South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
SCDCA vs. Vision Financial Management, LLC, et al

AGENCY:
South Carolina Department of Consumer Affairs

PARTIES:
Petitioners:
South Carolina Department of Consumer Affairs

Respondents:
Vision Financial Management, LLC and Nelzarie Wynn, as an individual
 
DOCKET NUMBER:
08-ALJ-30-0043-IJ

APPEARANCES:
Carolyn Grube Lybarker, Esquire,
for Petitioner SC Dept. of Consumer Affairs

Randall S. Hiller, Esquire,
for Respondents Vision Financial Management, LLC
and Nelzarie Wynn
 

ORDERS:

AMENDED FINAL ORDER


STATEMENT OF THE CASE

This matter is before the Administrative Law Court (“ALC” or “Court”) pursuant to a Petition filed on February 1, 2008, by the South Carolina Department of Consumer Affairs (“Department”) seeking, among other relief[1], an Order from this Court requiring Respondents Vision Financial Management, LLC (“Vision”) and Nelzarie Wynn, as an individual[2] (“Wynn”) (collectively referred to as “Respondents”), to cease and desist from offering and/or engaging in credit counseling services in violation of the South Carolina Consumer Credit Counseling Act (“Act”), S. C. Code Ann. Section 37-7-101 et seq. A hearing was held before me on April 15, 2008 at the offices of the ALC in Columbia, South Carolina.

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion of the parties, I make the following findings of fact by a preponderance of evidence:

1. Vision Financial Management is a limited liability company organized under the laws of the State of South Carolina. On August 1, 2006, Wynn submitted Articles of Organization for Vision to the South Carolina Secretary of State. In those articles, she listed herself as co-organizer and agent for service of process.[3]

2. Wynn is a licensed nurse and is not a licensed credit counselor. She is the sole owner and President of Vision Financial Management, LLC, located at 1 Chicksprings Road, Suite 207-B Greenville, SC 29609.

3. Vision Financial Management, LLC operates as a credit counseling organization under S.C. Code Ann. Section 37-7-101(2), and has offered and continues to offer credit counseling services as defined in S.C. Code Ann. Section 37-7-101(3). Vision’s services are provided by three unlicensed credit counselors.

4. Department received a complaint which was the basis of this action on December 1, 2007 from a client of Vision, Brandon Williams. In his complaint, Williams asserts that he was charged $1,346 for “credit repair” and paid $500 to Vision to repair his credit. He also asserts that he incurred “debt negotiation fees.”

5. As a result of Williams’ complaint, Department brought this injunctive action, alleging that Vision operates a Credit Counseling Organization and has offered and engaged in credit counseling services in violation of the Act without obtaining a license as required by Section 37-7-102 of the Act. Department seeks an order from this Court requiring Respondents to cease and desist from offering and/or engaging in credit counseling services pursuant to Section 37-7-119(A).

6. Respondents assert that the services they offer are not “credit counseling services” but are rather “financial services” and argue that they are not subject to regulation by Department. Wynn admits to offering “debt management” as part of her services, but claims that she is exempt from the Act because she does not charge a fee for the debt management services.

7. Respondents have advertised and/or are advertising as a Credit Counseling Organization and credit counselors, without obtaining the required licenses, in violation of S. C. Code Ann. Section 37-7-102 (2007) of the Act. Respondents maintain a website wherein they advertise that they provide financial consulting, financial planning, debt management, securities rescindment, account disputes, debt negotiation, and tradeline annexation. On that website, Wynn and two other parties are listed as “credit counselors.” Respondents also have a paper flyer that advertises these same services in addition to “free credit repair.” Respondents contend that the flyer is not advertisement because it was not widely distributed. However, the fact that this flyer was only distributed in Vision’s office does not negate the fact that these representations were made.

8. Respondents have charged consumers upfront fees for credit counseling services in excess of those allowed per regulation, in violation of S.C. Code Ann. Section 37-7-112 (2007). While Respondents contend that the fees collected are simply fees to cover postage and other miscellaneous items, it is clear from the Consultation Agreement (“Agreement”) given to Vision’s customers that each customer must pay a $500 retainer fee in order to receive services. According to the Agreement, they are allowed to cancel their contract with Vision within 72 hours of the agreement, but Vision will keep $100 dollars of the retainer fee for “processing fees for miscellaneous cost” and $25 for the cost of the client’s initial consultation. Moreover, clients are charged a $40 non compliance fee for not complying with the budget that the company has created for the client.

9. While Respondents hold themselves out as offering “free services,” it is clear from the Consultation Agreement that the customers are indirectly paying for credit repair through paying for financial management. Additionally, the customers’ credit is repaired through Vision’s service of correcting error on customers’ credit reports. Therefore, Vision is engaged in offering the service of “credit repair” without a license.

DISCUSSION AND CONCLUSIONS OF LAW

1. The matter is before the Court under S.C. Code Ann. Section 37-6-108 and Section 37-7-119 wherein the Department seeks enforcement of its administrative order requiring Respondent to cease and desist from operating as a consumer credit counseling organization and from offering and engaging in consumer credit counseling services.

2. The Department is an administrative agency of the State of South Carolina as defined in SC Code Ann. Section 1-23-610(1) of the Administrative Procedures Act and is responsible for administering and enforcing the South Carolina Consumer Protection Code (S.C. Code Ann. Section 37-7-101), a part of which is the Consumer Credit Counseling Act (“Act”).

3. Pursuant to the Act, a person may not engage in consumer credit counseling services in South Carolina unless the person has obtained a license from the Department. S.C. Code Ann. Section 37-7-102(2007). “Consumer credit counseling services,” includes, among other services, “improving or offering to improve a consumer's credit record, history or rating.” S.C. Code Ann. § 37-7-101(3)(b) (2007). Further, a person operates a “consumer counseling organization” if the person provides or offers to provide consumer credit counseling services either for or in the expectation of a fee, compensation, or gain. S.C. Code Ann. § 37-7-101(2) (2007).

4. The Department argues that Respondents must obtain a license from it before providing or offering services to improve a consumer's credit record, history or rating. Respondents, however, assert that they can not improve or make an offer to improve a consumer's credit record, history, or rating, because only a credit bureau can improve a credit record or rating. Rather, they argue that they merely offer credit correction services which involve asking credit bureaus to correct errors on a consumer's credit record. Clearly, the services Respondents offer to consumers ultimately result in the improvement of their credit records or ratings. When Respondents are successful in convincing a credit bureau to remove or correct erroneous information on a consumer's credit record, the correction will likely result in an increase in the consumer's credit score, which constitutes an improvement in the consumer's credit record, history, or rating.

5. Further, Respondents website, flyer, and Agreement make representations that they can improve credit history. Accordingly, I find that the services which Respondent offers and engages constitute “consumer credit counseling services” as defined in Section 37-7-101(3)(B) and that Respondent must obtain a license from the Department prior to offering and/or engaging in those services with consumers in this state.

6. Department asserts that Respondents have charged fees for their consumer credit counseling services in excess of those allowed by the Act. S.C. Code Ann. Section 37-7-112(2007) provides that “[a] licensee may not charge a consumer a fee except as established by the department by regulation.” S.C. Code Ann. Regs. 28-700(B)(1)(2007), which sets forth the fees that may be charged, provides:

(1) A licensee may not charge or receive from a consumer, directly or indirectly, a fee except the following:

(a) an initial consultation fee, not to exceed fifty dollars for each consumer;

(c) additional maintenance fees, not to exceed forty dollars for each month

(d) a reinstatement fee, not to exceed twenty-five dollars

Respondents’ fees exceeded these allowable charges. Respondents charged a $500 retainer fee to each customer. Although Respondents assert that the services are free and that the fees collected cover “miscellaneous fees,” the fees nevertheless exceed the amount allowed by the regulation.

7. S.C. Code Ann. Section 37-7-119(C)(2007) provides that the Department may impose administrative fines in amounts not more than five hundred dollars for each offense or not more than five thousand dollars for the same set of transactions or occurrences upon persons violating the provisions of Chapter 7 of Title 37. This section provides that each violation constitutes a separate offense. Inherent in and fundamental to the powers of an Administrative Law Judge, as the trier of fact, is the authority to decide the appropriate sanction. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E. 2d 633 (1991). In deciding what penalty amount is appropriate, the weight and credibility assigned to evidentiary factors bearing on the issue are matters within the province of the trier of fact. See S.C. Cable Television Ass‘n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992). Because Respondents charged fees in excess of those allowed under the Act, Respondents shall pay a fine in the amount of $1,500.00 to Department within sixty (60) days of the date of this Order.


ORDER

Therefore, based upon the foregoing,

IT IS HEREBY ORDERED that as of May 27, 2008;

1.                           Respondents immediately cease and desist from offering consumer credit counseling services to, or engaging in consumer credit counseling services with, consumers in this state. This includes no longer operating a website or producing flyers offering credit counseling services to the public.

2.                           that Respondents are restrained from further violating the Act.

3.                           that Respondents shall remit to Department within sixty (60) days after May 27, 2008, a total administrative fine in the amount of $1,500.00 pursuant to S.C. Code Ann. Section 37-7-119(c) (2007).

AND IT IS FURTHER ORDERED that as of the date of this Amended Final Order, Respondents, and their agents or assigns shall within sixty (60) days of the date of this Order refund all monies collected from South Carolina consumers who entered into contract with Respondents after December 1, 2005 and shall provide a listing of consumers and proof of such refund distributions to the Department within sixty (60) days.

AND IT IS SO ORDERED.

___________________________________

CAROLYN C. MATTHEWS

Administrative Law Judge

July 1, 2008

Columbia, South Carolina.



[1] Petitioner, in its Petition for Injunctive Relief, sought an order of the court: (1) Requiring Respondents, their agents or assigns to cease and desist from offering and/or engaging in credit counseling services in violation of the Act; (2) Requiring Respondents, their agents or assigns to refund all monies collected form South Carolina consumers who entered into a contract with Respondents after December 1, 2005; (3) Assessing Respondents, an administrative fine of five hundred ($500.00) dollars for each violation of the Act, Pursuant to S.C. Code Ann. Section 37-7-119(c); (4) Restraining the Respondent from violating the Act; (5) that this Order take effect immediately; and (6) Granting such other relief as may be necessary, just and appropriate.

[2] Respondents’ counsel asserts that this court does not have jurisdiction over Nelzarie Wynn as an individual. Because Wynn is the 100% owner of Vision, the company is essentially an extension of herself. S.C. Code Ann. Section 37-6-108(B) provides that the jurisdiction of the ALC is exclusive.

[3] Saeed Drake was also listed as an organizer.


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