vs. ) CASE NO. 90-1184
) BANKERS ACCEPTANCE OF AMERICA, ) A FLORIDA GENERAL PARTNERSHIP, ) DAN NORMAN, and JUANITA NORMAN, )
Respondents. )
A hearing was held in this case on May 11, 1990, in Tampa, Florida, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.
For the Petitioner: Robert K. Good, Esquire
400 W. Robinson St., Suite 501 Orlando, Florida 32801
Juanita Norman, pro se Bankers Acceptance of America 3505 34th Avenue Drive, West Bradenton, Florida 34205
The issue for consideration herein is whether Respondents should be disciplined as proposed in the Cease and Desist Order And Complaint filed herein because of the alleged misconduct outlined therein.
By undated Cease And Desist Order And Complaint For Imposition Of Administrative Fine With Notice Of Rights, Robert K. Good, on behalf of the Comptroller of the State of Florida, advised the Respondents of that officer's intention to impose an administrative fine on them for their alleged violation of certain provisions of the Florida Statutes, and to issue a Final Order to Cease and Desist such activity. Thereafter, on January 24, 1990, the Respondents filed a Petition For Informal Proceeding and an Answer to the Department's initial pleading, and by letter dated February 19, 1990, the matter was transmitted to the Division of Administrative Hearings for the appointment
of a Hearing Officer. After the parties' responses to the Initial Orders issued herein, the undersigned set the case for hearing in Tampa on May 11, 1990, at which time it was held as scheduled.
At the hearing, Petitioner presented the testimony of Stephen W. Fischer, a client of Respondents; Dan Maurice Norman, Sr., a Respondent; and Lynn D. Chang, a financial administrator for the Florida Comptroller's office. Petitioner also introduced Petitioner's Exhibits 1 through 3. Respondents Dan and Juanita Norman testified in their own behalf and introduced Respondents' Exhibits A through C.
No transcript of the proceeding was provided and only Petitioner submitted Proposed Findings of Fact which have been reviewed and are accepted and incorporated herein. Respondents submitted a "Proposed Recommended Order Answer" which does not constitute Proposed Findings of Fact.
At all times pertinent to the allegations contained in the Cease and Desist Order and Administrative Complaint, the Petitioner was the state agency responsible for the administration and enforcement of the Florida Consumer Finance Act, Chapter 516, Florida Statutes. Respondents Norman were licensed real estate professionals who also established and operated Bankers Acceptance of America, a credit "repair" agency.
Sometime in February, 1989, Steven Fischer who, with his wife was, at the time, substantially in debt, contacted Respondent, Bankers Acceptance of America, (Bankers), because of its advertisement which he had seen in the Bradenton Herald. This ad offered assistance with "credit repair", and, by implication, with securing Visa and Master Card, auto loans and home loans.
When he first called the number listed in the ad, Mr. Fischer spoke with Respondent, Dan Norman, and made an appointment to meet with him at Fischer's home, where they discussed his credit situation and how Respondents could help him. As a result of the representations made by Mr. Norman, Mr. Fischer signed a two page contract for Respondents' service.
This contract, which bears the signature of Dan Norman for Bankers and that of Mr. and Mrs. Fischer as well, is entitled a "Service Contract Agreement", wherein Bankers is identified as the consultant and the Fischers as the clients. Review of the contract document indicates that it relates solely to the client's credit situation and makes no reference to the credit "repair" service being conditioned upon or related to the purchase or sale of real
estate through Respondents, in any fashion whatever. Though the contract is silent on the issue of real estate, Mr. Fischer recalls that at the time of their interview, there was some mention of real estate, but at the time of hearing, he could not recall what it was. He does not recall Mr. Norman telling him that he or Bankers were real estate brokers or that they would be interested in working on credit only with those who would consider buying or selling real estate through them. He does recall, however, that his prime concern at the time was the repair of his credit and he had no interest in either purchasing or selling real estate. Neither the ad in the paper, the contract he signed, nor the "Client Questionnaire" filled out by Mr. Norman regarding him made any reference to real estate except as an asset of the client. Neither did they refer to Respondents as real estate brokers.
On his initial visit to the Fischer home, Mr. Norman remained for several hours, talking about the Fischers' credit situation. Ultimately Mr. Fischer paid Mr. Norman $100.00 as a deposit and agreed to pay an additional
$300.00 at $100.00 per month for three months, for a total credit repair fee of
$400.00.
Thereafter, Respondent Juanita Norman was the Fischers' primary contact with their creditors, with Mr. Norman coming in only when creditors had some objection to efforts to arrange some compromise or payment schedule. Whenever such a situation arose, either the Fischers would call her or she would call them.
Several of the Fischers' creditors, notably American Express, refused to accept Respondents as a credit repair service. Mr. Fischer did not request a refund because of Respondents' inability to completely accomplish that which was to be done. He admits that he did not always follow Respondent's instructions. He did not file a complaint with the Petitioner herein, but after a complaint was filed by someone unknown, was contacted by Mr. Norman who offered a partial refund of fees paid. None was forthcoming, however.
In his testimony at the hearing, Dan Norman claimed that notwithstanding the advertisement in the newspaper, and the terms of the service contract agreement involved herein, neither he, his wife, nor Bankers, agreed to "repair" credit for the Fischers but merely to assist them in their fixing their own credit by helping them to establish new credit over time. He admits his contract provides that with the Fischer's cooperation, he could help them set up a repayment schedule, could work with their creditors, and could set up a budget for them so that they could repair their own credit. He claims this was done. The success of Respondents in repairing the Fischer's credit is not, however, the issue involved in this case.
Mr. Norman admits that the Fischers paid him $400.00, and further acknowledges that he signed similar contracts with between 60 and 70 other clients who paid a similar fee or less. Neither the $400.00 received from the Fischers, however, nor the fees paid by the other clients was placed in a trust account maintained by Norman or Bankers for the credit repair service.
Mr. Norman claims that he is a real estate broker and that he and his wife operated a real estate brokerage agency under the name, Bankers Acceptance Real Estate Group, under which Bankers Acceptance of America, the credit repair firm, was operated as a part of the real estate operation. Mrs. Norman admits that it was their intention to use the credit repair service as a means to feed customers to the real estate business. Norman had a trust account in the name of the real estate business, but none of the fees received from the credit repair clients were placed into that trust account because they were not deposits placed in a real estate transaction. By the same token, since he did not consider himself to be operating a "credit repair" service, other than incident to his real estate business, he felt he did not need to obtain a surety bond and did not do so.
After a complaint was filed with the Department of Banking and Finance by someone not further identified, Lynn D. Chang, a financial administrator with the Comptroller's office, issued a subpoena to Respondents on June 16, 1989, calling for them to provide information regarding the surety bonding company, the location and a copy of their surety bond, the location and account number of this escrow account, proof of said account, and a copy of the information statement and consumer contract. None of the requested information was
provided by the Respondents. Instead, by letter to Ms. Chang dated July 7, 1989, Both Dan and Juanita Norman advised her that based on their prior telephone conversation, their evaluation of the law regarding credit repair, and a telephone discussion with Mr. Underwood, a representative
of the Comptroller's office, they concluded that their operation fell within the exemption from bonding and escrow requirements afforded real estate brokers, and that no additional information would be provided.
Respondents claim that their credit repair operation was incident to their operation of a real estate brokerage firm. It is their contention that by helping to repair their clients' credit, Respondents were getting those clients ready to buy houses and Respondents claim that as of the time the complaint herein was filed, 20 of their 60 to 70 clients were ready to purchase real estate and had qualified for financing. No evidence in support of this claim was presented, however. After the complaint was filed, and an article concerning them was published in the local newspaper, in effect, their business was wiped out and only one of their 20 qualified buyers actually went through with their deal.
Mr. Norman claims that a client was never taken on in the credit repair business unless that client indicated that he or she was interested in buying real estate when their credit had been repaired. The Respondent indicates, however, that while in business as a credit repair agency, "incident" to the real estate operation for two years, Respondent's generated $16,000.00 in credit repair income, and only $5,000.00 in real estate commissions as the result of the one previously mentioned sale.
Considering the evidence in its totality, it is clear that the Normans, through Bankers Acceptance of America, were operating a classical credit service organization. It may have been in conjunction with a real estate business, but the service was not rendered incident to that business. They failed to obtain the required surety bond; to establish a trust account for the repair service operation; and to submit the required disclosure forms as is called for in the Florida Statutes, and at no time during the operation of the repair service, were those requirements met.
However, the Respondents' credit service organization operation was not large scale, and there is substantial evidence that since the complaint was filed in this case and the preliminary Cease and Desist Order entered, the Respondents' business has dried up and no further income has been earned as a result of it. The Normans claim, and there is no evidence to contradict it, that that operation has ceased.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.
Petitioner here seeks to issue a Final Cease and Desist Order against the Respondents as a result of their continued operation of a credit service organization without complying with the bond, escrow, and disclosure requirements of the statute. To succeed, Petitioner must establish the alleged misconduct upon which it relies to take that action by clear and convincing evidence.
A "credit service organization" is defined by Section 817.7001(2)(a), Florida Statutes, as:
... any person who, with respect to the extension of credit by others, sells, provides, performs, or represents that he or she can or will sell, provide, or perform, in return for the payment of money or other valuable consideration, any of the following services:
Improving a buyer's credit record, history, or rating;
Obtaining an extension of credit for a buyer; or
Providing advice or assistance to a buyer with regard to the services described in either subparagraph 1 or subparagraph 2.
The statute also provides, at Section 817.001(2)(b)5, however, that a "credit service organization" does not include:
Any person licensed as a real estate broker by this state if the person is acting within the course and scope of that license.
The evidence presented by the Department clearly establishes that notwithstanding their claims to the contrary, the Normans, through Bankers, were operating a "credit service organization" as defined by the statute. At the very least, and by their own admission, they provided the advice and assistance to their clients that is defined in subsection 3, supra, and the evidence is sufficient to find they did even more.
Since the Normans are claiming an exemption from the requirements of the statute on the basis of their real estate operation, the burden to establish their entitlement to that exemption rests with the Respondents. Here, they have clearly failed to successfully carry that burden. While they well may be licensed real estate brokers, (there was no evidence to corroborate their testimony in that regard), it is impossible to reasonably conclude that their operation of the credit repair business was incident to the real estate operation. In over two years of operation, and out of 60 to 70 clients of the credit service, only one actually purchased any real estate from the Respondents. If, as they claimed, there were 19 more who were ready to buy, there was no independent evidence of this sufficient to support such a conclusion.
In addition, none of the solicitation material or the paperwork incident to the credit service made any reference to a real estate connection; the services performed by Respondents were totally consistent with those normally performed by a credit service organization; the contract entered into with the Fischers here was for credit "repair" service without any reference to a subsequent dealing in real estate; and the Respondents were separately and independently compensated for the services rendered in the credit service operation.
The only client identified in this operation was Mr. Fischer. While he indicated the Normans mentioned real estate in their initial interviews with him, Mr. Fischer made it abundantly clear that his relationship with Respondents was for credit service only. There is no evidence, save the unsupported claim by Respondents, that any of their other credit service clients were real
estate clients as well. In short, though the Respondents may have intended to use the credit service to bring in clients to their real estate operation, there is no evidence it did, and in any event, this does not appear, reasonably, to be what is meant by an operation "within the course and scope" of the real estate license. The Fischers were not real estate clients first or primarily, whose credit needed assistance so that a real estate transaction, agreed upon and ready for closure, could be accomplished. The reported telephonic concurrence by Mr. Underwood, being hearsay in nature, is insufficient in and of itself, as evidence of a finding by the Petitioner that Respondent's operation was exempt from the requirements for bond, escrow and disclosure.
It being obvious, then, that the Respondent's activities constituted the operation of a credit service organization which, under various subsections of Chapter 817, Florida Statutes, must comply with certain requirements including:
... the filing of a surety bond in the amount of $10,000 in favor of its customers and to set up a trust account, (817.7005(1), and
... providing its clients with a statement containing the information set out in section 817.703, (817.702)
These requirements were not met and Respondents have shown no legal justification for failing to do so.
Petitioner claims that because Respondents have failed to comply with the subpoena duly served upon them by Ms. Chang, their action is subject to the provisions of Section 516.07(1)(i), Florida Statutes. It thereby seeks to impose an administrative Fine of $1,000.00 against each of them for each of the violations alleged in the Complaint in addition to making permanent the Cease and Desist Order. Violations of Chapter 817, Florida Statutes, are made subject to disciplinary action under Section 516.07(1)(g), Florida Statutes, 1988 Supplement.
Respondents' activity is governed. by the provisions of Part III, Chapter 817, Florida Statutes. Prohibited acts are delineated in Section 817.7005. Since there is a clear violation of the surety bond, escrow, and disclosure provisions of the statute, a Final Cease and Desist Order, as provided for in Section 516.23(b) is appropriate.
Respondents have also failed to comply with the subpoena duly served on them by Ms. Chang, and their assertion that Mr. Underwood indicated their operation was acceptable is insufficient justification for not providing the required information and constituted a violation of Section 516.07(1)(i).
In light of the fact that no financial injury to any client was shown, nor were Respondents shown to have been unjustly enriched by their activities, an administrative fine, though permitted under the provisions of Section 516.07(2)(f), is not appropriate.
Based on the foregoing Findings of Fact and conclusions of Law, it is, therefore:
RECOMMENDED that a Final Cease and Desist Order be issued against each of the Respondents, Dan Norman, Juanita Norman, and Bankers Acceptance of America, a Florida General Partnership, as to each of the allegations of misconduct outlined in the initial Cease and Desist Order and Complaint filed herein.
RECOMMENDED this 20th day of June, 1990, in Tallahassee, Florida.
ARNOLD H. POLLOCK
Filed with the Clerk of the Division of Administrative Hearings this 20th day of June, 1990.
Robert K. Good, Esquire Office of the Comptroller
Bankers Acceptance of America 3505 34th Avenue Drive West Bradenton, Florida 34205 Hon.
William G. Reeves General Counsel
Plaza Level, Rm. 1302 Tallahassee, Florida 32399-0350
