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IN THE MATTER OF: CASHCALL, INC. * * * * * * * * * * * * * * * * * * * |
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ORDER TO MAKE RESTITUTION AND NOTICE OF RIGHT TO HEARING |
I. LEGAL AUTHORITY AND JURISDICTION
The Banking Commissioner (“Commissioner”) is charged with the administration of Part III of Chapter 668, Sections 36a-555 to 36a-573, inclusive, of the Connecticut General Statutes, “Small Loan Lenders”, and the regulations adopted thereunder (Sections 36a-570-1 to 36a-570-17, inclusive, of the Regulations of Connecticut State Agencies) (“Regulations”).
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, 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 or Regulations within the jurisdiction of the Commissioner.
Section 36a-17(a) of the Connecticut General Statutes provides, in pertinent part, that:
The commissioner, in the commissioner’s discretion, may, subject to the provisions of section 36a-21 and the Freedom of Information Act, as defined in section 1-200; (1) 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, (2) require or permit any person to testify, produce a record or file a statement in writing, under oath, or otherwise as the commissioner determines, as to all the facts and circumstances concerning the matter to be investigated or about which an action or proceeding is pending . . . .
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, or any regulation . . . adopted . . . thereunder, 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, [or] regulations . . . 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 of the Connecticut General Statutes provides, in pertinent part, that:
(a)(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, or any regulation . . . adopted . . . thereunder, 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, [or] regulations . . . 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 not later than fourteen days after 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, [or] regulation, . . . 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. . . .
(c) 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, or any regulation . . . adopted . . . under such provisions, the commissioner may, in addition to any other remedy authorized by law, order such person to (1) make restitution of any sums shown to have been obtained in violation of any such provision, [or] regulation . . . plus interest at the legal rate set forth in section 37-1 . . . . After the commissioner issues such an order, the person named in the order may, not later than fourteen days after receipt of such order, file a written request for a hearing. The order 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 hearing shall be held in accordance with the provisions of chapter 54.
II. MATTERS ASSERTED
| 1. |
Respondent is a California corporation with an address at 1600 South Douglass Road, Anaheim, California, and has been licensed as a mortgage lender in Connecticut since November 2010. John Paul Reddam is listed as the President, CEO and sole owner of Respondent. |
| 2. |
From at least March 2012 to the present, Respondent offered, via various media in Connecticut, including the Internet, unsecured consumer loans in amounts less than $15,000 with annual interest rates of greater than 12% (“Consumer Loans”). |
| 3. |
Respondent’s website offers Consumer Loans to consumers, not excluding Connecticut residents, by soliciting such consumers to “Apply NOW!”, call a telephone number or fill out an on-line form. The website continues to state, in pertinent part, that:
At CashCall, we do our best to make it easy for people just like you to
obtain an unsecured personal loan. . . .You must be able to send us the following information: > Statement of an active bank account
> Proof of Employment > Provide proof that you are at least 21 years of age with a valid form of
ID, such as a driver's license. |
| 4. |
On or about March 1, 2012 and January 29, 2013, a Connecticut resident inquired about Consumer Loans via the on-line form provided on Respondent’s website. In response, Respondent e-mailed the Connecticut resident to discuss Consumer Loans and offered to “complete [the resident’s] application over the phone”.
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| 5. | On or about August 3, 2012, a second Connecticut resident inquired about Consumer Loans via the telephone number provided on Respondent’s website. Respondent called back the Connecticut resident to discuss Consumer Loans and followed up with an e-mail communication. The e-mail communication stated that once the Connecticut resident provided some additional information, he would be “pre-approved for a personal loan ASAP”. |
| 6. | Generally, Consumer Loans offered by Respondent in Connecticut are made by a third-party lender not licensed as a small loan lender in Connecticut (“Third Party”). On at least 5 occasions from April 2011 to October 2012, within three days of consummation of Consumer Loans by Connecticut residents with Third Party, such Consumer Loans were sold and assigned to Respondent. From at least April 2011 to the present, Respondent charged to and received from Connecticut residents numerous payments of interest in excess of 12% on such Consumer Loans. |
| 7. | Respondent’s website fails to identify Third Party or mention that Consumer Loans in Connecticut are made by Third Party, rather than Respondent. Respondent’s website states, in pertinent part, “Get funded – CashCall unsecured personal loans are fast!” and provides the notation that “All loans made pursuant to California Department of Corporations Finance Lenders Law License #603-8780. NMLS #38512”. Such license and NMLS identification number are held by Respondent, not Third Party, and in Connecticut, Consumer Loans are not made pursuant to such license. |
| 8. | At no time relevant hereto was Respondent licensed as a small loan lender in Connecticut, nor is Respondent exempt from such licensure requirements. |
| 9. |
Respondent has been the subject of numerous state actions concerning its consumer loan activity, including a lawsuit by the State of West Virginia, Civil Action No. 08-C-1964, alleging, inter alia, that Respondent participated in a “rent-a-bank” or “rent-a-charter” scheme designed to avoid West Virginia usury laws. On September 10, 2012, the Circuit Court of Kanawha County, West Virginia, found that Respondent was the de facto lender of usurious loans made by the bank and had engaged in unfair or deceptive acts or practices as a result of making and collecting on such loans without a license. Most recently, on January 30, 2013, the State of Washington Office of Administrative Hearings for the Department of Financial Institutions found that Respondent violated Washington’s usury laws and engaged in unfair acts or practices by collecting on usurious loans made by Third Party. |
III. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST,
ORDER TO MAKE RESTITUTION AND IMPOSITION OF CIVIL PENALTY
Section 36a-53b of the Connecticut General Statutes provides, in pertinent part, that:
No person shall, in connection with any activity subject to the jurisdiction of the commissioner: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or (3) engage in any act, practices, or course of business which operates or would operate as a fraud or deceit upon any person.
Section 36a-555 of the Connecticut General Statutes provides, in pertinent part, that:
No person shall (1) engage in the business of making loans of money or credit; (2) make, offer, broker or assist a borrower in Connecticut to obtain such a loan; or (3) in whole or in part, arrange such loans through a third party or act as an agent for a third party, regardless of whether approval, acceptance or ratification by the third party is necessary to create a legal obligation for the third party, through any method, including, but not limited to, mail, telephone, Internet or any electronic means, in the amount or to the value of fifteen thousand dollars or less for loans made under section 36a-563 or section 36a-565, and charge, contract for or receive a greater rate of interest, charge or consideration than twelve per cent per annum therefor, unless licensed to do so by the commissioner pursuant to sections 36a-555 to 36a-573, inclusive. . . .
Section 36a-573 of the Connecticut General Statutes provides, in pertinent part, that:
(a) No person, except as authorized by the provisions of sections 36a-555 to 36a-573, inclusive, shall, directly or indirectly, charge, contract for or receive any interest, charge or consideration greater than twelve per cent per annum upon the loan, use or forbearance of money or credit of the amount or value of . . . fifteen thousand dollars or less for any such transaction entered into on and after October 1, 1997. The provisions of this section shall apply to any person who, as security for any such loan, use or forbearance of money or credit, makes a pretended purchase of property from any person and permits the owner or pledgor to retain the possession thereof, or who, by any device or pretense of charging for the person’s services or otherwise, seeks to obtain a greater compensation than twelve per cent per annum. No loan for which a greater rate of interest or charge than is allowed by the provisions of sections 36a-555 to 36a-573, inclusive, has been contracted for or received, wherever made, shall be enforced in this state, and any person in any way participating therein in this state shall be subject to the provisions of said sections, provided, a loan lawfully made after June 5, 1986, in compliance with a validly enacted licensed loan law of another state to a borrower who was not, at the time of the making of such loan, a resident of Connecticut but who has become a resident of Connecticut, may be acquired by a licensee and its interest provision shall be enforced in accordance with its terms.
(b) The provisions of subsection (a) of this section shall apply to any loan made or renewed in this state if the loan is made to a borrower who resides in or maintains a domicile in this state and such borrower (1) negotiates or agrees to the terms of the loan in person, by mail, by telephone or via the Internet while physically present in this state; (2) enters into or executes a loan agreement with the lender in person, by mail, by telephone or via the Internet while physically present in this state; or (3) makes a payment of the loan in this state. As used in this subsection, “payment of the loan” includes a debit on an account the borrower holds in a branch of a financial institution or the use of a negotiable instrument drawn on an account at a financial institution, and “financial institution” means any bank or credit union chartered or licensed under the laws of this state, any other state or the United States and having its main office or a branch office in this state.
(c) Whenever it appears to the commissioner that any person has violated the provisions of subsection (a) of this section or offered a loan that violates the provisions of subsection (a) of this section, the commissioner may investigate, take administrative action or assess civil penalties and restitution in accordance with the provisions of sections 36a-50 and 36a-52.
| 1. |
Respondent’s failure to identify Third Party as the entity that makes Consumer Loans in Connecticut when offering such loans to Connecticut residents, and Respondent’s statement on its website that all loans are made pursuant to its California lender license, when in fact Consumer Loans in Connecticut are not made pursuant to such license, as more fully described in paragraphs 2 through 9, inclusive, of the Matters Asserted, constitute violations of Section 36a-53b of the Connecticut General Statutes. Such violations form the basis to issue an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty pursuant to Section 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. |
| 2. |
Respondent's offering Consumer Loans, assisting Connecticut borrowers to obtain such loans or, in whole or in part, arranging such loans through Third Party or acting as an agent for Third Party without obtaining the required license, as more fully described in paragraphs 2 through 9, inclusive, of the Matters Asserted, contitutes violations of Section 36a-555 of the Connecticut General States. Such violations form the basis to issue an order to cease and desist
pursuant to Section 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes. |
| 3. |
Respondent’s charging and receiving interest at a rate greater than 12% on at least five Consumer Loans to Connecticut residents in amounts less than $15,000, as more fully described in paragraphs 6 and 8 of the Matters Asserted, constitute violations of Section 36a-573(a) of the Connecticut General Statutes. Such violations form the basis to issue an order to cease and desist pursuant to Sections 36a-573(c) and 36a-52(a) of the Connecticut General Statutes, issue an order to make restitution pursuant to Sections 36a-573(c) and 36a-50(c) of the Connecticut General Statutes, and impose a civil penalty pursuant to Sections 36a-573(c) 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. |
IV. FINDING AND STATUTORY BASIS FOR
TEMPORARY ORDER TO CEASE AND DESIST
The Commissioner finds that the public welfare requires immediate action to issue a temporary order requiring Respondent to cease and desist from violating Sections 36a-53b, 36a-555 and 36a-573(a) of the Connecticut General Statutes, and to take such 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 continuing to offer loans in amounts less than $15,000 with annual interest rates greater than 12%, and receiving interest in excess of 12% on such loans, while failing to be duly licensed as a small loan lender in Connecticut and comply with the restrictions imposed on such licensees pursuant to Sections 36a-555 to 36a-573, inclusive, of the Connecticut General Statutes.
V. TEMPORARY ORDER TO CEASE AND DESIST, ORDER TO MAKE RESTITUTION,
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-573(c) and 36a-52(a) of the Connecticut General Statutes, an order to make restitution pursuant to Sections 36a-573(c) and 36a-50(c) of the Connecticut General Statutes, and impose a civil penalty pursuant to Sections 36a-573(c) 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 CashCall, Inc., immediately CEASE AND DESIST from violating Sections 36a-53b, 36a-555 and 36a-573(a) of the Connecticut General Statutes. This Temporary Order shall become effective upon receipt by CashCall, 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-17(a) and 36a-52(b) of the Connecticut General Statutes, that: Not later than fourteen (14) days from receipt of this Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing, CashCall, Inc., shall provide to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov, a list of all Connecticut residents who, on or after October 1, 2009, have been: (1) offered Consumer Loans by CashCall, Inc.; or (2) charged interest in excess of 12% by CashCall, Inc., on a Consumer Loan. For each Consumer Loan consummated by a Connecticut resident, such submission shall include: (a) A copy of each loan agreement specifying the amount and annual interest rate of the loan, and (b) a list of each Connecticut resident’s name and address and full itemization of payments made pursuant to the loan agreement, specifying the dates and amounts of such payments.
THE COMMISSIONER FURTHER ORDERS, pursuant to Sections 36a-573(c) and Section 36a-50(c) of the Connecticut General Statutes, that CashCall, Inc., MAKE RESTITUTION of any sums obtained as a result of CashCall, Inc., violating Section 36a-573(a) of the Connecticut General Statutes. Specifically, the Commissioner ORDERS that: Not later than forty-five (45) days from the date this Order to Make Restitution becomes permanent, CashCall, Inc., shall:
| 1. |
Repay any interest in excess of 12% received by CashCall, Inc., on or after October 1, 2009, from Connecticut residents identified in Exhibit A or any other Connecticut resident in connection with a Consumer Loan. Payments shall be made by cashier’s check, certified check or money order; and |
| 2. |
Provide to Carmine Costa, Director, Consumer Credit Division, Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, or carmine.costa@ct.gov, evidence of such repayments. |
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-53b, 36a-555 and 36a-573(a) 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 Respondent’s receipt of this Temporary Order to Cease and Desist, Order to Make Restitution, 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 Section 36a-50 of the Connecticut General Statutes. This Temporary Order to Cease and Desist, Order to Make Restitution, 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 May 8, 2013, 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 period prescribed or fails to appear at any hearing, the Order to Make Restitution shall remain in effect and become permanent against Respondent, and the Commissioner will issue an order that Respondent cease and desist from violating Sections 36a-53b, 36a-555 and 36a-573(a) of the Connecticut General Statutes, and may order a civil penalty in an amount not to exceed One Hundred Thousand Dollars ($100,000) per violation be imposed upon Respondent.
So ordered at Hartford, Connecticut
this 12th of March 2013. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 13th day of March 2013, the foregoing Temporary Order to Cease and Desist, Order to Make Restitution, 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 CashCall, Inc., Attention: Jordana Gilden, Associate Counsel, 1600 South Douglass Road, Anaheim, California 92806, certified mail no. 70121010000172645731; and CashCall, Inc., P.O. Box 66007, Anaheim, California 92816, certified mail no. 70121010000172645748.
________/s/_________
Stacey L. Serrano
Prosecuting Attorney