On April 5, the CFPB filed a complaint against two individuals, both individually and in their roles as co-trustees of two trusts, accusing them of concealing assets to avoid paying a fine owed to the Bureau. In 2015 the Bureau filed an administrative action alleging one of the co-trustees—the former president of a Delaware-based online payday lender (the “individual defendant”)—and the lender violated TILA and EFTA and engaged in unfair or deceptive acts or practices when making short-term loans. (Covered by InfoBytes here.) The Bureau’s administrative order required the payment of more than $38 million in both legal and equitable restitution, along with $7.5 million in civil penalties for the company and $5 million in civil penalties for the individual defendant.
As previously covered by InfoBytes, two different administrative law judges (ALJs) decided the present case years apart, with their recommendations separately appealed to the Bureau’s director. The director upheld the decision by the second ALJ and ordered the lender and the individual defendant to pay the restitution. A district court issued a final order upholding the award, which was appealed on the grounds that the enforcement action violated their due process rights by denying the individual defendant additional discovery concerning the statute of limitations. The lender and the individual defendant recently filed a petition for writ of certiorari challenging the U.S. Court of Appeals for the Tenth Circuit’s affirmation of the CFPB administrative ruling, and asked the U.S. Supreme Court to review whether the high court’s ruling in Lucia v. SEC, which “instructed that an agency must hold a ‘new hearing’ before a new and properly appointed official in order to cure an Appointments Clause violation” (covered by InfoBytes here), meant that a CFPB ALJ could “conduct a cold review of the paper record of the first, tainted hearing, without any additional discovery or new testimony,” or whether the Court intended for the agency to actually conduct a new hearing.
The Bureau claimed in its announcement that to date, the defendants have not complied with the agency’s order, nor have they obtained a stay while their appeal was pending. The defendants have also made no payments to satisfy the judgment, the Bureau said. The complaint alleges that the co-trustee defendants transferred funds to hinder, delay, or defraud the Bureau, in violation of the FDCPA, in order to avoid paying the owed restitution and penalties. Specifically, the complaint alleges that between 2013 and 2015, after becoming aware of the Bureau’s investigation, the individual defendant transferred $12.3 million to his wife through their revocable trusts, for which his wife is the beneficiary. The complaint requests a declaration that the transactions were fraudulent, seeks to recover the value of the transferred assets via liens on the property in partial satisfaction of the Bureau’s judgment against the individual defendant, and seeks a monetary judgment against the wife and her trust for the value of the respective property and/or funds received as a transferee of fraudulent conveyances of the property belonging to the individual defendant.
