Eduardo De La Torre, et al v. CashCall, Inc.

Filing

Filed Order for PUBLICATION Certifying Question to the California State Supreme Court (A. WALLACE TASHIMA, ANDREW D. HURWITZ and LYNN S. ADELMAN) The central issue in this case is whether the interest rates on consumer loans of $2500 or more that are governed by California Finance Code 22303, which provides no interest rate limitations on such loans, can be deemed unconscionable under California Finance Code 22302 and thus be the predicate for a private cause of action under the California Unfair Competition Law ( UCL ). The answer to this question could determine the outcome of this matter and there is no controlling precedent. We therefore respectfully request that the California Supreme Court exercise its discretion to decide the certified question presented below. See Cal. R. Ct. 8.548(a). Absent certification, we will predict as best we can what the California Supreme Court would do in these circumstances. Pacheco v. United States, 220 F.3d 1126, 1131 (9th Cir. 2000). (SEE ORDER FOR FULL TEXT) The clerk of this court is hereby directed to file in the California Supreme Court, under official seal of the United States Court of Appeals for the Ninth Circuit, copies of all relevant briefs and excerpts of record, and an original and ten copies of this order and request for certification, along with a certification of service on the parties, pursuant to California Rule of Court 8.548(c) and (d). This case is withdrawn from submission. Further proceedings are stayed pending final action by the California Supreme Court. The panel will resume control and jurisdiction of this case upon receiving a decision from the California Supreme Court answering the certified question or upon that court s decision to decline our request to answer the certified question. [10405389] [14-17571, 15-15042]

Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 1 of 16

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MARY ANN SMITH
Deputy Commissioner
SEAN M. ROONEY
Assistant Chief Counsel
JUDY L. HARTLEY (CA BAR NO. 110628)
Senior Corporations Counsel
ADAM WRIGHT (CA BAR NO. 262378)
Department of Business Oversight
Corporations Counsel
320 West 4th Street, Ste. 750
Los Angeles, California 90013-2344
Telephone: [phone] Fax: [phone]

State of California – Department of Business Oversight

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Attorneys for Complainant
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BEFORE THE DEPARTMENT OF BUSINESS OVERSIGHT

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OF THE STATE OF CALIFORNIA

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) File No.: 603-8780; 603-H991; 603-J333; 603) J386; 603-J514; and 603-J823
017
)
17, 2
April
) ACCUSATION
d on
hive
Complainant,
)17571 arc
. 14)
., No
, Inc
Call
vs.
)
Cash
re v.
Tor
)
la
in De
ited
CASHCALL,cINC.,
)
)
)
Respondent.
)
)
)
In the Matter of the Accusation of THE
COMMISSIONER OF BUSINESS
OVERSIGHT,

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The Complainant is informed and believes, and based upon such information and belief,
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alleges and charges Respondents as follows:
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I
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1.

Respondent CashCall, Inc. (“CashCall”) is a finance lender licensed by the

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Commissioner of Business Oversight (“Commissioner”) pursuant to the California Finance Lenders
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Law of the State of California (California Financial Code § 17000 et seq.) (“CFLL”). CashCall
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currently has six (6) licenses issued under the CFLL. The main licensed office of CashCall is
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located at One City Boulevard, Suite 1000, Orange, California 92868.

Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 2 of 16

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2.

On or about November 23, 2010, the Commissioner, by and through staff,

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commenced a regulatory examination of the books and records of CashCall (“regulatory

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examination”). Under the provisions of the CFLL, interest rates are only regulated on loans under

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$2,500. Accordingly, a CFLL licensed lender can charge whatever interest rate it chooses on loans

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of bona fide principal amounts of $2,500 or more.

State of California – Department of Business Oversight

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7

Material Misrepresentations and/or Omissions to Consumers
3.

The regulatory examination disclosed that CashCall, with the intent to induce

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members of the public to enter into unregulated personal loans, advertised, published, distributed or

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broadcasted, or caused or permitted to be advertised, published, distributed, or broadcast, statements

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and/or representations regarding the terms and conditions of the loans that were false, misleading or

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deceptive and/or omitted material information that were necessary to make the statements and/or

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representations made not false, misleading, or deceptive in violation of Financial Code section

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22161 as follows:

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17

017
17, 2
April
a.
CashCall routinely advertised on televisionhand on
ived radio that it made personal loans
arc
7571
4-1
to” $2,600, but when consumers telephonedNo. 1
., CashCall or went to its website they were told that
, Inc
Call
Cash
re v.under $2,600.
CashCall does not make Tor
loans
De la
ed in
cit

b.

“up

CashCall routinely represented, when consumers stated they only wanted a loan for

18

less than $2,600, that on the day of funding or shortly thereafter, they could just give back whatever

19

amount they did not want (prepayment), which would reduce the principal balance resulting in

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significant interest savings. However, CashCall failed to inform the consumers that because the loan

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was for “$2,600”, CashCall could charge any interest rate it choose (and did charge up to 179%), but

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that loans of less than $2,500 would carry a maximum interest rate of approximately 30%.

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c.

Cashcall routinely represented to consumers seeking to borrow less than $2,600 that

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by making a prepayment, the loan term would be substantially reduced (paid off in several months

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versus three years) resulting in significant interest savings. It was explained that the term of the loan

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would be reduced because the prepayment would reduce the principal balance at the onset resulting

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in more of the monthly payments going towards principal, but CashCall then failed on numerous

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occasions to take initially scheduled monthly payment(s) resulting in an extended loan term and less

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 3 of 16

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interest savings. See also paragraph 9 below.

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False Reports to the Commissioner

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4.

During the course of the regulatory examination, CashCall was requested to submit a

loan report covering the period of January 1, 2008 through December 31, 2010. The initial loan

5

report submitted to the Commissioner in February 2011, disclosed, with respect to loans for

6

State of California – Department of Business Oversight

4

$2,600.00, that 502 borrowers made an initial payment on the same day their loan was funded. As

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such, the Commissioner was concerned that CashCall was making loans for a bona fide principal

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amount of less than $2,500, but charging interest rates and fees allowed only for loans of a bona fide

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principal amount of $2,500 or more. Accordingly, on or about August 11, 2011, the Commissioner

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made demand on CashCall to perform a self-audit for the period covering January 1, 2008 through to

11

the present and refund all interest and administrative fee overcharges.

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5.

According to CashCall, its self-audit covering the period of January 1, 2008 through

August 31, 2011, disclosed only 6 loans wherein the borrower made an initial payment on the same
2017
17,
April
onwith the initial loan report
day their loan was funded. The self-audit information conflicted
ived
arch
7571
4-1
submitted by CashCall in February 2011, c., No. 1 disclosed 502 such borrowers for a shorter time
which
, In
Call
Cash
re v. now stating that the “prepayment date” set forth in the initial loan
period. However, CashCall was
Tor
De la
ed in
cit

report provided on or about February 9, 2011 was actually the date upon which the payment was
credited to the borrower’s account and not the actual date of the “prepayment”.

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6.

Due to the conflicting information provided by CashCall, the Commissioner made

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demands on CashCall to submit further information and documentation. In particular, on or about

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December 2, 2011, demand was made upon CashCall to provide an accurate loan report. On or

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about December 6, 2011, CashCall provided a revised loan report for the period of January 1, 2008

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through December 31, 2010, which it re-submitted on or about December 12, 2011 to include

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borrower addresses. The revised loan report disclosed only 2 borrowers having made an initial

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payment on the same day their loan was funded. However, a review of loan records sampled during

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the regulatory examination1 disclosed that CashCall, in the revised report, misrepresented the

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1

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The number of loans sampled during the regulatory examination numbered twenty-one. The documents reviewed
included the underwriting summary, promissory note, transaction history and conversation log for 5 borrowers, the
promissory note, transaction history, conversation log, and recordings of telephone communications for the remaining 16
borrowers. The Department also obtained recordings of telephone communications for 10 other borrowers.

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 4 of 16

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prepayment date in 100% (21 of 21) of the loans sampled in violation of Financial Code sections

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22159(b) and 22170(a). Examples are as follows:

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a.

In loan number 651232

, the revised loan report states a prepayment date of

August 30, 2008, but the transaction log discloses that the borrower authorized CashCall to

5

electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

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State of California – Department of Business Oversight

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April 21, 2008; the date of funding. The original loan report submitted by CashCall had set forth a

7

prepayment date of April 21, 2008.

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9

b.

In loan number 1854545

, the revised loan report states a prepayment date of

March 26, 2008, but the transaction log discloses that the borrower authorized CashCall to

10

electronically debit a prepayment in the amount of $1,400 from the borrower’s bank account on

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March 25, 2008; the date of funding. The original loan report submitted by CashCall had set forth a

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prepayment date of March 25, 2008.

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15
16
17
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c.

In loan number 1859087

, the revised loan report states a prepayment
2017

,
ril 17
n Ap
oborrower authorized CashCall to
date of April 11, 2008, but the transaction log discloses archivthe
that ed
7571
1
. 4electronically debit a prepayment in the Iamount1of $1,725 from the borrower’s bank account on
., No
, nc
Call
Cash
re v.
April 10, 2008; the date of rfunding. The original loan report submitted by CashCall had set forth
To
De la
ed in
cit

a

prepayment date of April 10, 2008.
d.

In loan number 1861863

, the revised loan report states a prepayment date

19

of February 12, 2008, but the transaction log discloses that the borrower authorized CashCall to

20

electronically debit a prepayment in the amount of $1,100 from the borrower’s bank account on

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February 11, 2008; the date of funding. The original loan report submitted by CashCall had set forth

22

a prepayment date of February 11, 2008.

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e.

In loan number 1874559

, the revised loan report states a prepayment date of

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January 10, 2008, but the transaction log discloses that the borrower authorized CashCall to

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electronically debit a prepayment in the amount of $1,500 from the borrower’s bank account on

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January 9, 2008; the date of funding. The original loan report submitted by CashCall had set forth a

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prepayment date of January 9, 2008.

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 5 of 16

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f.

In loan number 4166107

, the revised loan report states a prepayment date of

2

August 4, 2010, but the transaction log and telephone recordings disclose that the borrower

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authorized CashCall to electronically debit a prepayment in the amount of $1,178 from the

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borrower’s bank account on August 3, 2010. The original loan report submitted by CashCall had set

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forth a prepayment date of August 3, 2010.

State of California – Department of Business Oversight

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g.

In loan number 4698250

, the revised loan report states a prepayment date

7

of November 9, 2010, but the transaction log and telephone recordings disclose that the borrower

8

authorized CashCall to electronically debit a prepayment in the amount of $525 from the borrower’s

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bank account on November 8, 2010; the date of funding. The original loan report submitted by

10
11

CashCall had set forth a prepayment date of November 8, 2010.
h.

In loan number 4817668

, the revised loan report states a prepayment date

12

of December 6, 2010, but the transaction log and telephone recordings disclose that the borrower

13

authorized CashCall to electronically debit a prepayment in the amount of0$800 from the borrower’s
2 17

14
15
16

7,
pril 1
on A
bank account on December 4, 2010. The original loan report d
ive submitted by CashCall had set forth a
arch
7571
4-1
prepayment date of December 4, 2010., Inc., No. 1
Call
Cash
re v.4928001
i.
In loan number
, the revised loan report states a prepayment date
Tor
De la
ed in
cit

17

of December 6, 2010, but the telephone recordings disclose that the borrower authorized CashCall to

18

electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

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December 3, 2010; the date of funding. The original loan report submitted by CashCall had set forth

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a prepayment date of December 3, 2010.

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j.

In loan number 4888026

, the revised loan report states a prepayment date of

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December 2, 2010, but the telephone recordings disclose that the borrower authorized CashCall to

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electronically debit a prepayment in the amount of $900 from the borrower’s bank account on

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December 1, 2010. The original loan report submitted by CashCall had set forth a prepayment date

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of December 1, 2010.

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k.

In loan number 4107506

, the revised loan report states a prepayment

27

date of July 13, 2010, but the telephone recordings disclose that the borrower authorized CashCall to

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electronically debit a prepayment in the amount of $525 from the borrower’s bank account on

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 6 of 16

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July 12, 2010; the date of funding. The original loan report submitted by CashCall had set forth a

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prepayment date of July 12, 2010.

3

l.

In loan number 4483223

, the revised loan report states a prepayment date

of October 18, 2010, but the telephone recordings disclose that the borrower authorized CashCall to

5

electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

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State of California – Department of Business Oversight

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October 15, 2010; the date of funding. The original loan report submitted by CashCall had set forth

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a prepayment date of October 15, 2010.

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9

7.

It was also noted that the prepayment amount was misrepresented in both loan reports

in violation of Financial Code sections 22159(b) and 22170(a) in at least 6 of the loans for which

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either loan records and/or telephone recordings were reviewed. The misrepresentations are as

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follows:

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13
14
15
16

a.

In loan number 4107506

, both loan reports state a prepayment amount of

$330.00, but the telephone recordings disclose that the borrower authorized 7
CashCall to
201

7,
pril 1
on A
electronically debit a prepayment in the amount of $525archivedthe borrower’s bank account on July
from
7571
4-1
12, 2010; the date of funding. [See alsoInc., No. 1 9.a. below.]
paragraph
,
Call
Cash
re v.4191188
b.
In loan number
, both loan reports state a prepayment amount of
Tor
De la
ed in
cit

17

$746.50, but the transaction log and telephone recordings disclose that the borrower authorized

18

CashCall to electronically debit a prepayment in the amount of $1,000 from the borrower’s bank

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account on August 12, 2010; six days after funding.

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c.

In loan number 4483223

, both loan reports state a prepayment amount of

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$805.00, but the transaction log and telephone recordings disclose that the borrower authorized

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CashCall to electronically debit a prepayment in the amount of $1,000 from the borrower’s bank

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account on October 15, 2010; three days after funding and during the welcome call. [See also

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paragraphs 8.e. and 9.b. below]

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d.

In loan number 4717338

, both loan reports state a prepayment amount

26

of $785.50, but the telephone recordings disclose that the borrower authorized CashCall to

27

electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

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November 12, 2010; three days after funding. [See also paragraph 9.c. below.]

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 7 of 16

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e.

In loan number 4790238

, both loan reports state a prepayment amount of

2

$664.56, but the telephone recordings disclose that the borrower authorized CashCall to

3

electronically debit a prepayment in the amount of $1,100 from the borrower’s bank account on

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November 18, 2010; one day after funding. [See also paragraph 9.d. below.]

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f.

In loan number 4928001

, both loan reports state a prepayment amount of

State of California – Department of Business Oversight

6

$717.25, but the telephone recordings disclose that the borrower authorized CashCall to

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electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

8

December 3, 2010; the date of funding and welcome call. Moreover, the borrower paid off the loan

9

in full on December 31, 2010 before the first scheduled monthly installment was due.

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False Representations to the Commissioner
8.

On or about September 2, 2011, CashCall also represented to the Commissioner that

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it is “CashCall’s policy to credit any payments authorized during the welcome call as of the date of

13

the loan funded.” Records from the sampled loan transactions disclose that 7 is another
this
201

14
15
16
17

7,
pril 1
on A Code 22170(a).
misrepresentation on the part of CashCall in violation of rFinancial
ived
a ch
7571
1
. 14follows:
., No
, Inc
Call
Cash
re v.4166107
a.
In loan number
, the transaction log and telephone
Tor
De la
ed in
cit

Examples are as

recordings reveal

that the borrower authorized a prepayment in the amount of $1,178 during the welcome call on

18

August 3, 2010, but was charged $78.00 in interest indicating that the prepayment was not credited

19

as of the date the loan funded.

20

b.

In loan number 4817668

, the transaction log and telephone recordings

21

reveal that the borrower authorized a prepayment in the amount of $800 during the welcome call on

22

December 4, 2010, but was charged $9.75 in interest indicating that the prepayment was not credited

23

as of the date the loan funded.

24

c.

In loan number 4249965

, the transaction log and telephone recordings

25

reveal that the borrower authorized a prepayment in the amount of $1,000 during the welcome call

26

on August 19, 2010, but was charged $9.75 in interest indicating that the prepayment was not

27

credited as of the date the loan funded.

28

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 8 of 16

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d.

In loan number 4225624

, the transaction log and telephone recordings

2

reveal that the borrower authorized a prepayment in the amount of $1,325 during the welcome call

3

on September 8, 2010, but was charged $9.75 in interest indicating that the prepayment was not

4

credited as of the date the loan funded.

5

e.

In loan number 4483223

, the transaction log and telephone recordings

State of California – Department of Business Oversight

6

reveal that the borrower authorized a prepayment in the amount of $1,000 during the welcome call

7

on October 15, 2010, but was charged $29.25 in interest indicating that the prepayment was not

8

credited as of the date the loan funded.

9

f.

In loan number 5108266

, the transaction log and telephone recordings

10

reveal that the borrower authorized a prepayment in the amount of $1,250 before or during the

11

welcome call on December 30, 2010, but was charged $9.75 in interest indicating that the

12

prepayment was not credited as of the date the loan funded.

13
14
15
16
17
18

Other Material Misrepresentations to Consumers
2017

7,
pril 1
on A
9.
The regulatory examination also disclosedcthatdCashCall, during the “welcome call”
ive
ar h
7571
14-1
No.
or when customers called in to make a ,prepayment, made statements and/or representations
Inc.,
Call
Cash
re v.
regarding the terms anda conditions of the loans were false, misleading or deceptive in violation of
Tor
De l
ed in
cit

Financial Code section 22161 as follows:
a.

In loan number 4107506

, the borrower authorized Cashcall to

19

electronically debit a prepayment in the amount of $525 from the borrower’s bank account on July

20

12, 2010; the date of funding. CashCall, despite reiterating to the borrower that monthly

21

installments would still be taken as scheduled, applied $195 of the prepayment to cover the first

22

monthly installment scheduled to be taken via Automated Clearing House (“ACH”) payment thereby

23

reducing the interest savings sought by the borrower in making a prepayment.

24

b.

In loan number 4483223

, the borrower authorized CashCall to

25

electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

26

October 15, 2010; three days after funding and during the welcome call. CashCall, despite

27

reiterating to the borrower that monthly installments would still be taken as scheduled, applied the

28

$1,000 to principal as requested minus interest of $29.25 (interest that should not have been charged

-8-

Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 9 of 16

1

- see paragraph 8.e. above) and then did not take the ACH payment for the first scheduled monthly

2

installment thereby reducing the interest savings sought by the borrower in making a prepayment.

3

c.

In loan number 4717338

, the borrower authorized CashCall to

electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

5

November 12, 2010; three days after funding. CashCall, despite reiterating to the borrower that

6

State of California – Department of Business Oversight

4

monthly installments would still be taken as scheduled, applied the $1,000 minus accrued interest of

7

$29.25 to principal as requested and then did not take the ACH payment for the first scheduled

8

monthly installment thereby reducing the interest savings sought by the borrower in making a

9

prepayment.

10

d.

In loan number 4790238

, the borrower authorized CashCall to

11

electronically debit a prepayment in the amount of $1,100 from the borrower’s bank account on

12

November 18, 2010; one day after funding. CashCall, despite reiterating to the borrower that

13

making a prepayment would not change the scheduled monthly installments, applied the $1,100
2017

14
15
16
17

7,
pril 1
on A
minus accrued interest of $9.75 to principal as requested randethen failed to take the ACH payment
iv d
a ch
7571
1
. 14for the first scheduled installment therebycreducing the interest savings sought by the borrower in
., No
, In
Call
Cash
re v.
making a prepayment. la Tor
in De
cited

e.

In loan number 4698250

, the borrower authorized CashCall to

18

electronically debit a prepayment in the amount of $525 from the borrower’s bank account on

19

November 8, 2010; the date of funding. CashCall, despite reiterating to the borrower that monthly

20

installments would still be taken as scheduled, applied the $525 to principal as requested and then

21

did not take the ACH payment for the first scheduled monthly installment thereby reducing the

22

interest savings sought by the borrower in making a prepayment.

23

f.

In loan number 4249965

, the borrower authorized CashCall to

24

electronically debit a prepayment in the amount of $1,000 from the borrower’s bank account on

25

August 19, 2010; the day after funding and during the welcome call. CashCall, despite reiterating to

26

the borrower that monthly installments would still be taken as scheduled, applied the $1,000 to

27

principal as requested minus interest of $9.75 (interest that should not have been charged - see

28

-9-

Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 10 of 16

1

paragraph 8.c. above) and then did not take the ACH payment for the second scheduled installment

2

thereby reducing the interest savings sought by the borrower in making a prepayment.

3

g.

In loan number 4225624

, the borrower authorized CashCall to

electronically debit a prepayment in the amount of $1,325 from the borrower’s bank account on

5

September 8, 2010; the day after funding and during the welcome call. CashCall, despite reiterating

6

State of California – Department of Business Oversight

4

to the borrower that monthly installments would still be taken as scheduled, applied the $1,325 to

7

principal as requested minus interest of $9.75 (interest that should not have been charged - see

8

paragraph 8.d. above) and then did not take the full ACH payment for the first scheduled installment

9

thereby reducing the interest savings sought by the borrower in making a prepayment.

10

h.

In loan number 3817310

, the borrower authorized CashCall to

11

electronically debit a prepayment in the amount of $1,100 from the borrower’s bank account on

12

February 17, 2010; nine days after funding. On or about February 22, 2010, the borrower authorized

13

CashCall to electronically debit a further prepayment in the amount of $1,000.00 from the
2017

14
15
16
17
18

7,
pril 1
on A
borrower’s bank account. CashCall, despite reiterating archived
to the borrower that monthly installments
7571
1
. 14would still be taken as scheduled, appliedctheo$1,100 and $1,000 to principal as requested minus
., N
, In
Call
Cash
re v.$29.77 respectively and then did not take the full ACH payment for
accrued interest of $87.75oand
T r
De la
ed in
cit

the first scheduled installment thereby reducing the interest savings sought by the borrower in
making prepayments.

19

i.

In loan number 3944275

, the borrower authorized CashCall to electronically

20

debit a prepayment in the amount of $800 from the borrower’s bank account on April 28, 2010; two

21

days after funding. CashCall, despite being told by the borrower that he wanted the full monthly

22

payments taken as scheduled, applied the $800.00 to principal as requested minus accrued interest of

23

$19.50 and then did not take the ACH payment for the first scheduled installment thereby reducing

24

the interest savings sought by the borrower in making a prepayment.

25

10.

In those instances where CashCall told a customer(s) that it would not be taking the

26

first monthly scheduled payment because the customer had made a significant prepayment2,

27

CashCall failed to inform the customer as to the effect of not having the regularly scheduled

28

2

This statement was contrary to representations made during the sales pitch.

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 11 of 16

1
2

payment taken further violating Financial Code section 22161.
11.

The regulatory examination further disclosed that CashCall was otherwise making

3

materially false or misleading statements or representations in regards to the terms or conditions of

4

unregulated personal loans in violation of Financial Code sections 22161 in that:

5

a.

CashCall required consumers to agree to repayment of the loan by means of

State of California – Department of Business Oversight

6

electronic fund transfers as a condition of loan approval, when the Electronic Fund Transfer Act (15

7

U.S.C. section 1693 et seq. (“EFTA”), in particular, Section 1693k and Regulation E, 12 C.F.R.

8

section 1005.10(e)(1) prohibits conditioning the extension of credit on the customer’s agreement to

9

repayment by means of electronic fund transfers.

10

b.

CashCall routinely represented to consumers that they had to notify CashCall in

11

writing at least three business days in advance in order to cancel an electronic fund transfer

12

authorization, when EFTA only requires oral notice in order to cancel electronic fund transfer

13

authorizations (15 U.S.C. section 1693e(a) and 12 C.F.R. section 1005.10(c)(1)
2017

14
15

12.

7,
pril 1
on A
ed
Failure to ProvideaRecords
rchiv
7571
14-1
In furtherance of the regulatory. examination, on March 4, 2014, a written demand
., No
, Inc
Call
Cash
re v. a detailed explanation of its loan origination process as it pertains
CashCall ltoTprovide
or
De a
ed in
cit

16

was made to

17

to unsecured loans and to provide all training materials provided to loan agents and collection staff

18

and any and all materials provided to consumer services representatives. On or about March 21,

19

2014, CashCall responded that it has previously provided detailed information about its loan

20

origination process. However, CashCall has only provided a summary chart of its loan origination

21

process. To date, CashCall has failed to provide any training materials as demanded in the March 4,

22

2014 letter in violation of Financial Code section 22701.

23
24

False Filings
13.

CashCall originates residential mortgage loans in addition to unsecured loans. As

25

such, Financial Code section 22100(e), CashCall was required to transition its CFLL license by

26

registering with and maintaining a unique identifier issued by the National Mortgage Licensing

27

System and Registry (“NMLS”). On or about March 3, 2010, CashCall submitted the Uniform

28

Mortgage Lender/Broker Application (“Form MU1”) to the Commissioner through the NMLS for

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 12 of 16

1

purposes of transitioning its CFLL license. Jordana Boag, associate counsel, on behalf of and with

2

the authority of CashCall, signed the Form MU1 under penalty of perjury, or unsworn falsification to

3

authorities, or similar provisions provided by law, that the information provided in the MU1 was

4

current, true, and complete.

5

14.

CashCall, in the March 3, 2010 Form MU1 responded “NO” to Disclosure Question

State of California – Department of Business Oversight

6

(F)(1) that asks “[h]as any domestic or foreign court (1) in the past ten years enjoined the entity or a

7

control affiliate in connection with any financial services-related activity?” The term “financial

8

services-related” is defined in pertinent part as “pertaining to . . . consumer lending . . ..” However,

9

on or about August 24, 2009, CashCall was enjoined in Los Angeles County Superior Court case

10

number BC420115 brought by the California Department of Justice. In that action, CashCall was

11

permanently enjoined from committing numerous illegal acts and practices relating to the offering

12

and collection of consumer loans. Financial Code section 22170(b) makes it a violation to

13

knowingly make an untrue statement to the Commissioner or NMLS. CashCall did not disclose the
2017

14
15
16
17

7,
pril 1
on A Department of Justice in
Final Judgment and Permanent Injunction obtained by the hived
California
arc
7571
4-1
August 2009 until on or about November c., No. 1
12, 2010.
, In
Call
Cash
re v. violated Financial Code section 22170(b) on March 3, 2010 when
15.
CashCall Tor
further
De la
ed in
cit

it

responded “NO” to Disclosure Questions (C)(4) and (C)(5) on Form MU1, which questions ask:

18

“(C) In the past ten years, has any State or federal regulatory agency or foreign financial regulatory

19

authority: (4) entered an order against the entity or a control affiliate in connection with a financial

20

services-related activity?” and “(5) denied, suspended, or revoked the entity’s or a control affiliate’s

21

registration or license or otherwise, by order, prevented it from associating with a financial services-

22

related business or restricted its activities?” On or about June 23, 2009, the Maryland Commissioner

23

of Financial Regulation had issued a Summary Order to Cease and Desist against CashCall, which

24

prohibited CashCall from engaging in credit services business activities with Maryland consumers.

25

CashCall did not disclose the 2009 Maryland Order until on or about May 9, 2011.

26

16.

CashCall again violated Financial Code section 22170(b) on March 3, 2010 when it

27

responded “NO” to Disclosure Question (G) on Form MU1, which question asks “[i]s the entity or a

28

control affiliate named in any pending financial services-related action that could result in a ‘yes’

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 13 of 16

1

answer to any part of (F)?” On or about October 8, 2008, the West Virginia Attorney General filed a

2

Complaint for Injunction, Consumer Restitution, Civil Penalties and other Appropriate Relief against

3

CashCall regarding lending activities of CashCall. CashCall did not disclose the October 2008 West

4

Virginia civil action until on or about September 12, 2012.

5

17.

Pursuant to Financial Code section 22108 and California Code of Regulations, title

State of California – Department of Business Oversight

6

10, section 1409.1, CashCall was required to promptly notify the Commissioner through NMLS of

7

any change in the information contained in its Form MU1, other than financial information.

8

CashCall violated Financial Code section 22108 and California Code of Regulations, title 10, section

9

1409.1 on numerous occasions as follows:

10

a.

On or about September 27, 2011, the Kansas Commissioner of Banking, Consumer &

11

Mortgage Lending Division issued a Summary Order Revoking Supervised Loan License, to Cease

12

and Desist, Pay Civil Penalties, etc. against CashCall. CashCall did not disclose the September 2011

13

Order action until on or about May 7, 2012.

14
15
16
17
18

017
17, 2
April
do
b.
On or about October 11, 2011, CashCall renteredninto a Consent Order with the
hive
1ac
1757
. 4Alaska Department of Commerce, Community 1 Economic Development, Division of Banking
., No and
c
ll, In
shCa
. Ca
rre v
wherein CashCall was lassessed a penalty in the amount of $2,000 for failing to disclose the
a To
n De
i
cited

permanent injunction obtained by the California Department of Justice and described in paragraph
13 above. CashCall did not disclose the October 2011 Consent Order until on or about May 7, 2012.

19

c.

On or about March 12, 2013, the Connecticut Banking Commissioner issued a

20

Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Issue Order to

21

Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing (later

22

amended on June 5, 2013 to include additional allegations and a Notice Intent to Revoke Mortgage

23

Lender Licenses) against CashCall. CashCall did not disclose the March 2013 Order until on or

24

about May 6, 2013 despite having filed an amended disclosure explanation on or about April 15,

25

2013.

26

d.

On or about August 23, 2013, the Georgia Attorney General obtained an Interlocutory

27

Injunction Order against Cashcall in a civil action filed against CashCall in July 2013. The

28

Interlocutory Injunction Order prohibits CashCall from engaging in any business that consists in

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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 14 of 16

1

whole or in part in the making, offering, arranging or acting as an agent in the making of unsecured

2

loans of $3,000 or less in Georgia. CashCall has yet to disclose the August 23, 2013 Georgia

3

Interlocutory Injunction Order despite having filed amended disclosure explanations on or about

4

September 23, 2013, October 25, 2013, November 26, 2013, December 20, 2013, and May 14, 2014.

5

e.

On or about December 23, 2013, the Florida Attorney General and the Florida Office

State of California – Department of Business Oversight

6

of Financial Regulation filed a civil action against CashCall seeking injunctive relief along with

7

restitution and civil penalties for violations involving consumer lending. CashCall has yet to

8

disclose the December 23, 2013 Florida civil action despite having filed an amended disclosure

9

explanation on or about May 14, 2014.

10
11
12
13
14
15
16
17

18.

CashCall violated Financial Code section 22170(b) again on or about May 14, 2013,

when it filed an amended disclosure explanation that:
a.

Described the March 23, 2013 Connecticut Order (see paragraph 17.c. above) as

having been settled and the order lifted. In fact, as noted in paragraph 16.c. 7
above, the Temporary
201

17,
April
onIntent to Issue Order to Cease and
Order to Cease and Desist, Order to Make Restitution, Noticedof
ive
arch
7571
1
. 4Desist, Notice of Intent to Impose Civil IPenalty1and Notice of Right to Hearing was amended on
., No
, nc
Call
Cash
re v.
June 5, 2013 to includeaadditional allegations and a Notice of Intent to Revoke Mortgage Lender
Tor
De l
ed in
cit

Licenses. Additionally, the matter went to hearing on June 19, 2013 wherein afterwards on or about

18

February 4, 2014, Findings of Fact, Conclusions of Law, and Order were issued in favor of the

19

Connecticut Banking Commissioner and ordering that (i) the Temporary Cease and Desist Order

20

issued against CashCall become permanent, (ii) CashCall make restitution, (iii) the mortgage lender

21

license of CashCall be revoked, and (iv) CashCall pay a penalty of $350,000. Thereafter, on or about

22

April 2, 2014, the matter was settled with no admissions or denials on the part of Cashcall. However,

23

the Consent Order issued as a result of the settlement contained an Order that (i) CashCall cease and

24

desist from violating certain statutes related to consumer lending, (ii) CashCall make restitution, (iii)

25

CashCall pay Connecticut a penalty of $350,000, and (iv) Cashcall’s mortgage lender license was

26

revoked.

27

b.

28

Described the August 12, 2013 civil action brought against it by the New York

Attorney General as pending. In fact, on or about February 14, 2104, the New York Supreme Court

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had entered a Consent Order and Judgment against CashCall based upon a settlement entered into

2

between CashCall and New York whereby CashCall was (i) permanently enjoined from, among

3

other things, (a) targeting residents with advertisements, offers, or solicitations for loans with interest

4

rates greater that that prescribed by law, (b) making, financing, or collecting on loans to residents

5

with interest rates greater than that prescribed by law, (c) engaging in the business of making loans

6

State of California – Department of Business Oversight

1

until licensed; and (d) engaging in any deceptive, fraudulent, or illegal practices in connection with

7

the promotion of financial goods and services; (ii) ordered to pay restitution up to $7,000,000.00;

8

and (iii) pay penalties of $1,500.000.00.

9
10

Disciplinary Actions
19.

In addition to the nine civil and administrative actions discussed above, during the

11

course of the Commissioner’s regulatory examination, there have been at least twelve further civil or

12

administrative actions brought against CashCall by the states of Arkansas, Colorado, Illinois, Iowa,

13

Massachusetts, Minnesota, New Hampshire, North Carolina, Oklahoma, 2017
Pennsylvania, and

14
15
16
17

7,
pril 1
on A
Washington, and the federal Consumer Financial Protectionved
i Bureau. These actions involve the
arch
7571
1
. 14lending and servicing activities of CashCall,Nand allegations of unlicensed lending, usury violations,
., o
, Inc
Call
Cash
re v.
engaging in deceptive, lfraudulent or illegal practices in promoting financial goods and services, and
Tor
De a
ed in
cit

false license applications. At least three of the twenty-one civil and/or administrative actions have

18

become final, including the Alaska administrative action described in paragraph 16.b. above, the

19

Connecticut administrative action described in paragraphs 17.c. and 18.a. above, and the New York

20

civil action described in paragraph 18.b. above.

21
22
23
24
25
26
27
28

20.

Financial Code section 22705.1 provides:
(a) For any licensee, a disciplinary action taken by the State of California,
another state, an agency of the federal government, or another country for
an action substantially related to the activity regulated under this division
may be grounds for disciplinary action by the commissioner. A certified
copy of the record of the disciplinary action taken against the licensee by
the State of California, another state, an agency of the federal government,
or other country shall be conclusive evidence of the events related therein.
(b) Nothing in this section shall preclude the commissioner from applying
a specific statutory provision in this division providing for discipline against
a licensee as a result of disciplinary action taken against a licensee by the
State of California, another state, an agency of the federal government, or
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Case: 14-17571, 04/21/2017, ID: 10405389, DktEntry: 61-2, Page 16 of 16

1

another country.

2
3
4
5

II
California Financial Code section 22714 provides in pertinent part:
(a) The commissioner shall suspend or revoke any license, upon notice
and reasonable opportunity to be heard, if the commissioner finds any of
the following:

State of California – Department of Business Oversight

6
7
8
9
10

(1) The licensee has failed to comply with any demand, ruling, or requirement
of the commissioner made pursuant to and within the authority of this division.
(2) The licensee has violated any provision of this division or any rule or
regulation made by the commissioner under and within the authority of this
division.

11

III

12

Complainant finds that, by reason of the foregoing, Respondent CashCall, Inc. (i) has

13

violated Financial Code sections 22108, 22159(b), 22161(a) and (b), 22170(a) and (b), and 22701
17

17

0
17, 2
April
and California Code of Regulations, title 10, section 1409.1, ed onhas failed to comply with a demand
iv (ii)
arch
7571
1
. 14of the Commissioner, and (iii) has been disciplined by other states, and based thereon, grounds exist
., No
, Inc
Call
Cash
to suspend the finance lenders .licenses of CashCall, Inc.
re v
Tor
De la
ed in
cit
WHEREFORE, IT IS PRAYED that the finance lenders licenses of CashCall be suspended

18

for a period of up to 12 months;

19

Dated: June 4, 2014
Los Angeles, CA

14
15
16

JAN LYNN OWEN
Commissioner of Business Oversight

20
21
22

By_____________________________
Judy L. Hartley
Senior Corporations Counsel

23
24
25
26
27
28

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