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,
an Order from this Court requiring Respondents Vision Financial Management, LLC
(“Vision”) and Nelzarie Wynn, as an individual (“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.
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.
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