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The Connecticut Department of Banking is one busy department. A new wave of administrative orders and settlements is out again with some new debt industry participants named. Some readers may recognize some of the names instantly. One that caught my eye was CC Brown Law, that came up in a comment and was alleged to be indirectly related to a company I wrote about that resulted in a nastygram from a lawyer about the post.
Connecticut Foreclosure Division, Alfred Beauchamp
Alfred R. Beauchamp, Connecticut Foreclosure Division Corp, Connecticut Foreclosure Division Corp CFDC HOME, Connecticut Foreclosure Division, CT Foreclosure Division Corporation, Ct Foreclosure Division Corporation, CT Foreclosure Division, CT Foreclosure Div Corp and CT Foreclosure Division Corp were named in a May 29, 2012 action.
The statement of facts says:
From at least February 6, 2007 to the present, CFDC has been an issuer of securities in the form of promissory notes (“CFDC Notes”).
For all relevant periods, Beauchamp was the sole officer, shareholder and manager of CFDC. CFDC and Beauchamp purported to counsel people who were in financial distress and in danger of losing their homes, and represented that one of their methods of providing assistance was to stop a bank from foreclosing on a home and to sell the home, after obtaining additional time from the bank and the courts.
From at least February 6, 2007 to the present, CFDC and Beauchamp offered and sold CFDC Notes in or from Connecticut to at least three investors.
Specifically, on February 6, 2007, Respondents offered and sold a Connecticut investor (“Investor 1”) a promissory note (“CFDC Note 1”) in the sum of $30,000 for a 4-month term for a minimum return of 10% with the ability to roll the note into another 4-month term having a minimum return of 10% on the investment. The terms of CFDC Note 1 guaranteed that the investor’s principal would be available at the end of the term, even “[i]n a worst case scenario and a deal gone bad”.
On June 11, 2007, Respondents offered and sold Investor 1 another CFDC Note (“CFDC Note 2”) in the sum of $30,000 for a 4 to 6-month term for a return of 20% with the ability to roll the note into another 4 to 6-month term having a minimum return of 10% on the investment. CFDC Note 2 represented a reinvestment of the principal from CFDC Note 1. The terms of CFDC Note 2 guaranteed that the investor’s principal would be available at the end of the term, even “[i]n a worst case scenario and a deal gone bad”.
In connection with the offer and sale of CFDC Note 1 and CFDC Note 2, Beauchamp alone and on behalf of CFDC told Investor 1 that the money would be used for CFDC’S operating expenses, to buy leads and to purchase a property if one were located.
On March 5, 2007, Respondents offered and sold another Connecticut investor (“Investor 2”) a promissory note (“CFDC Note 3”) in the sum of $50,000 for a 3 to 4-month term after which Respondents would pay the entire principal balance plus $10,000.
On March 14, 2007, Respondents offered and sold Investor 2 another CFDC Note (“CFDC Note 4”) in the sum of $50,000 for a 3 to 4-month term after which Respondents would pay the entire principal balance plus $10,000.
In connection with the offer and sale of CFDC Note 3 and CFDC Note 4, Beauchamp alone and on behalf of CFDC told Investor 2 that he was looking for investors to pool funds for the purpose of purchasing foreclosed homes, fixing and reselling them.
On June 17, 2007, Respondents offered and sold another Connecticut investor (“Investor 3”) a promissory note (“CFDC Note 5”) in the sum of $50,000 for a 4-month term for a minimum return of 10%. In connection with the offer and sale of CFDC Note 5, Beauchamp alone and on behalf of CFDC told Investor 3 that CFDC’s business was to help people get out of foreclosure, to save their credit and, if the opportunity arose, to invest in properties that Beauchamp would locate during his interviews with individuals who were in foreclosure. Beauchamp alone and on behalf of CFDC told Investor 3 that he needed Investor 3’s money for this business purpose.
The CFDC Notes offered and sold by Respondents were never registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status.
Respondents used some of the money raised from selling the CFDC Notes to Investors 1, 2, and 3 to pay for the personal and medical expenses of Beauchamp and Beauchamp’s family as well as the business expenses of Beauchamp’s spouse.
Respondents failed to pay Investors 1, 2, and 3 all of the money due under the CFDC Notes.
Both CFDC and Beauchamp failed to disclose, inter alia, any risk factors related to the investment, any financial information on CFDC or Beauchamp, and/or that Respondents would use part of the investors’ money to pay for the personal, medical and household expenses of Beauchamp and Beauchamp’s family as well as the business expenses of Beauchamp’s spouse. Each of these omitted items was material to investors and prospective investors of the CFDC Notes. – Source
The Department of Banking issued a cease and desist notice, order to make restitution, and notice of intent to fine.
CC Brown Law
On May 15, 2012 the Banking Commissioner issued the following information, action and facts.
Respondent is a Utah limited liability company with an office at 193 East Fort Union Boulevard, Suite 300, Midvale, Utah.
Respondent offers to engage in debt negotiation in this state via the Internet.
On or after October 1, 2009, at least five (5) Connecticut residents, while physically present in this state, entered into agreements with Respondent for loan modification services on mortgages secured by residential property in Connecticut.
In connection with such loan modification services, the Connecticut residents referred to in paragraph 3 above remitted total payments of $16,244.62 to Respondent, in excess of amounts that debt negotiators may charge for services pursuant to the Schedule of Maximum Fees established by the Commissioner on or about October 1, 2009.
On or about October 1, 2009, the Commissioner established a Schedule of Maximum Fees, which provides, in pertinent part, that “[a] debt negotiator of secured debt, including Short Sales and Foreclosure Rescue Services, may impose a fee upon the mortgagor or debtor for performing debt negotiation services not to exceed five hundred dollars ($500). Such fee shall only be collectable upon the successful completion of all services stated in the debt negotiation service contract”.
At no time relevant hereto did Respondent perform or successfully complete the services specified in the contracts entered into by the Connecticut residents, as more fully described in paragraph 3 above.
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.
The Commissioner received complaints filed by the five (5) Connecticut residents referred to in paragraph 3 above, concerning Respondent’s failure to perform the debt negotiation services.
By emails dated September 6, November 9 and November 18, 2011, the Division, as part of its investigation, requested that Respondent provide a complete list of all Connecticut clients who contracted with Respondent for loan modification services. To date, Respondent has failed to provide the requested information.
During the period of July 25, 2011 to February 13, 2012, Respondent refunded $16,244.62 to the five (5) Connecticut residents. – Source
The department has issued a cease and desist order and a notice of intent to impose a civil penalty.
Fidelity Debt Solutions
On May 14, 2012 the Department of Banking issued the following information, actions, and statements against Fidelity Debt Solutions.
Respondent is a California limited liability company with a last known address at 510 Market Street, 2nd Floor, San Diego, California.
Respondent offered to assist Connecticut residents negotiate the terms of unsecured debt via the Internet.
On or about April 15, 2010, a Connecticut resident, while physically present in this state, entered into an agreement with Respondent for debt negotiation services. The agreement stated, in pertinent part, that “Fidelity Debt Solutions agrees to provide debt settlement and restructure services to Client . . . This Service consists of negotiating with creditors on behalf of Client for reduction of unsecured debt and formulation of a payment plan”. under the heading “Compensation”, the agreement further stated that “[i]n consideration for the Service provided by Fidelity Debt Solutions, Client shall pay to Fidelity Debt Solutions a Service Fee equal to 14% of the Program Debt. Approximately 10% to 40% of the Service Fee will be paid upon acceptance into the program”.
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From at least May 2010 through June 2011, the Connecticut resident remitted payments of at least $3,593.86 for such debt negotiation services, which fee is in excess of amounts that debt negotiators may charge for services pursuant to the Schedule of Maximum Fees established by the Commissioner on or about October 1, 2009.
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 licensure.
At no time relevant hereto did Respondent perform or successfully complete the services specified in the agreement, as more fully described in paragraph 3 above.
On or about May 20, 2011, the Connecticut resident filed a complaint against Respondent with the Commissioner concerning the fees paid to Respondent for debt negotiation services.
From at least October 1, 2009 to May 5, 2010, Respondent engaged in debt negotiation in this state on behalf of at least twenty-four (24) additional Connecticut residents who negotiated or agreed to contract terms while in this state concerning their unsecured debt and who remitted approximately $38,665.57 to Respondent. – Source
the department issued a cease and desist order and notice of intent to impose a civil penalty.
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