By the Division of Banks


COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
DEBT COLLECTOR LICENSING
Docket No. 2013-009

TEMPORARY ORDER TO CEASE
AND DESIST

In the Matter of
DELBERT SERVICES CORPORATION
JOHN P. REDDAM, Individually

Debt Collector License No(s). DC112059-100 et seq.

Las Vegas, Nevada


The Commissioner of Banks (Commissioner) having determined that DELBERT SERVICES CORPORATION and JOHN P. REDDAM, (collectively, Delbert Services or the Corporation), located at 7125 Pollock Drive, Las Vegas, Nevada have engaged, are engaged in, or are about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 93, sections 24 through 28, inclusive, Massachusetts General Laws chapter 140, sections 96 through 114A, inclusive and applicable regulations found at 209 CMR 18.00 et seq., 209 CMR 20.00 et seq., and 209 CMR 26.00 et seq., hereby issues the following TEMPORARY ORDER TO CEASE AND DESIST (Temporary Order) pursuant to General Laws chapter 93, section 24J.

A. FINDINGS OF FACT

  1. The Division of Banks (Division), through the Commissioner, has jurisdiction over the licensing and regulation of persons and entities engaged in the business of a debt collector in Massachusetts pursuant to Massachusetts General Laws chapter 93, section 24A.
  2. Delbert Services is, and, at all relevant times, has been, a foreign corporation conducting business in the Commonwealth. Delbert Services’ main office is located at 7125 Pollock Drive, Las Vegas, Nevada.
  3. Delbert Services is licensed by the Division as a Debt Collector under Massachusetts General Laws chapter 93, section 24A. According to records maintained on file with the Division and the Nationwide Multi-State Licensing System (NMLS), the Commissioner issued Delbert Services’ license to engage in the business of a debt collector at 7125 Pollock Drive, Las Vegas, Nevada and 1600 S. Douglass Road, Anaheim, California on or about August 30, 2011 with license numbers DC112059-100 and DC112059-101 respectively.
  4. According to the Division’s records, at all relevant times John P. Reddam was and is the sole director and 100% owner of Delbert Services.
  5. Delbert Services is licensed as a debt collector in Massachusetts. Debt collectors are engaged in the business of collecting debt, or attempting to collect, directly or indirectly, debt owned or due or asserted to be owned or due to another.
  6. Debt Collectors in Massachusetts are licensed and regulated under Massachusetts General Laws chapter 93, sections 24 through 28 which are administered and enforced by the Commissioner. Pursuant to Massachusetts General Laws chapter 93, section 24D, the Division is authorized to inspect the books, accounts, papers, records, and files of debt collectors transacting business in Massachusetts to determine compliance with the provisions of Massachusetts General Laws or any rule, or regulation issued thereunder, and with any law, rule, or regulation applicable to the conduct of the business of a debt collector.
  7. Beginning November 27, 2012 and continuing through February 11, 2013, the Division conducted an examination of the books, accounts, papers, records, and files maintained by Delbert Services to evaluate the Corporation's compliance with the laws, regulations, and regulatory bulletins applicable to the conduct of the debt collector business in Massachusetts (2012 examination).
  8. The Division's Report of Examination (Report), which was issued to Delbert Services on the effective date of this Temporary Order, presented the findings of the 2012 examination and alleged significant failures to comply with applicable state and federal laws, rules, regulations, and regulatory bulletins governing the conduct of those engaged in the business of a debt collector in Massachusetts.

    A. Unfair or Deceptive Acts and Practices

  9. Massachusetts General Laws chapter 93A, section 2(a) states:

    Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

  10. Massachusetts General Laws chapter 93, section 24I(a) states:
    1. The commissioner may suspend or revoke a license issued pursuant to this chapter if the commissioner finds that: (1) the licensee has violated this chapter or any rule or regulation adopted hereunder, or any other law applicable to the conduct of its business; or (2) any fact or condition exists which, if it had existed at the time of the original application for the license, would have warranted the commissioner in refusing to issue the license.
  11. Massachusetts General Laws chapter 93 section 24B states, in part:

    The commissioner may reject an application for a [debt collector] license or an application for the renewal of a license if he is not satisfied that the financial responsibility, character, reputation, integrity and general fitness of the applicant and of the owners, partners or members thereof, if the applicant be a partnership or association, and of the officers and directors, if the applicant be a corporation, are such as to command the confidence of the public and to warrant the belief that the business for which the application for a license is filed will be operated lawfully, honestly and fairly.

  12. Books and records reviewed by the Division’s examiner during the 2012 examination indicated that Delbert Services engaged in unfair or deceptive acts and practices by collecting consumer debt on behalf of unlicensed small loan companies, which made small loans to Massachusetts consumers, in violation of the small loan act. In addition, the terms of the small loans violated the Massachusetts small loan rate order and are void subject to the provisions of Massachusetts General Laws chapter 140, section 110.

    (i) Collecting Debt on behalf of Unlicensed Entities

  13. Massachusetts General Laws 140 section 96 states, in part:

    No person shall directly or indirectly engage in the business of making loans of six thousand dollars or less, if the amount to be paid on any such loan for interest and expenses exceeds in the aggregate an amount equivalent to twelve per cent per annum upon the sum loaned, without first obtaining from the commissioner of banks, in sections ninety-six to one hundred and fourteen, inclusive, called the commissioner, a license to carry on the said business in the town where the business is to be transacted.

  14. Massachusetts General Laws chapter 140, section 110 states in part:

    Whoever, not being duly licensed as provided in section ninety-six on his own account or on account of any other person not so licensed, engages in or carries on, directly or indirectly, either separately or in connection with or as a part of any other business, the business of making loans or buying notes or furnishing endorsements or guarantees, to which sections ninety-six to one hundred and eleven, inclusive, apply, shall be punished by imprisonment in the state prison for not more than ten years or in a jail or house of correction for not more than two and one half years, or by a fine of not more than ten thousand dollars, or by both such fine and imprisonment. Any loan made or note purchased or endorsement or guarantee furnished by an unlicensed person in violation of said sections shall be void. [emphasis added].

  15. Massachusetts General Laws 140, sections 96 through 114A, inclusive, the "Small Loans Act," requires entities to be licensed by the Commissioner of Banks if they are engaged, directly or indirectly, in the business of making loans of $6,000.00 or less and the interest and expenses paid on the loan exceed in the aggregate 12% per annum in the loan amount.
  16. During the 2012 examination, the Division’s examiner reviewed consumer loan agreements (loan agreements) for 25 accounts currently in collection by Delbert Services. A review of the loan agreements revealed that Delbert Services has been collecting on these accounts on behalf of CashCall, Inc., (CashCall), GP Investors and Novea Resource Management.
  17. A review of each of the loan agreements indicates that the loans were unsecured consumer loans made to Massachusetts residents with loan amounts under $6,000 and the interest rate exceeded 12% per annum. The loan amounts ranged from $850 to $5075. Interest rates ranged from 59% to 169%. The annual percentage rate for all of these loans ranged from 59.88% to 337.97%.
  18. Twenty-three of the 25 loan agreements identified Western Sky Funding, LLC (Western Sky) as the original lender. Western Sky is not licensed as a small loan company in the Commonwealth.
  19. The Division’s review of the detailed account information provided by Delbert Services revealed that 17 of the 25 loan agreements reviewed were consumer loans owned by WS Funding, however the client was identified as CashCall. According to information provided by the Corporation, WS Funding, a wholly owned subsidiary of CashCall, purchased the consumer loans from Western Sky and thereafter transferred the servicing rights of the loans to CashCall who in turn subcontracted Delbert Servicing for collection of those loans.
  20. The Division’s review of the detailed account information provided by Delbert Services revealed that three of the 25 loans were owned by GP Investors and five loans were owned by Novea Resource Management. Both GP Investors and Novea Resource Management subcontracted Delbert Servicing for collection of those loans.
  21. Books and records reviewed by the Division’s examiner during the 2012 examination also included a list of collection accounts provided by Delbert Services for Massachusetts consumer loans currently in collection. A review of detailed account information provided by the Corporation for each of the loans indicates that Delbert Services currently maintains an extensive number of active and inactive accounts for which the debtor is a Massachusetts consumer.
  22. The Division’s examiner reviewed detailed account information for at least 158 collection accounts and based on the examiner’s review 156 small loans were originated by unlicensed small loan companies.
  23. A review of the Division’s records indicates that CashCall is not licensed as a small loan company or registered as a third party loan servicer in the Commonwealth. Additionally, it is the Division’s understanding that CashCall is owned solely by John P. Reddam.
  24. A review of the Division’s records indicates that WS Funding is not licensed as a small loan company in the Commonwealth and based upon information and belief, WS Funding is a wholly owned subsidiary of CashCall.
  25. A review of the Division’s records indicates that GP Investors is not licensed as a small loan company in the Commonwealth.
  26. A review of the Division’s records indicates that Novea Resource Management is not licensed as a small loan company in the Commonwealth.
  27. As of the date of this Temporary Order, Delbert Services continues to collect consumer loans owned by unlicensed entities and those loans violate the small loan rate order.

    (ii) Collecting Debt that Violates the Massachusetts Small Loans Act and Small Loan Rate Order

  28. The Division’s regulation at 209 CMR 26.01(a) establishes the Small Loan Rate Order and states in part:

    All persons subject, in whole or in part, to the provisions of M.G.L. c. 140, §§ 96 through 113, may charge, contract for, and receive the following maximum interest charges for loans not in excess of $6,000:

    (a) 23% per annum of the unpaid balances of the amount financed calculated according to the actuarial method plus an administrative fee of $20 upon the granting of a loan. An administrative fee is not permitted to be assessed to a borrower more than once during any 12 month period.

  29. The Massachusetts criminal usury statute at Massachusetts General Laws chapter 271, section 49 establishes that it is usury in Massachusetts to hold a loan contract which calls for an interest rate exceeding a twenty percent annual percentage rate (APR). However, said section 49 further states that loans in excess of twenty percent are permissible provided that the lender registers with the Office of the Attorney General.
  30. Based upon information and belief, CashCall, Novea Management, WS Funding, Western Sky and GP Investors are not registered with the Office of the Attorney General.
  31. The Division’s review of the 25 loan agreements revealed that the interest rates for all 25 loans ranged from 59% to 169%, with annual percentage rates ranging from 59.88% to 337.97% in violation of 209 CMR 26.01.
  32. The examiner’s review of the account information also revealed that all accounts include contractual late fees of either $15 or $29 and returned check fees of either $15 or $29.
  33. The Division’s examiner reviewed detailed account information for at least 158 collection accounts and based on the examiner’s review 157 accounts had contractual interest rates which exceeded 23% per annum. At least 118 accounts reviewed, identified interest rates exceeding 100%.
  34. As of the date of this Temporary Order, Delbert Services continues to collect consumer loan debt that violates the Division’s Small Loan Rate Order regulation at 209 CMR 26.00.

    B. Failure To Demonstrate the Financial Responsibility, Character, Reputation, Integrity, and General Fitness to Maintain a Debt Collector License

  35. Massachusetts General Laws chapter 93, section 24B relative to the licensing of debt collectors states in part:

    The commissioner may reject an application for a license or an application for the renewal of a license if he is not satisfied that the financial responsibility, character, reputation, integrity and general fitness of the applicant and of the owners, partners or members thereof, if the applicant be a partnership or association, and of the officers and directors, if the applicant be a corporation, are such as to command the confidence of the public and to warrant the belief that the business for which the application for a license is filed will be operated lawfully, honestly and fairly.

  36. The Division’s regulation at 209 CMR 18.03(2)(c) relative to the licensing of debt collectors states in part:

    An applicant shall submit information demonstrating that the applicant possesses the character, reputation, integrity and fitness to engage in the business of a debt collector in an honest, fair, sound, and efficient manner.

  37. Books and Records reviewed by the Division’s examiner during the 2012 examination revealed that Delbert Services failed to maintain the financial responsibility character, reputation, integrity and fitness to conduct the business of a debt collector in the Commonwealth, by conducting its business in an unsafe and unsound manner through collecting consumer debt that was made, owned and or serviced by unlicensed small loan companies and whose terms violated the Massachusetts small loan rate order cited as regulation 209 CMR 26.00 and as specifically enumerated in this Temporary Order.

    B. CONCLUSIONS OF LAW

  38. Based upon the information contained in paragraphs 1 through 37, Delbert Services, has failed to demonstrate the character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 93, sections 24B(a) and 24G(a), and the Division’s regulation 209 CMR 18.03(2)(c).
  39. Based upon the information contained in paragraphs 1 through 37, by collecting debt on behalf of entities that were not licensed to engage in the business of a small loan company at the time the consumer loans were made, Delbert Services has engaged in unfair and deceptive acts and practices and failed to maintain the character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Law chapter 140 sections 96 through 114A inclusive and Massachusetts General Laws chapter 93A, section 2A.
  40. Based upon the information contained in paragraphs 1 through 37, by continuing to collect debt that is in violation of the Small Loan Law and Small Loan Rate Order, Delbert Services has engaged in unfair and deceptive acts and practices and failed to maintain the character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 93A section 2, Massachusetts General Laws chapter 140 sections 96 through 114A inclusive and the Division’s regulation at 209 CMR 26.00 et seq.
  41. Based upon the information contained in paragraphs 1 through 37, had the foregoing existed at the time of Delbert Services’ original debt collector application, such conditions would have warranted a denial by the Commissioner of the license application and are grounds for the suspension or revocation of Delbert Services’ debt collector license numbers DC112059-100 and DC112059-101, pursuant to Massachusetts General Laws chapter 93, section 24I.
  42. Based upon the information contained in paragraphs 1 through 37, the public interest will be harmed by delay in issuing an Order to Cease and Desist under General Laws chapter 93, section 24J because, upon information and belief, Delbert Services has a portfolio of Massachusetts consumer loans which when made violated the Small Loan Law and to date continue to violate the Small Loan Rate Order and which require immediate action to protect the interests of the affected Massachusetts consumers.
  43. Based upon the information contained in paragraphs 1 through 37, the Commissioner has determined that:
    1. Delbert Services has engaged, or is about to engage in, acts or practices which warrant the belief that the Corporation is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a debt collector including, but not limited to, the provisions of the Division’s regulations at 209 CMR 18.00 et seq.
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Delbert Services.

    C. ORDER TO CEASE AND DESIST

    After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:

  44. ORDERED that Delbert Services and any and all employees, independent contractors, or agents operating on behalf of Delbert Services, and their successors or assigns, shall immediately cease collecting debt on any accounts or loans which violate the small loan law and the small loan rate order. Therefore, Delbert Services is ordered to immediately cease collecting any consumer collection accounts from debtors located within Massachusetts and to cease soliciting the right to collect or receive payment for another of an account, bill or other indebtedness, or advertise for or solicit in print the right to collect or receive payment for another of an account, bill or other indebtedness soliciting or accepting, either directly or indirectly, any third party debt collection accounts for any loans that violate the small loan law and small loan rate order.
  45. IT IS FURTHER ORDERED that Delbert Services shall, within ten (10) days of the effective date of this TEMPORARY ORDER, provide the Division with a complete record, including a verification of receipt, of all funds collected on behalf of clients from August 30, 2011 through the effective date of this TEMPORARY ORDER.
  46. IT IS FURTHER ORDERED that Delbert Services shall, within ten (10) days of the effective date of this TEMPORARY ORDER, provide the Division with a record of all clients and/or creditors and a detailed record of all accounts held for collection by Delbert Services on behalf of such clients.
  47. IT IS FURTHER ORDERED that Delbert Services shall, within ten (10) days of the effective date of this TEMPORARY ORDER provide information or documents detailing whether Delbert Services has ever submitted any negative or adverse information to any consumer reporting agency, against any Massachusetts consumer, for loans that were collected by Delbert Services on behalf unlicensed small loan companies.
  48. IT IS FURTHER ORDERED that within forty-five (45) days of the effective date of this TEMPORARY ORDER, the Corporation shall refund to consumers, all collection fees retained on all loans that were collected by Delbert Services on behalf unlicensed small loan companies.
    1. Within forty-five (45) days of the effective date of this TEMPORARY ORDER, Delbert Services shall submit to the Commissioner a list of all consumers to whom a reimbursement is owed by the Corporation in accordance with this Paragraph of the TEMPORARY ORDER; and
    2. Within sixty (60) days of the effective date of this TEMPORARY ORDER, Delbert Services shall submit evidence of all reimbursements issued to consumers pursuant to this Paragraph of the TEMPORARY ORDER, including the consumers’ names, check numbers, the amount of the reimbursements and certified mail receipts to illustrate the consumers’ receipt of the reimbursement.
  49. IT IS FURTHER ORDERED that this TEMPORARY ORDER TO CEASE AND DESIST shall become effective immediately and shall remain in effect unless set aside, limited, or suspended by the Commissioner or upon court order after review under General Laws chapter 30A.
  50. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such TEMPORARY ORDER shall become permanent and final only upon receipt of a written request for such a hearing from the Corporation within twenty (20) days of the effective date of this TEMPORARY ORDER. If no hearing is requested within this twenty (20) day period, this TEMPORARY ORDER shall become permanent and final until it is modified or vacated by the Commissioner.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS:

Dated at Boston, Massachusetts, this 4th day of April, 2013

By:
David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts