STATE OF ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION DIVISION OF FINANCIAL INSTITUTIONS

Transcription

1 STATE OF ILLINOIS DEPARTMENT OF FINANCIAL & PROFESSIONAL REGULATION DIVISION OF FINANCIAL INSTITUTIONS In the Matter of ) ) CareOne Services, Inc. ) No. 11 CC 338 ) TO: CareOne Services, Inc. Gordon Feinblatt LLC 8930 Stanford Boulevard 233 East Redwood Street Columbia, MD Baltimore, MD CEASE AND DESIST ORDER The DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION, DIVISION OF FINANCIAL INSTITUTIONS (the Department ), having conducted an investigation related to the debt settlement services conducted by CareOne Services, Inc. ( CareOne ) pursuant to the Debt Settlement Consumer Protection Act, 225 ILCS et seq. (the Act ), and pursuant to 38 Ill. Admin. Code et seq. (the Code ), hereby issues this cease and desist order ( Order ) for violations of the Act and the Code: STATUTORY PROVISIONS 1. Section 10 of the Act states, in pertinent part: Debt settlement provider means any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation, or any person who solicits for or acts on behalf of any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation..... Debt settlement service means: (1) offering to provide advice or service, or acting as an intermediary between or on behalf of a consumer and one or more of a consumer's creditors, where the primary purpose of the advice, service, or action is to obtain a settlement, adjustment, or satisfaction of the consumer's unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt; or (2) offering to provide services related to or providing services advising, encouraging, assisting, or counseling a consumer to accumulate funds for the primary purpose of proposing or obtaining or seeking to obtain a settlement, adjustment, or satisfaction of

2 the consumer's unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt. 225 ILCS Section 15 of the Act states: It shall be unlawful for any person or entity to act as a debt settlement provider except as authorized by this Act and without first having obtained a license under this Act. 225 ILCS Section 80(b) of the Act states: Any contract of debt settlement service as defined in this Act made by an unlicensed person shall be null and void and of no legal effect. 225 ILCS (b). 4. Section 80(c) of the Act states, in pertinent part: (c) The Secretary may, after 10 days notice by registered mail to the debt settlement service provider at the address on the license or unlicensed entity engaging in the debt settlement service business, stating the contemplated action and in general the grounds therefore, fine such debt settlement service provider or unlicensed entity an amount not exceeding $10,000 per violation, and revoke or suspend any license issued hereunder if he or she finds that: (1) The debt settlement service provider has failed to comply with any provision of this Act or any order, decision, finding, rule, regulation or direction of the Secretary lawfully made pursuant to the authority of this Act ILCS (c). 5. Section 83 states: Any person who, without the required license, engages in conduct requiring a license under this Act without the required license shall be liable to the Department in an amount equal to the greater of (1) $1,000 or (2) an amount equal to four times the amount of consumer debt enrolled ILCS Section 95 of the Act states, in pertinent part: (a) The Secretary may issue a cease and desist order to any debt settlement provider or other person doing business without the required license when, in the opinion of the Secretary, the debt settlement provider or other person is violating or is about to violate any provision of the Act or any rule or condition imposed in writing by the Department. (b) The Secretary may issue a cease and desist order prior to a hearing. 225 ILCS Section 105 of the Act states: (a) A debt settlement provider shall not represent, expressly or by implication, any results or outcomes of its debt settlement services in any advertising, marketing, or other communication to consumers unless the debt settlement provider possesses substantiation for such representation at the time such representation is made. (b) A debt settlement provider shall not, expressly or by implication, make any unfair or deceptive representations, or any omissions of material facts, in any of its advertising or marketing communications concerning debt settlement services. 2

3 (c) All advertising and marketing communications concerning debt settlement services shall disclose the following material information clearly and conspicuously: Debt Settlement services are not appropriate for everyone. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. 225 ILCS Section 145 of the Act states, in pertinent part: A debt settlement provider shall not do any of the following:.... (2) Advise or represent, expressly or by implication, that consumers should stop making payments to their creditors. (3) Advise or represent, expressly or by implication, that consumers should stop communicating with their creditors. 225 ILCS Section 150(c) of the Act states, in pertinent part: Any contract for debt settlement service that does not comply with the applicable provisions of this Act: (1) shall be treated as void; and (2) may not be enforced by any federal or State court or any other person; and Upon notice of a void contract, a refund by the debt settlement provider to the consumer shall be made as if the contract had been cancelled as provided in Section 135 of this Act. 225 ILCS (c). 10. Section (e) of the Code states: No fees shall be paid to an attorney, lending institution, or any other source for the referral of customers. 38 Ill. Admin. Code (e). FACTUAL FINDINGS 11. CareOne is incorporated in the State of Maryland, with its principal place of business located at 8930 Stanford Boulevard, Columbia, Maryland. 12. CareOne purports to provide only administrative and paralegal assistance under its debt settlement program to Persels & Associates, LLC ( Persels ), a law firm, but Persels is located in a different location than CareOne. Persels is a Maryland limited liability company, with its principal place of business located at 29 West Susquehana Avenue, Suite 400, Towson, Maryland. 3

4 13. CareOne holds itself out to consumers, through traditional and internet-based advertising, as a business that actually and independently offers debt relief services to consumers, including debt settlement programs. 14. CareOne routinely conducts telephone consultations with Illinois customers seeking debt relief services, including debt settlement services. During such consultations, CareOne collects confidential financial information from the consumers, and provides the consumers with information and recommendations regarding the services to be performed. 15. CareOne determines which debt relief service to recommend to consumers, including debt settlement services. 16. CareOne solicits and obtains signed agreements from Illinois consumers who enroll in the debt settlement program, retaining Persels s legal representation in connection with the same, prior to any communication between the consumers and Persels. 17. CareOne advises consumers who enroll in the debt settlement program to ignore communications from creditors, including court summonses for collection actions, and to refrain from contacting their creditors. 18. Certain Illinois consumers who were advised by CareOne to ignore court summonses from creditors became subject to court judgments and wage garnishments as a result of their failure to respond. CareOne subsequently advised those consumers to consider CareOne s bankruptcy program to obtain relief from the judgments and garnishments. 19. CareOne collects a fee for every Illinois consumer who submits a signed retainer agreement in connection with the debt settlement program. 20. CareOne performs initial and ongoing analyses of the financial circumstances of Illinois consumers who enroll in the debt settlement program. 21. CareOne contacts consumer creditors and negotiates settlements on behalf of consumers enrolled in the debt settlement program. 22. CareOne fields incoming calls from debt settlement program consumers and determines which calls they will forward to Persels. 23. CareOne has developed propriety Debt Resolution Software in connection with the debt settlement program, and provides Persels with access to the same. 24. Persels, which is located in Townson, Maryland, does not supervise CareOne, or CareOne s employees, who are located in Columbia, Maryland, with regard to services provided under the debt settlement program. 25. CareOne advertises its debt relief services, including debt settlement, through mass media and the internet without providing the disclosures required under Section 105 of the Act. 4

5 26. From August 2010 through December 2011, CareOne enrolled at least 1,638 Illinois consumers into its debt settlement program. 27. CareOne has never been licensed by the Department to offer or provide debt settlement services to Illinois consumers pursuant to the Act. LEGAL FINDINGS 28. CareOne acted as a debt settlement provider and provided debt settlement services to Illinois consumers, as defined under Section 10 of the Act. 225 ILCS Pursuant to Section 15 of the Act, CareOne must be licensed before engaging in debt settlement services in Illinois. 225 ILCS CareOne advised and represented, expressly or by implication, that consumers should stop communicating with their creditors, in violation of Section 145 of the Act. 225 ILCS (3). 31. CareOne advertised its debt settlement services without providing the disclosures required under Section 105 of the Act. 225 ILCS (c). 32. The Department has the regulatory authority to fine CareOne in an amount of $10,000 per violation of the Act or the Code. 225 ILCS (c). 33. CareOne is liable to the Department in an amount equal to the greater of $1,000 or four times the amount of the Illinois consumer debt enrolled. 225 ILCS The Department has the regulatory authority to issue this Order to stop CareOne from violating the Act. 225 ILCS Pursuant to Section 150(c) of the Act, all CareOne contracts with Illinois consumers for debt settlement services are void and may not be enforced by any federal or state court or any other person under. CareOne shall remit refunds to all Illinois consumers for any fees collected under voided contracts. 225 ILCS (c). NOW IT IS HEREBY ORDERED THAT: I. CareOne shall CEASE AND DESIST from engaging in debt settlement service without the proper debt settlement license. II. CareOne shall PRODUCE DOCUMENTS to the Department consisting of any and all records, files, account statements, correspondence, and documents containing any and all information relevant to the debt settlement accounts of all Illinois consumers since August 1, The documents produced pursuant to this paragraph shall be exhaustive and inclusive of any and all documents in the possession, custody, or control of (a) CareOne, (b) any affiliate, subsidiary, division, agent, employee, predecessor, successor, or assigns of CareOne, or (c) any entity substantially identical with CareOne in which CareOne or any 5

6 CareOne employee holds or previously held an interest. CareOne shall provide the Department copies of all its referral agreements with law firms, companies, or individuals. CareOne shall provide the Department a listing of all third party entities and agreements pursuant to which CareOne provides debt settlement services to Illinois consumers, any and all agreements between or applicable to said third party entities, and any and all agreements to provide debt settlement services to Illinois consumers. CareOne shall provide the Department copies of all advertising, mailings, fliers and any other type of solicitation or advertisement CareOne is using or has used to solicit Illinois consumers. CareOne shall report to the Department any and all debt settlements, including settlement amounts and associated fees, negotiated for Illinois consumers since August 1, CareOne shall provide the Department copies of all settlement letters received from or on behalf of creditors in conjunction with any and all debt settlements negotiated for Illinois consumers since August 1, All documents requested pursuant to this paragraph shall be produced by February 11, 2013, and delivered to the Consumer Credit Supervisor at the Illinois Department of Financial and Professional Regulation, Division of Financial Institutions, 100 W. Randolph Street, 9 th Floor, Chicago, IL An affidavit stating whether the production is complete in accordance with this Order shall accompany any and all documents produced to the Department. III. IV. CareOne is LIABLE to the Department for an amount equal to four times the total amount of Illinois consumer debt that CareOne enrolled in debt settlement plans. Effective immediately, all existing contracts entered into between CareOne and Illinois consumers for debt settlement services are unlawful and therefore declared VOID. CareOne shall pay full RESTITUTION to all said Illinois consumers. Pursuant to Section 95(c) of the Act, the Secretary shall serve notice of his action, including a statement of the reasons for his actions, either personally or by certified mail, return receipt requested. Service by mail shall be deemed completed if the notice is deposited in the U.S. Mail. Within 10 days after service of the cease and desist order, the licensee or other person may request, in writing, a hearing. Dated this 11th day of January, Roxanne Nava, Director cc: Rebecca Pruitt, Assistant Attorney General 6