DOB: Cardinal Management, LLC - NOI CD-CP

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IN THE MATTER OF:

CARDINAL MANAGEMENT, LLC  
  
    ("Respondent")

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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 Part III of Chapter 668, Sections 36a-555 to 36a-573, inclusive, of the Connecticut General Statutes, “Small Loan Lenders”.
 
Pursuant to the authority granted by Section 36a-17 of the 2012 Supplement to the 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 within the jurisdiction of the Commissioner.
 
Section 36a-17(a) of the 2012 Supplement to the 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(a) 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 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.
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 Nevada limited liability company with a mailing address of 2533 North Carson Street, Suite 4026, Carson City, Nevada.
2.
On or about March 26, 2011, Respondent offered via the Internet consumer loans in amounts less than $15,000 with annual interest rates in excess of 12%.  On at least one occasion, Respondent made a loan to a Connecticut resident for approximately $300 and charged an annual interest rate of 842% on such loan.
3.
At no time relevant hereto was Respondent licensed as a small loan lender in Connecticut, nor is Respondent exempt from such licensure requirements.
 
 
III.  STATUTORY BASIS FOR ORDER TO CEASE
AND DESIST AND IMPOSITION OF CIVIL PENALTY
 
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 2012 Supplement to the General Statutes provides 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 (1) five thousand dollars or less for any such transaction entered into before October 1, 1997, and (2) 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 offering and making at least one loan in Connecticut without obtaining the required license, as more fully described in paragraphs 1 through 3, inclusive, of the Matters Asserted, constitutes a violation of Section 36a-555 of the Connecticut General Statutes.  Such violation forms the basis to issue an order to cease and desist against Respondent pursuant to Section 36a-52(a) of the Connecticut General Statutes and impose a civil penalty upon Respondent 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 charging a Connecticut resident an interest rate of greater than 12 percent on a loan in the amount of less than fifteen thousand dollars, as more fully described in paragraph 2 of the Matters Asserted, constitutes a violation of Section 36a-573(a) of the 2012 Supplement to the General Statutes.  Such violation forms the basis to issue an order to cease and desist against Respondent pursuant to Section 36a-573(c) of the 2012 Supplement to the General Statutes and Section 36a-52(a) of the Connecticut General Statutes and impose a civil penalty upon Respondent pursuant to Section 36a-573(c) of the 2012 Supplement to the General Statutes and 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.
 
 
IV.  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 against Respondent to Section 36a-573(c) of the 2012 Supplement to the General Statutes and Section 36a-52(a) of the Connecticut General Statutes, and impose a civil penalty pursuant to Section 36a-573(c) of the 2012 Supplement to the General Statutes and Section 36a-50(a) of the Connecticut General Statutes.
 
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-555 of the Connecticut General Statutes and Section 36a-573(a) of the 2012 Supplement to the 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 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 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 August 22, 2012, 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-555 of the Connecticut General Statutes and Section 36a-573(a) of the 2012 Supplement to the 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 20th day of June 2012.              ________/s/_________
                                                   Howard F. Pitkin
                                                   Banking Commissioner
 
 

CERTIFICATION
 
I hereby certify that on this 21st day of June 2012, the foregoing 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 certified mail, return receipt requested to Cardinal Management, LLC, c/o Laughlin Associates, Inc., 9120 Double Diamond Parkway, Reno, Nevada 89521, certified mail no. 70112000000247358598; Scott Burnett, Manager, Cardinal Management, LLC, 2533 N. Carson Street, Suite 4026, Carson City, Nevada 89706, certified mail no. 70112000000247358604; and Julian Dayal, Esq., Katten Munchin Rosenman LLP, 2900 K Street NW, North Tower, Suite 200, Washington, DC 20007-5118, certified mail no. 70112000000247358611.
 
 
                                                   ________/s/_________
                                                   Stacey L. Serrano
                                                   Prosecuting Attorney
 

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