia.com 1 The Consumer Financial Protection Bureau (“Bureau”) commenced this civil 2 action to obtain injunctive and monetary relief and civil penalties, from Global Client 3 Solutions, LLC, Global Holdings LLC, Robert Merrick, and Michael Hendrix 4 (collectively, “Defendants”). The Complaint alleges violations of the Telemarketing 5 Sales Rule (“TSR”), 16 C.F.R. pt. 310, and sections 1031(a) and 1036(a) of the 6 Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531(a), 5536(a). 7 The Parties, by and through respective counsel, agree to the entry of this Stipulated 8 Final Judgment and Consent Order (“Consent Order”). Defendants waive: service of the 9 Complaint and Summonses; any right to seek judicial review or to otherwise challenge or 10 contest the validity of this Consent Order; and any right that may arise in this case under 11 the Equal Access to Justice Act, 28 U.S.C. § 2412. 12 13 The Parties having requested the entry of this Consent Order, it is therefore ORDERED, ADJUDGED, and DECREED as follows: 14 15 FINDINGS AND CONCLUSIONS 1. The Bureau is an agency of the United States. 12 U.S.C. § 5491(a). It has 16 independent litigating authority, 12 U.S.C. § 5564(a)-(b), including the authority to 17 enforce the TSR as it applies to persons subject to the CFPA, 12 U.S.C. § 5531(a); 15 18 U.S.C. §§ 6102(c)(2), 6105(d). 19 2. Defendant Global Client Solutions, LLC (“GCS”) is a limited liability 20 company organized under the laws of Oklahoma and is wholly-owned by defendant 21 Global Holdings LLC (“Global Holdings”) (collectively, “Global”). 22 3. Global offers and provides Payment Processing and Account Maintenance 23 Services for consumers who have contracted with Debt Relief Service Providers. These 24 services are consumer financial services under the CFPA. 12 U.S.C. § 5481(5), 25 (15)(A)(iv), (15)(A)(vii), (15)(A)(viii)(II). Global is therefore a “covered person” under 26 the CFPA. 12 U.S.C. § 5481(6). 27 28 2 1 4. Defendant Robert Merrick co-founded GCS and is the chairman of the board 2 of directors of Global Holdings. Merrick has managerial responsibility for Global and 3 materially participates in the conduct of its affairs. Merrick is therefore a “related person” 4 under the CFPA, 12 U.S.C. § 5481 (25)(C)(i)-(ii), and deemed a “covered person.” 12 5 U.S.C. § 5481(25)(B). 6 5. Defendant Michael Hendrix co-founded and is the Chief Executive Officer 7 of GCS. Hendrix has managerial responsibility for Global and materially participates in 8 the conduct of its affairs. Hendrix is therefore a “related person” under the CFPA, 12 9 U.S.C. § 5481 (25)(C)(i)-(ii), and deemed a “covered person.” 12 U.S.C. § 5481(25)(B). 10 6. This Court has subject-matter jurisdiction because this action is brought 11 under Federal consumer financial law, 12 U.S.C. § 5565(a)(1), presents a federal 12 question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. 13 § 1345. 14 7. Venue is proper in this district because a substantial amount of the 15 transactions, acts, practices, and courses of conduct allegedly constituting violations of 16 Federal consumer financial law occurred within this district. 28 U.S.C. § 1391(b)(2); 12 17 U.S.C. § 5564(f). 18 8. The Complaint states claims upon which relief can be granted for 19 Defendants’ alleged violations of the TSR’s assisting-and-facilitating provision, 16 20 C.F.R. § 310.3(b), and sections 1031(a) and 1036(a)(1) of the CFPA, 12 U.S.C. §§ 21 5531(a), 5536(a)(1). 22 9. Since October 27, 2010, Debt Settlement Relief Providers charged 23 consumers tens of millions in alleged unlawful advance fees in transactions in which 24 GCS acted as a third-party account administrator and payment processor. 25 10. The Bureau and Defendants agree to entry of this Order, without 26 adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising 27 from the conduct alleged in the Complaint to the date this Order is entered (the “Effective 28 3 1 Date”). Defendants do not admit or deny any of the allegations in the Complaint or this 2 Consent Order. However, for the purposes of this Consent Order, Defendants admit the 3 facts necessary to establish the Bureau’s jurisdiction over Defendants and the subject 4 matter of this action. 5 6 7 11. The terms and provisions of this Consent Order shall be binding upon, and inure to the benefit of, the parties hereto and their successors in interest. 12. Entry of this Order is in the public interest. 8 9 10 DEFINITIONS The following definitions shall apply to this Consent Order: 13. “Account Maintenance Services” means holding or maintaining an account 11 on behalf of any Person, or providing a Person, directly or indirectly, with the means to 12 manage, track, or create reports on an account, whether accomplished through the use of 13 software or otherwise. 14 14. “ACH Debit” means any completed or attempted debit to a Person’s 15 account at a financial institution that is processed electronically through the Automated 16 Clearing House Network. 17 15. “Advance Fee” means any fee or consideration requested or received by a 18 Debt Relief Service Provider from a Consumer for any Debt Relief Service, whether 19 directly or indirectly, that occurs before: 20 a. the Debt Relief Service Provider has renegotiated, settled, reduced, or 21 otherwise altered the terms of a debt pursuant to a settlement agreement, 22 debt management plan, or other valid contractual agreement executed by 23 the Consumer; and 24 b. the Consumer has made at least one payment pursuant to that settlement 25 agreement, debt management plan, or other valid contractual agreement 26 between the Consumer and the creditor or debt collector. 27 28 4 1 16. “Affected Consumer” means any Consumer who has paid an Advance Fee 2 to a Debt Relief Service Provider claiming an unlawful exemption from the 3 Telemarketing Sales Rule that was processed by Defendants on or after October 27, 4 2010. 5 6 7 17. “Consumer” means an individual or an agent, trustee, or representative acting on behalf of an individual. 18. “Debt Relief Service” means any program or service represented, directly or 8 by implication, to renegotiate, settle, or in any way alter the terms of payment or other 9 terms of the debt between a Consumer and one or more creditors or debt collectors, 10 including but not limited to, a reduction in the balance, interest rate, or fees owed by a 11 person to a creditor or debt collector. 12 13 14 15 16 19. “Debt Relief Service Provider” or “DRSP” means any Person that offers or provides any Debt Relief Service. 20. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his/her delegee. 21. “Face-to-Face Transaction” means telephone calls in which the sale of 17 goods or services is not completed, and payment or authorization of payment is not 18 required, until after a face-to-face sales presentation by the seller. 19 22. “Payment Processing” means providing a Person, directly or indirectly, 20 with the means used to charge or debit accounts through the use of any payment 21 mechanism, including, but not limited to, ACH Debits. Whether accomplished through 22 the use of software or otherwise, Payment Processing includes, among other things: (a) 23 reviewing and approving applications of DRSPs to be customers of Global or other 24 Persons’ applications for Payment Processing or Account Maintenance Services; (b) 25 providing the means to transmit Consumer payment transaction data to acquiring banks 26 and/or other financial institutions; (c) clearing, settling, or distributing Consumer 27 28 5 1 payments from acquiring banks or financial institutions to DRSPs or other Persons; or (d) 2 processing returned payments via any mechanism. 3 23. “Person” means an individual, partnership, company, corporation, 4 association (incorporated or unincorporated), trust, estate, cooperative organization, or 5 other entity. 6 24. “Related Consumer Action” means a private action by or on behalf of one 7 or more consumers or an enforcement action by another governmental agency brought 8 against any of the Defendants based on substantially the same facts as alleged in the 9 Complaint. 10 25. “Telemarketing” means a plan, program, or campaign which is conducted 11 to induce the purchase of goods or services or a charitable contribution, by use of one or 12 more telephones and which involves more than one interstate telephone call. The term 13 does not include the solicitation of sales through the mailing of a catalog which: contains 14 a written description or illustration of the goods or services offered for sale; includes the 15 business address of the seller; includes multiple pages of written material or illustrations; 16 and has been issued not less frequently than once a year, when the person making the 17 solicitation does not solicit customers by telephone but only receives calls initiated by 18 customers in response to the catalog and during those calls takes orders only without 19 further solicitation. For purposes of the previous sentence, the term “further solicitation” 20 does not include providing the customer with information about, or attempting to sell any 21 other item included in the same catalog which prompted the customer’s call or in a 22 substantially similar catalog. 23 26. “Total Return Rate” means the proportion (expressed as a percentage) of 24 all attempted ACH debit transactions that are returned for any reason, whether before or 25 after payment, out of the total number of such attempted transactions. 26 27 28 6 1 27. “Unauthorized Return Rate” means the proportion (expressed as a 2 percentage) of all attempted ACH debit transactions that are returned as unauthorized, 3 whether before or after payment, out of the total number of such attempted transactions. 4 CONSENT ORDER 5 6 A. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Injunction Against Processing Advance Fees or Otherwise Providing Substantial Assistance in Violation of the TSR 28. IT IS THEREFORE ORDERED that Defendants, their officers, agents, servants, employees, and all persons who are in active concert or participation with any of them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or indirectly, are permanently restrained and enjoined from providing substantial assistance or support to any Person, including by providing Account Maintenance Services or Payment Processing, when Defendants know or consciously avoid knowing that the Person is requesting or receiving unlawful Advance Fees or is engaged in any other act or practice that violates the TSR, including but not limited to, when such Person is claiming to be exempt from the TSR based on an exemption not recognized in the TSR (e.g. “legal” exemption). B. Reasonable Screening of Current and Prospective DRSP Clients 29. IT IS FURTHER ORDERED that Defendants, their officers, agents, servants, employees, and all persons who are in active concert or participation with any of them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or indirectly, are permanently restrained and enjoined from providing Payment Processing or Account Maintenance Services to any DRSP unless and until Defendants have conducted a reasonable screening of the DRSP to determine that the DRSP: (1) is complying with the TSR, 16 CFR pt. 310; and (2) is complying with sections 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531 and 5536. Such reasonable screening shall include but not be limited to: 27 28 7 1 a. Obtaining from each current and prospective DRSP, including all 2 principal(s) and controlling person(s) of the entity who own 10% or more 3 of the ownership interests in the DRSP, either directly or indirectly: 4 i. A description of the nature of the business, including describing all 5 services for which the DRSP seeks Payment Processing or 6 Account Maintenance Services for its customers; 7 ii. A form which requests the DRSP to list all business and trade 8 names, fictitious names, DBAs, and Internet websites under or 9 through which the DRSP has marketed or intends to market the 10 services for which the DRSP seeks Payment Processing or 11 Account Maintenance Services for its customers; 12 13 iii. The name and address of every bank and Payment Processor used by the DRSP during the preceding one year; 14 iv. The names of business or trade references and bank references; 15 v. The DRSP’s past Total Return Rates, if applicable; 16 vi. Representative examples of all DRSP marketing materials 17 18 19 20 21 22 currently in use; vii. All current consumer contract templates being used for Debt Relief Service; viii. A summary description of the DRSP’s complaint intake and management system; ix. All complaints, up to a maximum of 200 of the most current 23 complaints, by or on behalf of any consumer about a DRSP and 24 received by the DRSP in the preceding year and information 25 relating to the resolution, if any, of such complaints. For DRSPs 26 exceeding 200 complaints in the preceding year, after review of the 27 200 most current complaints, the volume of corresponding 28 8 1 complaints that were resolved, the volume of complaints 2 outstanding (or resolution pending) and the number of complaints 3 that were resolved with refunds to consumers; 4 x. Information regarding whether the DRSP, including the 5 principal(s) and controlling person(s) of the entity with 10% or 6 more ownership interest in the entity, has ever been the subject of 7 an investigation or the subject of any legal action by any state or 8 federal law enforcement agency. 9 b. For a DRSP claiming it is not subject to the TSR because its business 10 practices do not involve Telemarketing or for any other reason, such 11 reasonable screening shall also include, but not be limited to, obtaining: 12 13 14 15 16 i. A detailed description of why the DRSP contends its acts or practices do not constitute Telemarketing; ii. A detailed description of any aspects of the DRSP’s business practices that involve the telephone; iii. A list of each physical address at which the DRSP and all Persons 17 employed or engaged by the DRSP to make calls to or receive calls 18 from consumers are conducting or will conduct business, including 19 all physical addresses for making calls to or receiving calls from 20 consumers, to determine whether the DRSP is processing Advance 21 Fees for consumers in multiple states; 22 23 24 25 26 27 28 iv. A list of all inbound and outbound telephone numbers used by the DRSP; v. Representative samples of catalogs and related communications provided to Consumers; and vi. Names of any attorneys claiming to provide any Debt Relief Service or any other service related to or through the DRSP; the 9 1 states in which they are licensed to practice law; and any non- 2 confidential information about state bar complaints or disciplinary 3 proceedings against those attorneys. 4 c. For a DRSP claiming it is exempt from the TSR because its business 5 practices involve only Face-to-Face Transactions, such reasonable 6 screening shall also include obtaining: 7 8 9 i. A detailed description of why the DRSP contends its acts or practices qualify as Face-to-Face Transactions; ii. A detailed description of how the DRSP conducts meetings with 10 consumers which includes information as to whether the DRSP 11 uses employees or independent contractors to conduct face-to-face 12 sales presentations; 13 iii. For DRSPs which use independent contractors, a list of all 14 independent contractors and current contract templates with the 15 independent contractors hired to conduct face-to-face meetings 16 with consumers; 17 iv. All information and materials relating to the content, length, 18 location, and other circumstances surrounding the face-to-face 19 presentations; 20 v. Representative examples of the materials relating to the training of 21 DRSP representatives, whether employees or independent 22 contractors, meeting face-to-face with consumers to provide the 23 sales presentations, including training materials, scripts, guidance 24 documents, or other similar materials; and 25 26 vi. All materials provided to Consumers prior to signing a Debt Relief Service contract. 27 28 10 1 d. Taking reasonable steps to assess the accuracy of the information 2 provided pursuant to requirements of Paragraph 29.a through 29.c, 3 including: 4 i. Contacting consumers and financial institutions, if applicable, to 5 gather detailed information, including complaints and other 6 relevant information, about the DRSP; 7 8 ii. Reviewing and investigating Consumer complaints, if applicable, about a DRSP; 9 iii. Searching publically available sources for legal actions taken by 10 the Bureau or other federal or state law enforcement agencies 11 against the DRSP or its principals; 12 13 14 iv. Reviewing the DRSP’s websites from an IP address that is not associated with the Defendants; v. Investigating the accuracy of any DRSP’s claim that its business 15 practices involve only Face-to-Face Transactions by reviewing and 16 evaluating the information provided under Paragraphs 29.a through 17 29.c, considering any law enforcement actions against the 18 company, interviewing consumers, or taking other such 19 investigatory steps; 20 vi. Investigating the accuracy of any DRSP’s claim that it is not 21 subject to the TSR because its business practices do not involve 22 Telemarketing, e.g., because they do not involve more than one 23 interstate telephone call or involve catalog solicitations, by 24 reviewing and evaluating the information provided pursuant to 25 Paragraphs 29.a through 29.c above, requesting historical 26 consumer data to determine whether consumers in multiple states 27 have signed up for the service, considering any law enforcement 28 11 1 actions against the company, auditing relevant DRSP employees or 2 contractors, interviewing consumers, or taking other such 3 investigatory steps. 4 30. Defendant Global shall not provide Payment Processing or Account 5 Maintenance Services for any DRSP unless Defendant Global has compiled written 6 documentation establishing that Global has complied with all requirements under 7 Paragraph 29 of this Order subject to the written plan submitted pursuant to Paragraph 31 8 as applicable. 9 31. Within ten (10) days of the Effective Date, Global shall submit a written 10 plan to the Enforcement Director, subject to a determination of non-objection, setting 11 forth a specific timeline for completing the requirements of paragraphs 29 and 30 for 12 DRSPs for which Global currently provides Payment Processing or Account Maintenance 13 Services. Global shall complete the reasonable screening requirements in paragraphs 29 14 and 30 for these DRSPs as expeditiously as possible, and in no event shall Global take 15 more than 120 days from the Effective Date to satisfy these requirements. 16 32. Defendant Global shall not process any Advance Fee for any DRSP claiming 17 that its business practices involve Face-to-Face Transactions, unless the DRSP provides 18 evidence to Global that sale of services by the DRSP to the Consumer was not completed 19 until after a face-to-face sales presentation by the DRSP. Such evidence shall include, at a 20 minimum, the date, time, location, and attendees (including employer for the 21 representative of the DRSP) at the face-to-face meeting giving rise to the claimed Face- 22 to-Face Transaction. 23 33. Defendants shall not process any Advance Fee for any DRSP claiming that it 24 is not subject to the TSR on the basis that its business practices do not involve interstate 25 telemarketing calls unless the DRSP demonstrates that the DRSP, directly or indirectly, 26 makes all calls to and receives all calls from consumers located in the same state as the 27 DRSP. A DRSP that hires telemarketers in other states to conduct calls to induce the 28 12 1 purchase of Debt Relief Services within those states is still involved in a telemarketing 2 plan, program, or campaign covered by the TSR. 3 C. Monitoring of Debt Relief Service Providers 4 34. IT IS FURTHER ORDERED that Defendants, their officers, agents, 5 servants, employees, and attorneys, and all persons who are in active concert or 6 participation with any of them, who receive actual notice of this Order by personal 7 service or otherwise, whether acting directly or indirectly, shall continue to monitor each 8 DRSP client pursuant to the reasonable screening requirements of paragraph 29 and the 9 enhanced monitoring and due diligence procedures determined by the Third-Party 10 Monitor to consider whether the DRSP is complying with the TSR. 16 CFR pt. 310, and 11 sections 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 12 5531 and 5536. 13 35. Monitoring shall include, but not be limited to: 14 a. Semi-annual audits of each DRSP’s (1) compliance with the TSR, 16 15 CFR pt. 310, and sections 1031 and 1036 of the Consumer Financial 16 Protection Act of 2010, 12 U.S.C. §§ 5531 and 5536, and (2) if 17 applicable, the accuracy of the DRSP’s claim it is not subject to, or is 18 exempt from, the TSR because its business practices do not involve 19 Telemarketing, involve Face-to-Face Transactions, or fall under any 20 other claimed exemption, by updating and taking steps to verify the truth 21 and accuracy of information gathered pursuant to Paragraph 29 of this 22 Consent Order; 23 24 b. Reviewing and investigating complaints about DRSPs reported to Defendants; 25 c. Calculating on a monthly basis for each DRSP the Unauthorized Return 26 Rate. Such calculations must include all ACH transactions processed by 27 Defendants since the commencement of the processing relationship with 28 13 1 such DRSP. For any DRSP with multiple processing accounts, the 2 calculation of the Unauthorized Return Rate shall be made for each of the 3 DRSP’s individual processing accounts and in the aggregate; 4 d. Conducting a reasonable investigation for any DRSP whose 5 Unauthorized Return Rate exceeds 0.5% as calculated under Paragraph 6 35.c of this Order or that has received the greater of (1) three complaints 7 or (2) a number of complaints exceeding 0.2% of the total active clients 8 for the DRSP during the six month evaluation period, in either case to the 9 extent that such complaints are not resolved to the satisfaction of the 10 consumer. Such reasonable investigation shall include: 11 i. During the investigation, suspending all Advance Fees or other 12 payments to the DRSP under investigation until a determination is 13 made that remedial efforts are required in order to continue 14 operations with the DRSP, and continuing until such time as the 15 DRSP has implemented the remedial efforts required; and 16 ii. Updating and taking steps to verify the truth and accuracy of 17 information gathered pursuant to Paragraph 30 of this Consent 18 Order. 19 At the completion of the investigation, Defendants shall not recommence 20 payments to the DRSP under investigation (if payments to the DRSP 21 were previously suspended under Paragraph 35.d.i) unless Defendants 22 document facts that demonstrate that the DRSP has remediated. 23 D. Redress 24 36. 25 26 27 28 A judgment for equitable monetary relief is hereby entered in favor of the Bureau and against Defendants, jointly and severally, in the amount of $6,099,000. 37. Defendants shall pay to the Bureau, in the form of a wire transfer to the Bureau or to such agent as the Bureau may direct, and in accordance with wiring 14 1 instructions to be provided by counsel for the Bureau, $6,099,000 in full satisfaction of 2 the judgment as set forth in Paragraph 36 of this section. Defendants shall pay $4,000,000 3 within 10 days of the Effective Date and the remaining $2,099,000 on December 4, 2014. 4 38. Any funds received by the Bureau in satisfaction of this judgment shall be 5 deposited into a fund or funds administered by the Bureau or its agent in accordance with 6 applicable statutes and regulations to be used for redress for the Redress Class, including 7 but not limited to refund of moneys, restitution, or other monetary relief, and for any 8 attendant expenses for the administration of any such redress. 9 39. For the purposes of Redress, Section D, the Redress Class shall include any 10 Affected Consumer who has paid an Advance Fee to a DRSP that claimed to be exempt 11 from the TSR pursuant to a “legal” exemption where such Advance Fee was processed by 12 Defendants on or after October 27, 2010 through May 20, 2014. 13 14 40. The Bureau or its agent will administer restitution of the fees paid to Global by the Redress Class, as reflected in information provided by Global to the Bureau. 15 41. If the Bureau determines, in its sole discretion, that redress to any Affected 16 Consumer in the Redress Class is wholly or partially impracticable, or if funds remain 17 after redress is completed, the Bureau may apply any remaining funds for such other 18 equitable relief (including consumer information remedies) as the Bureau determines to 19 be reasonably related to the violations alleged in the Complaint. Any funds not used for 20 such equitable relief shall be deposited in the United States Treasury as disgorgement. 21 Defendants shall have no right to challenge any actions that the Bureau or its 22 representatives may take under this paragraph. 23 24 42. Payment of redress to any Affected Consumer under this Order shall not be conditioned on that Affected Consumer waiving any right. 25 E. Civil Money Penalty 26 43. Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the 27 violations of law set forth in this in the Complaint, and taking into account the factors set 28 15 1 forth in 12 U.S.C. § 5565(c)(3), Defendants, jointly and severally, shall pay a civil money 2 penalty of $1,000,000 to the Bureau, as directed by the Bureau and as set forth herein. 3 44. Within 10 days of the Effective Date, Defendants shall pay the civil money 4 penalty in the form of a wire transfer to the Bureau or to such agent as the Bureau may 5 direct, and in accordance with wiring instructions to be provided by counsel for the 6 Bureau. 7 45. The civil money penalty paid under this Order shall be deposited in the Civil 8 Penalty Fund of the Bureau in accordance with Section 1017(d) of the CFPA, 12 U.S.C. 9 § 5497(d). 10 46. Defendants shall treat the civil money penalty paid under this Order as a 11 penalty paid to the government for all purposes. Regardless of how the Bureau ultimately 12 uses those funds, Defendants shall not: 13 a. Claim, assert, or apply for a tax deduction, tax or tax credit, or any other 14 tax benefit with regard to any federal, state, or local tax for any civil 15 money penalty paid under this Order; or 16 b. Seek or accept, directly or indirectly, reimbursement or indemnification 17 from any source, including but not limited to payment made under any 18 insurance policy, with regard to any civil money penalty paid under this 19 Order. 20 47. To preserve the deterrent effect of the civil money penalty, in any Related 21 Consumer Action, Defendants shall not argue that Defendants are entitled to, nor shall 22 Defendants benefit by, any offset or reduction of any monetary remedies imposed in the 23 Related Consumer Action, because of the civil money penalty paid in this action 24 (“Penalty Offset”). If the court in any Related Consumer Action grants such a Penalty 25 Offset, Defendants shall, within 30 days after entry of a final order granting the Penalty 26 Offset, notify the Bureau, and pay the amount of the Penalty Offset to the U.S. Treasury. 27 28 16 1 Such a payment shall not be deemed an additional civil money penalty and shall not be 2 deemed to change the amount of the civil money penalty imposed in this action. 3 F. Other Monetary Provisions 4 48. In the event of any default on Defendants’ obligations to make payment 5 under this Order, interest, computed under 28 U.S.C. § 1961, as amended, shall accrue on 6 any outstanding amounts not paid from the date of default to the date of payment, and 7 shall immediately become due and payable. 8 9 10 49. Defendants shall relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law and no part of the funds shall be returned to Defendant. 11 50. In accordance with 31 U.S.C. § 7701, Defendants, unless they already have 12 done so, shall furnish to the Bureau their taxpayer identifying numbers, which may be 13 used for purposes of collecting and reporting on any delinquent amount arising out of this 14 Order. 15 51. Within 30 days of the entry of a final judgment, consent order, or settlement 16 in a Related Consumer Action, Defendants shall notify the Enforcement Director of the 17 final judgment, consent order, or settlement in writing. That notification shall indicate the 18 amount of redress, if any, that Defendants paid or are required to pay to consumers and 19 should describe the consumers or classes of consumers to whom that redress has been or 20 will be paid. 21 52. Under Section 604(a)(I) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l 22 b(a)(1), any consumer reporting agency may furnish a consumer report concerning any 23 Defendant to the Bureau, which shall be used for purposes of collecting and reporting on 24 any delinquent amount arising out of this Order. 25 G. Compliance Management System and Third-Party Monitor 26 53. 27 28 Within 90 days of the Effective Date, Global shall develop and implement an enhanced Compliance Management System to include, but not be limited to: 17 1 a. Comprehensive written policies and procedures designed to prevent 2 violations of the TSR, 16 C.F.R. pt. 310, 1031(a) and 1036(a) of the 3 CFPA, 12 U.S.C. §§ 5531(a), 5536(a), or other Federal consumer 4 protection laws, and associated risks to consumers; 5 b. Effective due diligence processes, consistent with the injunctions 6 provided in this Consent Order; 7 c. Effective training programs that include regular and specific training 8 regarding the TSR, consumer protection laws, and associated risks to 9 consumers; 10 d. Enhanced and documented compliance monitoring processes; 11 e. Effective consumer complaint monitoring processes; 12 f. Effective audit programs; and 13 g. Effective processes to monitor the monthly Total Return Rate for each 14 DRSP, including but not limited to, specific processes to review and 15 monitor DRSPs whose Total Return Rate exceeds 2.5%. 16 54. Within 90 days of the Effective Date, Global shall secure and retain one or 17 more third-party monitors, not subject to any conflict of interest, and subject to a 18 determination of non-objection by the Enforcement Director, to conduct an independent 19 review of Global’s business (the “Third-Party Monitor”). The Third-Party Monitor shall 20 review Global’s existing policies and procedures concerning the TSR and other consumer 21 protection laws, potential risks to consumers, consumer complaint resolution processes, 22 and employee training programs. The purposes of the review shall be to determine: 23 a. Whether Global has in place comprehensive written policies and 24 procedures designed to detect violations of the TSR, related violations of 25 consumer protection laws, and associated risks to consumers; 26 b. Whether Global has in place effective due diligence processes; 27 28 18 1 c. Whether Global has in place effective training programs that includes 2 regular and specific training regarding the TSR, consumer protection 3 laws, and associated risks to Consumers; 4 d. Whether Global has in place effective and documented compliance 5 monitoring processes; 6 e. Whether Global has in place effective consumer complaint monitoring 7 processes; and 8 f. Whether Global has in place effective audits of its compliance with the 9 TSR, including the Advance Fee ban, or other Federal consumer financial 10 laws applicable to Global. 11 55. Within 180 days of the Effective Date, the Third-Party Monitor shall prepare 12 a written report detailing the findings of the review (the “Third-Party Monitor Report”), 13 and provide the Third-Party Monitor Report to Global. 14 56. Within 20 days of receiving the Third-Party Monitor Report, Global shall: 15 a. Develop a plan (the “Compliance Management System”) to: (i) address 16 any deficiencies identified, and (ii) implement any recommendations or 17 explain in writing why a particular recommendation is not being 18 implemented; and 19 Submit the Third-Party Monitor Report and the Compliance Management 20 System to the Enforcement Director. 21 H. Additional Compliance Monitoring 22 57. Global agrees to be subject to the Bureau’s supervisory authority under 12 23 U.S.C. § 5514 for 3 years from the Effective Date. Consistent with 12 C.F.R. § 1091.111, 24 Global shall not petition for termination of supervision under 12 C.F.R. § 1091.113. 25 I. Reporting Requirements 26 58. 27 28 Defendants shall notify the Bureau of any change that may affect compliance obligations arising under this Consent Order, including but not limited to, a 19 1 dissolution, assignment, sale, merger, or other action that would result in the emergence 2 of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate 3 that engages in any acts or practices subject to this Consent Order; the proposed filing of 4 any bankruptcy or insolvency proceeding by or against Defendants; or a change in 5 Defendants’ names or addresses. 6 59. Within 7 days of the Effective Date, Defendants shall: 7 a. Designate at least one telephone number and an email, physical, and 8 postal address as points of contact, which the Bureau may use to 9 communicate with Defendants; 10 b. Identify all of Defendants’ businesses related to the subject matter of this 11 Consent Order or to the offering or provision of consumer financial 12 products or services by all of their names, telephone numbers, and 13 physical, postal, email, and Internet addresses; 14 c. Describe the activities of each business identified in (b), including the 15 products and services offered, the means of advertising, marketing, and 16 sales; 17 d. For all individual Defendants identify all titles and roles in each business 18 identified in (b), including any business for which such Defendant 19 performs services whether as an employee or otherwise and any entity in 20 which such Defendant has any ownership interest; and 21 e. For all individual Defendants describe in detail such Defendant’s 22 involvement in each business identified in (b), including title, role, 23 responsibilities, participation, authority, control, and any ownership. 24 60. Defendants shall report any change in the information required to be 25 submitted under Paragraphs 58 and 59 at least 30 days prior to such change. Provided, 26 however, that with respect to any proposed change about which Defendants learn less 27 28 20 1 than 30 days prior to the date such action is to take place, Defendants shall notify the 2 Bureau as soon as is practicable after obtaining such knowledge. 3 61. Within 90 days of the Effective Date, and again one year after the Effective 4 Date, each Defendant shall submit to the Enforcement Director an accurate written 5 compliance progress report (“Compliance Report”), which, at a minimum: 6 a. Describes in detail the manner and form in which Defendants have 7 complied with this Order; and 8 b. Attaches a copy of each Order Acknowledgment obtained under Section 9 J of this Consent Order, unless previously submitted to the Bureau. 10 62. After the one-year period, Defendants shall submit to the Enforcement 11 Director additional Compliance Reports within 14 days of receiving a written request 12 from the Bureau. 13 J. Order Distribution and Acknowledgement 14 63. Within 7 days of the Effective Date, Defendants shall submit to the 15 Enforcement Director an acknowledgment of receipt of this Consent Order, sworn under 16 penalty of perjury. 17 64. Within 30 days of the Effective Date, Defendants, for any business for 18 which he or it is the majority owner or which he or it directly or indirectly controls shall 19 deliver a copy of this Consent Order to each of its board members and executive officers, 20 as well as to any managers, employees, service providers, or other agents and 21 representatives who have responsibilities related to the subject matter of the Consent 22 Order. 23 65. For 5 years from the Effective Date, each Defendant, for any business for 24 which he or it is the majority owner or which he directly or indirectly controls shall 25 deliver a copy of this Order to any business entity resulting from any change in structure 26 as set forth in Section I, any future board members and executive officers, as well as to 27 any managers, employees, service providers, or other agents and representatives who will 28 21 1 have responsibilities related to the subject matter of this Order before they assume their 2 responsibilities. 3 66. Defendants shall secure a signed and dated statement acknowledging receipt 4 of a copy of this Order, with any electronic signatures complying with the requirements 5 of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons 6 receiving a copy of this Order under this Section. 7 K. Recordkeeping 8 67. 9 10 11 Defendants shall create, for at least 3 years from the Effective Date, and then retain, for at least 5 years, and make available to the Bureau upon request, the following business records: a. Documents and records necessary to demonstrate full compliance with 12 each provision of this Consent Order, including all submissions to the 13 Bureau; 14 b. For each individual Affected Consumer: the consumer’s name, address, 15 phone number, email address; the date the Affected Consumer enrolled in 16 Debt Relief Service; all payments and transactions related to the Affected 17 consumer; and the date the Affected Consumer left the Debt Relief 18 Service, if known; 19 c. For Payment Processing or Account Maintenance Services, accounting 20 records showing the gross and net revenues generated by those services; 21 and 22 d. All consumer complaints and refund requests (whether received directly 23 or indirectly, such as through a third party), and any responses to those 24 complaints or requests. 25 26 27 28 22 1 L. Notices 2 68. Unless otherwise directed by the Bureau, all submissions, requests, 3 communications, consents, or other documents relating to this Consent Order shall be in 4 writing and shall be sent by overnight courier (not the U.S. Postal Service), as follows: 5 Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1700 G Street, N.W. Washington D.C. 20552 In re Global Client Solutions, LLC, et al., File No. 2011-0113-02 6 7 8 9 10 Provided however, Defendants may send such reports or notifications by 11 first-class mail, but only if Defendants contemporaneously send an electronic version 12 of such report or notification to the Bureau at Enforcement_Compliance@cfpb.gov. 13 14 M. 69. 15 16 17 18 19 20 21 22 23 24 Cooperation with Bureau Counsel In connection with this action, or any subsequent matter related to the conduct described in the Complaint, Defendants shall cooperate in good faith with the Bureau and appear at such places and times as the Bureau shall reasonably request, after written notice, for interviews, conferences, pretrial discovery, review of documents, and for such other matters as may be reasonably requested by the Bureau. Specifically, Defendants shall assist the Bureau in determining the identity of and amount of injury suffered by each Affected Consumer. N. Retention of Jurisdiction 70. The Court shall retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Consent Order. 25 26 27 28 23 1 [THIS PAGE INTENTIONALLY LEFT BLANK] 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 1 SO STIPULATED: 2 Consumer Financial Protection Bureau 3 _____/s/_____________________________8/22/2014___ 4 Erin Mary Kelly, Enforcement Attorney 5 Defendant, Global Client Solutions, LLC BY: 6 ____/s/______________________________8/5/2014____ 7 8 9 10 11 12 13 Michael Hendrix, CEO Date Date Defendant, Global Holdings, LLC BY: ____/s/______________________________8/5/2014____ Michael Hendrix, CEO Date Defendant, Robert Merrick: ____/s/______________________________8/5/2014____ Robert Merrick Date Defendant Michael Hendrix: 14 ____/s/______________________________8/5/2014____ 15 Michael Hendrix Date 16 17 IT IS SO ORDERED. 18 19 DATED: August 27, 2014 20 21 22 23 24 _________________________________ 25 Hon. Dean D. Pregerson 26 United States District Judge 27 28 25
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