DOB: CashCall/Western Sky/Webb - Modification to Findings of Fact and CO

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IN THE MATTER OF:

CASHCALL, INC. 
NMLS # 38512
("CashCall")

WESTERN SKY FINANCIAL, L.L.C.
("Western Sky")

MARTIN A. WEBB
("Webb")

    (collectively, "Respondents")

   
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MODIFICATION TO FINDINGS 
  OF FACT, CONCLUSIONS OF      
  LAW AND ORDER                         

AND

  CONSENT ORDER                       

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Part I of Chapter 668, Sections 36a-485 to 36a-534a, inclusive, of the Connecticut General Statutes, “Mortgage Lenders, Brokers and Loan Originators”; and 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);
 
WHEREAS, CashCall is a California corporation with its main office at 1600 South Douglass Road, Anaheim, California;
 
WHEREAS, from November 5, 2010 to December 31, 2013, CashCall had been licensed as a mortgage lender in Connecticut;
 
WHEREAS, Western Sky is a South Dakota limited liability company with an address at 612 E. Street, Timber Lake, South Dakota;
 
WHEREAS, Webb is the sole owner and, as of February 9, 2011, sole member of Western Sky;
 
WHEREAS, the Commissioner, through the Consumer Credit Division (“Division”) of the Department of Banking, pursuant to Sections 36a-17(a) and 36a-498f of the Connecticut General Statutes, conducted an investigation of CashCall to determine if it had violated, was violating or was about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner;
 
WHEREAS, as a result of such investigation, on March 12, 2013, the Commissioner, acting pursuant to Section 36a-573(c) of the Connecticut General Statutes, subsections (a) and (b) of Section 36a-52 of the Connecticut General Statutes, and subsections (a) and (c) of Section 36a-50 of the Connecticut General Statutes, issued a 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 against CashCall (collectively “CashCall Notice”), which CashCall Notice is incorporated by reference herein;
 
WHEREAS, as a result of further investigation, pursuant to Section 36a-1-22 of the Regulations of Connecticut State Agencies, the Commissioner amended the CashCall Notice and on June 5, 2013, pursuant to Section 36a-573(c) of the Connecticut General Statutes, subsections (a) and (b) of Section 36a-494 of the Connecticut General Statutes, subsections (a) and (b) of Section 36a-52 of the Connecticut General Statutes, subsections (a) and (b) of Section 36a-51 of the Connecticut General Statutes, and subsections (a) and (c) of Section 36a-50 of the Connecticut General Statutes, by issuing an Amended and Restated Temporary Order to Cease and Desist, Amended and Restated Order to Make Restitution, Amended and Restated Notice of Intent to Issue Order to Cease and Desist, Amended and Restated Notice of Intent to Impose Civil Penalty, Notice of Intent to Revoke Mortgage Lender Licenses and Notice of Right to Hearing (collectively “CashCall Amended Notice”), which CashCall Amended Notice is incorporated by reference herein;
 
WHEREAS, CashCall requested a hearing on the allegations contained in the CashCall Amended Notice;
 
WHEREAS, after due notice, a hearing was held at the Department of Banking on June 19, 2013;
 
WHEREAS, CashCall presented evidence and argument and otherwise availed itself of Sections 36a-50, 36a-51, 36a-52 and 4-177c(a) of the Connecticut General Statutes;
 
WHEREAS, on February 4, 2014, the Commissioner issued a Findings of Fact, Conclusions of Law and Order in the Matter of: CashCall, Inc. (“FFCL&O”), which FFCL&O is incorporated by reference herein.  The FFCL&O found that CashCall offered loans in violation of Section 36a-555(2) of the Connecticut General Statutes; received interest in excess of 12% on loans, in violation of Section 36a-573(a) of the Connecticut General Statutes; and failed to promptly file the CashCall Notice with the Nationwide Mortgage Licensing System and Registry, in violation of Section 36a-490(c) of the Connecticut General Statutes.  As a result, the FFCL&O ordered that:  (1) the temporary cease and desist order be made permanent; (2) CashCall make restitution of the sums obtained as a result of CashCall’s violation of Section 36a-573(a) of the Connecticut General Statutes; (3) the license of CashCall to act as a mortgage lender in Connecticut be revoked, and (4) a civil penalty of $350,000 be imposed upon CashCall;
 
WHEREAS, on February 19, 2014, CashCall filed with the Commissioner a Motion for Stay and Motion for Reconsideration of the FFCL&O;
 
WHEREAS, on February 21, 2014, the Division filed with the Commissioner a letter expressing its concerns with the FFCL&O;
 
WHEREAS, on February 28, 2014, CashCall filed a response to the Division’s letter dated February 21, 2014, and the Division filed an opposition to CashCall’s Motion for Stay and Motion for Reconsideration;
 
WHEREAS, on March 14, 2014, pursuant to Section 4-181a(a)(2) of the Connecticut General Statutes, the Commissioner denied the CashCall Motion for Reconsideration and Division letter dated February 21, 2014, and decided to reconsider the FFCL&O on his own accord;
 
WHEREAS, pursuant to Section 4-181a(a)(3) of the Connecticut General Statutes, the Commissioner hereby modifies the FFCL&O such that, upon execution of this Modification to FFCL&O and Consent Order, the FFCL&O shall be modified so that paragraphs 1, 2 and 4 contained in the Order section shall read as follows:

1. Pursuant to Section 36a-52 of the Connecticut General Statutes, CashCall, Inc. shall CEASE AND DESIST from conduct the Commissioner has deemed violative of Sections 36a-490(c)(3), 36a-555 and 36a-573(a) of the Connecticut General Statutes, and shall not violate Sections 36a-490(c)(3), 36a-555 and 36a-573(a) of the Connecticut General Statutes;
2. Pursuant to Sections 36a-573(c) and 36a-50(c) of the Connecticut General Statutes, CashCall, Inc. shall MAKE RESTITUTION consistent with the Commissioner’s finding that CashCall, Inc. violated Section 36a-573(a) of the Connecticut General Statutes, in accordance with the terms specified in the Administration of Restitution to Connecticut Borrowers Addendum; and
4. A CIVIL PENALTY of Three Hundred Fifty Thousand Dollars ($350,000) shall be imposed upon CashCall, Inc., to be remitted to the Department of Banking by wire transfer or by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut, no later than March 31, 2014;

WHEREAS, the Commissioner, through the Division, pursuant to Section 36a-17(a) of the Connecticut General Statutes, conducted an investigation of Western Sky and Webb to determine if they had violated, were violating or were about to violate the provisions of the Connecticut General Statutes within the jurisdiction of the Commissioner;
 
WHEREAS, as a result of an investigation, on September 23, 2013, the Commissioner, acting pursuant to Sections 36a-573(c) and 36a-50(a) and subsections (a) and (b) of Section 36a-52 of the Connecticut General Statutes, issued a Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing against Western Sky Financial, L.L.C. and Martin A. Webb (collectively “Western Sky Notice”), which Western Sky Notice is incorporated by reference herein;

WHEREAS, the Western Sky Notice alleged that Western Sky:  (1) engaged in the business of making loans without obtaining the required license, in violation of Section 36a-555(1) of the Connecticut General Statutes, (2) made or offered consumer loans to borrowers in Connecticut, in violation of Section 36a-555(2) of the Connecticut General Statutes, (3) acted as an agent for a third-party without obtaining the required license, in violation of Section 36a-555(3) of the Connecticut General Statutes, and (4) contracted for interest at a rate greater than 12% on at least 3,800 consumer loans to Connecticut residents in amounts less than $15,000, in violation of Section 36a-573(a) of the Connecticut General Statutes.  Such violations form the basis for the Commissioner to issue an order to cease and desist against Western Sky pursuant to Sections 36a-573(c) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty against Western Sky pursuant to Sections 36a-573(c) and 36a-50(a) of the Connecticut General Statutes;
 
WHEREAS, the Western Sky Notice also alleged that Webb, as Western Sky’s sole owner and member, indirectly contracted for interest at a rate greater than 12% on at least 3,800 consumer loans made by Western Sky to Connecticut residents in amounts less than $15,000, in violation of Section 36a-- (a) of the Connecticut General Statutes, which constitutes sufficient grounds to issue an order to cease and desist against Webb pursuant to Section 36a-573(c) and 36a-52(a) of the Connecticut General Statutes and impose a civil penalty against Webb pursuant to Sections 36a-573(c) and 36a-50(a) of the Connecticut General Statutes;
 
WHEREAS, Western Sky and Webb requested a hearing on the Western Sky Notice, and such hearing is currently scheduled for a date to be determined;
 
WHEREAS, Section 4-177(c) of the Connecticut General Statutes and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;
 
WHEREAS, Section 4-166(2) of the Connecticut General Statutes defines “contested case” to mean, in pertinent part, “a proceeding . . . in which the legal rights, duties or privileges of a party are required by state statute or regulation to be determined by an agency after an opportunity for a hearing or in which a hearing is in fact held”;
 
WHEREAS, the Commissioner and Respondents now desire to fully resolve the matters alleged in the Western Sky Notice, found in the FFCL&O, and set forth herein;
 
WHEREAS, the Administration of Restitution to Connecticut Borrowers Addendum (“Addendum”) and terms defined therein, such as “Covered Loan”, are incorporated by reference herein;
 
WHEREAS, the Commissioner acknowledges that he will not consider Respondents’ future actions concerning Covered Loans, as contemplated by the terms of the Addendum and this Consent Order, to be violations of Sections 36a-555 to 36a-573, inclusive, of the Connecticut General Statutes;
 
WHEREAS, CashCall, including WS Funding, LLC, represents that since March 12, 2013, it has only sold or assigned to third parties Covered Loans which have been charged off;
 
WHEREAS, CashCall, Western Sky and Webb voluntarily agree to consent to the entry of a penalty and other relief described below without admitting or denying any allegation or finding made against them by the Commissioner in the CashCall Notice, the CashCall Amended Notice, the Western Sky Notice, the FFCL&O as modified, as set forth or incorporated by reference herein, or otherwise, including but not limited to without admitting or denying the existence of any violation of the Connecticut General Statutes described or incorporated by reference in this Consent Order and solely for the purpose of obviating the need for further administrative proceedings and litigation concerning the findings of fact, conclusions of law, and penalty and other relief contained in the FFCL&O as modified, the Western Sky Notice, and set forth herein;
 
WHEREAS, Respondents agree that notwithstanding their neither admitting or denying the findings and allegations in the Western Sky Notice and the FFCL&O, as modified, they may be used in construing the terms of this Consent Order and agree to the language of this Consent Order;
 
AND WHEREAS, Respondents, through each Respondent’s execution of this Consent Order, voluntarily agree to waive their procedural rights, including the right to a hearing as it pertains to the allegations contained in the Western Sky Notice and set forth herein, voluntarily waive their right to seek judicial review or otherwise challenge or contest the validity of the FFCL&O, as modified, and this Consent Order, and consent to the jurisdiction of the State of Connecticut solely for the purposes of enforcement of the FFCL&O, as modified, and this Consent Order.


CONSENT TO ENTRY OF PENALTY AND OTHER RELIEF

WHEREAS, CashCall, Western Sky and Webb, through their execution of this Consent Order, consent to the Commissioner’s entry of an Order imposing the following sanctions:

1. CashCall, and its successors and assigns, shall comply with the FFCL&O, as modified herein;
2. Western Sky, and its successors and assigns, shall CEASE AND DESIST from conduct the Commissioner has deemed violative of Sections 36a-555 and 36a-573(a) of the Connecticut General Statutes, and shall not violate Sections 36a-555 and 36a-573(a) of the Connecticut General Statutes;
3. Webb shall CEASE AND DESIST from conduct the Commissioner has deemed violative of Section 36a-573(a) of the Connecticut General Statutes, and shall not violate Section 36a-573(a) of the Connecticut General Statutes;
4.  Western Sky and Webb, jointly and severally with CashCall, shall be liable for the civil penalty and restitution ordered in the FFCL&O, as modified herein; and
5.
No later than March 31, 2014, CashCall, Western Sky and Webb shall remit the sum of Fifty Thousand Dollars ($50,000) to the Department of Banking by wire transfer or by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, for the purposes of consumer education and outreach concerning small loan lending, consumer collection, debt negotiation, check cashing and mortgage lending in Connecticut, including, but not limited to, outreach concerning the availability of restitution for Connecticut consumers who entered into loan agreements with Western Sky on or after October 1, 2009.

ORDER

NOW THEREFORE, the Commissioner hereby ORDERS:

1. The penalty and other relief set forth above be and are hereby entered;
2. The FFCL&O shall be modified as provided herein;
3. All other terms and conditions of the FFCL&O, which have not been modified herein, shall be final and remain in effect;
4. Upon issuance of this Consent Order, the Commissioner hereby releases and discharges CashCall, Western Sky, Webb, or anyone acting on their behalf, including but not limited to the principals, directors, officers, shareholders, employees, successors or assignees of CashCall or Western Sky, and agents in active concert or participation with any of the foregoing who are involved in the conduct of business that is the subject of the CashCall Amended Notice or Western Sky Notice; and to any corporation, company, business entity, or other entity or device through which Western Sky, CashCall, or Webb may now or hereafter act or conduct business that is the subject of  the CashCall Amended Notice or Western Sky Notice, from any and all grievances, suits, causes of action and any claims of any nature whatsoever, including claims which may be brought by the Attorney General on the Commissioner’s behalf, which (1) relate to or arise out of the conduct alleged by the Commissioner in past or pending administrative proceedings and occurring prior to the issuance of this Consent Order, whether arising in contract, tort, statute, or any other theory of action, whether arising in law or equity, whether known or unknown, choate or inchoate, matured or unmatured, contingent or fixed, liquidated or unliquidated, accrued or unaccrued, asserted or unasserted, based upon any fact, whether known or unknown; or (2) relate to or arise out of Sections 36a-555 to 36a-573, inclusive, of the Connecticut General Statutes concerning Respondents’ future collections activity on Covered Loans, provided such collections activity adheres to the terms specified in Paragraph 2 of the Addendum, and any other actions contemplated by the terms of this Consent Order and Addendum;
5. The issuance of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action based upon a violation of this Consent Order, the FFCL&O, as modified, or the matters underlying the entry of this Consent Order, if the Commissioner determines that compliance with the terms herein is not being observed or if any material representation made herein is subsequently discovered to be untrue; and
6.
This Modification to Findings of Fact, Conclusions of Law and Order and Consent Order shall become final when issued.



Issued at Hartford, Connecticut
this 2nd day of April 2014.                      ________/s/_________
                                                            Howard F. Pitkin
                                                            Banking Commissioner



I, J. Paul Reddam, state on behalf of CashCall, Inc., that I have read the foregoing Modification to Findings of Fact, Conclusions of Law and Order and Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of CashCall, Inc.; that CashCall, Inc., agrees freely and without threat or coercion of any kind to comply with the sanctions entered and terms and conditions ordered herein; and that CashCall, Inc., voluntarily agrees to enter into this Consent Order, expressly waiving the procedural rights set forth herein as to the matters described herein.

                                                     By: ________/s/_________  
                                                           Name:  J. Paul Reddam
                                                           Title:  President
                                                           CashCall, Inc.

State of:  California

County of:  Orange

On this the 27 day of March 2014, before me Alexa Pilato, the undersigned officer, personally appeared J. Paul Reddam who acknowledged himself to be the President of CashCall, Inc., a California corporation, and that he, as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.

In witness whereof I hereunto set my hand.

                                                         _________/s/_________
                                                         Notary Public  
                                                         Date Commission Expires:  Aug. 24, 2017


I, Martin A. Webb, state on behalf of Western Sky Financial, L.L.C., that I have read the foregoing Modification to Findings of Fact, Conclusions of Law and Order and Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Western Sky Financial, L.L.C.; that Western Sky Financial, L.L.C., agrees freely and without threat or coercion of any kind to comply with the sanctions entered and terms and conditions ordered herein; and that Western Sky Financial, L.L.C., voluntarily agrees to enter into this Consent Order, expressly waiving the procedural rights set forth herein as to the matters described herein.

                                                  By: ________/s/_________  
                                                        Name:  Martin A. Webb
                                                        Title:  Member
                                                        Western Sky Financial, L.L.C.

State of:  Colorado

County of:  Weld

On this the 27 day of March 2014, before me, Shannon Brockmeyer, the undersigned officer, personally appeared Martin A. Webb who acknowledged himself/herself to be the Member of Western Sky Financial, L.L.C., a member managed/manager managed limited liability company, and that he/she as such Member, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the limited liability company by himself/herself as Member.

In witness whereof I hereunto set my hand.


                                                          _________/s/_________
                                                          Notary Public  
                                                          Date Commission Expires:  11/19/2017

I, Martin A. Webb, state that I have read the foregoing Modification to Findings of Fact, Conclusions of Law and Order and Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the sanctions entered and terms and conditions ordered herein; and that I voluntarily agree to enter into this Consent Order, expressly waiving the procedural rights set forth herein as to the matters described herein.


                                                          ________/s/_________
                                                          Martin A. Webb

State of:  Colorado

County of:  Weld

On this the 27 day of March 2014, before me, Shannon Brockmeyer, the undersigned officer, personally appeared Martin A. Webb, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained. 

In witness whereof I hereunto set my hand.

                                                         _________/s/_________
                                                         Notary Public  
                                                         Date Commission Expires:  11/19/2017


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