DOB: Pathway Financial Management - Temp CD-NOI CD-CP

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IN THE MATTER OF:

PATHWAY FINANCIAL
MANAGEMENT, INC.

   ("Respondent")




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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


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 (“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 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.
 
II.  MATTERS ASSERTED
 
1.
Respondent is a California corporation with a place of business at 12661 Hoover Street, Garden Grove, California.
2.
During the period of at least October 1, 2009 through May 16, 2010, Connecticut residents, while physically present in this state, enrolled in Respondent’s debt services program for specific unsecured debts and paid Respondent fees for such services.
3.
By letter dated June 18, 2010, submitted on behalf of Respondent by its counsel, Respondent represented that it “will be refunding all fees that it received from Connecticut residents who enrolled in its debt programs between October 1, 2009 and May 16, 2010.  Such refunds shall be provided as quickly as possible, over the next few months”.
4.
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 such licensure.
5. By e-mail dated August 19, 2010, the Division requested that Respondent, through its counsel, provide an update on the status of its situation, specifically with respect to the refunds, as more fully described in paragraph 3 above.  To date, such information has not been received by the Division.
6. By e-mail dated August 23, 2010, the Division requested that Respondent, through its counsel, provide a listing of Connecticut residents who had contracts with Respondent, including the dates of the contracts and the fees paid.  To date, such information has not been received by the Division.
7.
By e-mail dated May 13, 2011, Respondent indicated, through its former counsel, that it refunded all fees paid by Connecticut residents as of November 30, 2010, and would forward a refund spreadsheet to the Division.  To date, such information has not been received by the Division.
 
 
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; . . . (2) “debtor” means any individual who has incurred indebtedness or owes a debt for personal, family or household purposes . . . .
(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 . . . .
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.
Respondent’s engaging in debt negotiation in this state without obtaining the required license, as more fully described in paragraphs 1 through 4, 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.
 
 
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 Section 36a-671(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 paid to it while it did not have a license to engage or offer to engage in debt negotiation in this state, and its failure to refund and provide proof that it has refunded such fees, and that the interests of additional Connecticut residents also may be materially prejudiced.
 
 
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 Section 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 Pathway Financial Management, Inc., immediately CEASE AND DESIST from violating Section 36a-671(b) of the Connecticut General Statutes.  This Temporary Order shall become effective upon receipt by Pathway Financial Management, 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 Section 36a-52(b) of the Connecticut General Statutes, that:  Not later than 10 days from receipt of this Order, Pathway Financial Management, Inc. shall:
 
1. Provide repayment of fees paid to it by Connecticut residents on and after October 1, 2009, such repayments to be made 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 Section 36a-671(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 October 4, 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 Section 36a-671(b) of the Connecticut General Statutes, issue an order for repayment of fees or charges to the Connecticut residents, and may order a civil penalty in an amount not to exceed Ten Thousand Dollars ($10,000) be imposed upon Respondent.
 
 
So ordered at Hartford, Connecticut
this 19th day of August 2011.                  ________/s/_________
                                                          Howard F. Pitkin
                                                          Banking Commissioner
 
 
 
CERTIFICATION
 
I hereby certify that on this 22nd day of August 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 Pathway Financial Management, Inc., Attention:  Tajbakhsh Ryan, President, 12661 Hoover Street, Garden Grove, California 92841, registered mail no RB028020583US; and Mai Phan, Agent for Service of Process, Pathway Financial Management, Inc., 13322 Day Place, Westminster, California 92683, registered mail no. RB028020597US.
 
 
                                                          ________/s/_________
                                                          Doniel Kitt       
                                                          Prosecuting Attorney
 

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