The Issue Whether or not Petitioner was subject to a discriminatory housing practice based on her race, age, and gender, or any of the foregoing, when her application for a loan was denied by Respondents.
Findings Of Fact Based on the testimony and demeanor of the witnesses and documentary evidence presented, the following Findings of Fact are made: Petitioner, Janice Buchanan, is an African-American female who was 44 years old at the time she applied for the home loan which is the subject of this claim. She had served on active duty in the United States Air Force and, as a result of her service, was eligible for a home loan guarantee by the federal Department of Veterans Affairs ("VA") if she met other financial criteria established by the VA. At all times material to the claim herein, Town & Country Mortgage Company ("Town & Country") was a correspondent mortgage lender. A correspondent mortgage lender originates a loan application for an individual seeking a loan, locates an investor, and, if the investor approves the applicant, assigns the file to the investor. As a correspondent mortgage lender, Town & Country did not make loans or make the decision whether or not to approve a loan application. The decision whether to approve the loan is made by an underwriter employed by the investor. The investor's underwriter, not Town & Country, decides whether an application for a VA home loan guarantee meets the criteria established by the VA. A Town & Country loan application commences with the "pre-qualification" interview. During this interview, the loan officer will obtain the applicant's income information, asset information, and look at a quick "snapshot" of the applicant's credit history, which is obtained from a credit reporting agency. Once the loan officer believes sufficient information has been obtained during the pre-qualification interview, the loan application is actually filled out by the applicant and the loan officer, and the applicant provides the loan officer with documents such as bank statements and income verification documents. While processing the loan application, the loan officer attempts verification of the information provided by the applicant during the initial interview. Once the loan application is completed, a loan processor with Town & Country will begin a more detailed verification of financial information which includes calling the applicant's employer, ordering a "full factual credit report," and verifying all financial information the applicant has provided. If the loan applicant has a complex financial history, the verification process may take a considerable amount of time. In the instant case, the "full factual credit report" was obtained from Stateswide Credit Bureau Services, Inc. ("Stateswide"). Stateswide assembles credit information on the loan applicant from the three main credit information repositories in the United States (Equifax, TransUnion, and TRW). The "full factual credit report" is known as a "tri- merge," i.e., credit information from all three credit information repositories is combined into one document. A "tri- merge" report is used because one credit information repository may not have all of the information another repository has. As a result, even if an applicant produced a satisfactory credit report from one credit information repository, it would be insufficient to overcome an unsatisfactory report on a "tri- merge." Petitioner's "full factual credit report" included at least nine negative credit references. A negative credit reference may be a delinquent account, a past due account, late payments or other activities considered inappropriate by a credit provider and reported to a credit information repository. The Stateswide "full factual credit report" was prepared by Laura Aguayo on November 2, 1999. In compiling the report, Ms. Aguayo telephoned each creditor which had provided negative credit information. Each creditor verified the negative information by social security number, in addition to name. If a creditor did not accept Ms. Aguayo's telephone call, she wrote the creditor. Petitioner was advised of the negative credit information; she provided Town & Country with additional information in an effort to explain the negative information on her credit report. After the verification process is completed, Town & Country's loan processor forwards the information obtained during the loan application and verification process to the investor. This information includes the loan application completed by the applicant and a credit package consisting of the applicant's credit report, income, assets, property, collateral, and additional information, e.g., the loan applicant's explanation of negative credit information, which was forwarded in the instant case. The investor's underwriter reviews the loan application and related information and makes a decision as to whether or not the investor will provide the loan. Town & Country would not forward a loan package to an investor if Town & Country did not want the application to be approved by the investor. There is an economic incentive for Town & Country to want a loan application to be approved by an investor; if an investor approves a loan, Town & Country receives a commission; if an investor does not approve a loan, Town & Country receives no income from the investor. The investor in the instant case was Irwin Mortgage Corporation ("Irwin"); the underwriter at Irwin who reviewed Petitioner's application was Ms. Christine Ross who, like her employer, has no affiliation with Town & Country. Ms. Ross has 15 or 16 years of underwriting experience. Ms. Ross reviewed Petitioner's income and assets and assessed whether she has the ability to make the payments and reviewed her credit history to determine if Petitioner had, in the past, made payments in a timely fashion. Ms. Ross determined that Petitioner was not credit worthy because of a poor credit history and insufficient funds to close the loan. In addition, Ms. Ross considered that Petitioner had several checks returned because of insufficient funds. She reviewed all of the information provided and opined that the application would not meet VA guidelines. If the loan is not approved by an investor, Town & Country's loan officer will work with the applicant to determine what can be done to have the loan approved. When dealing with a VA loan, as in this case, the loan application and related information can be forwarded to the VA for review even though it has not been approved by an investor. The benefit of having the package forwarded to the VA is that the VA might see something the investor missed, and provides the applicant with a second chance to have the loan approved. Town & Country would not request that the investor forward the loan file to the VA if it did not want the loan application to be approved. If the VA denies the loan, there is no purpose in trying to find another investor for the loan because by denying the loan application, the VA is indicating it will not accept the loan application from any investor. When Irwin advised Town & Country that Petitioner's loan application had been denied, Town & Country requested that Irwin forward the application directly to the VA. Upon Town & Country's request, Ms. Ross sent the loan package to the VA. If the VA had decided to guarantee the loan, Irwin would have no risk and would approve the loan. The VA also denied Petitioner's loan application. The reason the VA denied the loan was because "[t]he present income of the borrower(s) was not shown to be sufficient." Ultimately, Ms. Aguayo of Stateswide was able to remove one negative entry from Petitioner's credit report, but she was unable to remove any others. This deletion of one negative entry is evidenced by a December 17, 1999, Stateswide "full factual credit report." Had Ms. Ross been in possession of the December 17, 1999, credit report from Stateswide, this would not have affected her decision to deny Petitioner's loan application, because the report still showed a credit history that did not meet VA guidelines. Additionally, the VA denied the loan because of insufficient income, not poor credit. No credible evidence was presented that Town & Country caused a delay in seeking financing or provided false information as alleged in Petitioner's Petition For Relief. Steve Pilchick, President of Town & Country, had no direct involvement with Petitioner's loan application and did not discriminate against her. No evidence was offered regarding any discrimination against Petitioner based on her age. No evidence was presented that Town & Country was responsible for the denial of Petitioner's loan application. Nor was any evidence presented that Town & Country had approved loans for any particular person or persons of any race or gender who had loan qualifications similar to Petitioner.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations dismiss Petitioner's Petition for Relief with prejudice finding that neither Town & Country Mortgage Company nor Steve Pilchick unlawfully discriminated against Petitioner. DONE AND ENTERED this 4th day of April, 2002, in Tallahassee, Leon County, Florida. JEFF B. CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of April, 2002. COPIES FURNISHED: Janice Buchanan 4266 Cloverleaf Place Casselberry, Florida 32707 Janice Buchanan Teamesha Leyva 14901 Newland Street, Apartment C Midway City, California 92655 Denise Crawford, Agency Clerk Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301 Daniel P. O'Gorman, Esquire Ford & Harrison LLP 300 South Orange Avenue, Suite 1300 Orlando, Florida 32801 Cecil Howard, General Counsel Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the evidence adduced at the hearing, the Report of the hearing officer submitted on December 6, 1979, is hereby adopted and incorporated herein. It should be noted, however, that the total time and savings deposits for commercial banks in Collier County as of June 30, 1979, was $266,668,000 rather than $226,668,000 as indicated in the hearing officer's Report. The idea of establishing another savings and loan association in Naples originated with Robert E. Talley, a banker, and Allan L. McPeak, a lawyer. The name proposed for the new association is Marine Savings and Loan Association. No financial institution operating in Collier County at the time of the hearing had the word "Marine" in its name. All of the savings and loan associations in operation in Collier County at the time of the hearing had the word "federal" in their names. Applicant proposes to establish an office in downtown Naples, within a few blocks of several other financial institutions. Applicant has entered into a lease for the proposed facility, at an annual rental of $50,000, renewable for two three-month periods, during the pendency of Applicant's application. The lease provides for a ten-year term at an annual rental of $50,000, if the application is approved, with the option to renew for two additional five-year terms. The lease also contains an option to purchase which must be exercised within thirty-six months of opening or no later than March, 1983, whichever first occurs, at a purchase price of $600,000. In support of its application, Applicant caused an MAI appraisal to be prepared. According to the appraisal, the leased premises have a fair market value, as of March 14, 1979, of $433,000. According to a second, CCIM appraisal, also prepared at Applicant's instance, the property will be worth $632,400 as of February 26, 1982. Initially, Applicant plans to occupy the northern 4,285 square feet of the 6,700 square foot, single-story building it is leasing. Subleases with two tenants who are to occupy the southern portion of the building will be structured so as to provide additional space for expansion by Applicant. The leased premises include 43 parking spaces. Additional parking is available on adjacent streets. The site is easily accessible. Traffic conditions appear to pose no problems. The proposed savings and loan association would be a full service financial institution and expects to be competitive with the existing savings and loan offices in the primary service area (hereinafter PSA) with respect to interest rates and breadth of services. Some of the services that the proposed savings and loan association plans are a drive-in teller window, a night depository, safety deposit boxes, a walk-up window, extended hours on week days (from 9:00 a.m. to 6:00 p.m.), evening hours on Fridays (from 9:00 a.m. to 7:00 pm.), Saturday hours (from 9:00 a.m. to Noon), and safekeeping facilities. Most of the existing savings and loan associations in the PSA do not offer extended hours, drive-in teller windows or safekeeping facilities. The proposed PSA includes the populated portion of the city of Naples and segments of unincorporated Collier County to the north and east of the city. It is bounded on the north by Pine Ridge Road, 4.7 miles away; on the east by County Barn Road, 4.2 miles away; on the south by Gordon Pass and Holly Avenue, 3 miles away; and on the west by the Gulf of Mexico, .7 miles away. The PSA is roughly rectangular except for an indentation in the northeastern corner. Twelve savings and loan association offices now operate within the PSA. One savings and loan association has headquarters within the PSA. Four of the eleven branch offices in the PSA are limited facilities. The Protestant's main office is located 0.2 miles southeast of the premises Applicant has leased. Protestant has filed an application to relocate its main office to a site in unincorporated Collier County, 4.8 miles north of Applicant's proposed site and to make its present main office a branch office. One branch office is now located 0.2 miles southwest of the proposed site; three are between 1.3 miles and 2.0 miles from it; and one is 8.7 miles to the north. Except for the Protestant, no savings and loan association now operating in Collier County has headquarters in Collier County. There are 14 commercial bank offices, including five main banking offices and nine branch offices in operation within the PSA. Three of the five main bank offices are located within 0.3 miles of the proposed site; one is 2.6 miles away and another is 7.5 miles away. Of the branch offices, one is located one mile southwest of the proposed site; three are 1.3 to 2.0 miles from it; four are between 2.2 and 4.0 miles from it and one is 8 miles away. In addition, there are three approved but unopened branch offices which are to be located between 3.1 and 5.3 miles-from Applicant's proposed site. The main office of Security Trust of Naples, a non-deposit trust company, is located 0.3 miles southwest of Applicant's proposed site. Applicant proposed five million dollars as the initial capitalization for the savings and loan association. The capital accounts would initially consist of $1,500,000 common stock and $3,500,000 paid-in surplus. Eighteen percent of the stock of the proposed savings and loan association has been subscribed to by nine organizers. The remaining 82 percent has been subscribed to by more-than 400 members of the general public, mostly from the Collier County area. Applicant has estimated the permanent 1979 population of the PSA at 47,000. This represents an average annual rate of growth of 11.6 percent from the PSA's 1970 population of 23,000. Applicant estimates the County's 1979 permanent population at 77,900, the seasonal population of the PSA at between 12,000 and 14,000, and the seasonal County population at between 15,000 and 20,000. The Applicant estimated the combined permanent and seasonal populations of the County at between 92,900 and 97,900 and that of the PSA at between 59,000 and 61,000. The Applicant projects for the 1982 permanent population of the PSA a figure of 53,000, representing an average annual growth rate of 4.3 percent from 1979. According to data compiled by the Bureau of Economic and Business Research, Division of Population Studies, at the University of Florida, the population of Collier County on April 1, 1970, was 38,040; on July 1, 1979, 64,761; on July 1, 1977, 68,900; on July 1, 1978, 74,572. According to the same source, the population of Naples on April 1, 1970, was 12,042; on July 1, 1976, 17,425; on July 1, 1977, 17,437; and on July 1, 1978, 17,462. The population of unincorporated areas of Collier County, including Everglade City, according to the same source, was 25,998, on April 1, 1970; 47,336, on July, 1976; 51,463 on July 1, 1977; and on July 1, 1978, The population of Collier County grew at an average annual rate of approximately 11.7 percent between 1970 and 1976. Between 1976 and 1977, the County's population grew at a slower rate, viz., approximately 6.4 percent. The rate of growth increased to approximately 8.2 percent between 1977 and 1978. Between 1970 and 1976, the population of Naples grew at an annual average rate of approximately 7.5 percent. During the years 1976, 1977 and 1978, the population of Naples did not increase significantly. The population of the unincorporated areas of Collier County grew at an average annual rate of approximately 13.7 percent between 1970 and 1976, at a rate of approximately 8.7 percent between 1976 and 1977, and at a rate of approximately 11.0 percent between 1977 and 1978. Almost all (94.14 percent) of the population growth in the County between 1970 and 1978, was the result of net migration. Between 1970 and 1978, the proportion of Collier County's population older than 65 years of age increased from 14.0 percent in 1970, to approximately 17.5 percent in 1978. Recent unemployment data for Collier County show an unemployment rate of 10.2 percent for July, 1979 (revised), and 9.8 percent for August, 1979 (preliminary), in the County as compared to the state averages of 6.6 and 6.1 percent for the same months, respectively. The per capita personal income for Collier County was $6,905 in 1976, and $7,663 in 1977. The 11.0 percent increase from 1976 to 1977, is higher than the 9.8 percent increase in the state average for the same period. Collier County's averages were above the state averages of $6,101 in 1976, and $6,697 in 1977. The proposed board of directors would be composed of nine members, at least seven of whom are full-time Florida residents and at least eight of whom are United States citizens. Robert E. Talley, the proposed president and chief executive officer, has had extensive commercial banking experience. From 1964 to 1972, he served as vice-president and loan officer for the Manatee National Bank; from 1972 through 1973, he was senior vice-president of the National Bank of St. Petersburg; from 1973 through 1977, he was president, chief executive officer, and a director of the Community Bank of Homestead; and from 1977 to 1978, he was executive vice-president and branch manager of the National Bank of Collier County. Proposed director, Roland Erickson, served as president and director of the Guaranty Bank and Trust Company, Worcester, Massachusetts, from 1947 to 1964. Proposed director, Harold S. Smith, served as a director and member of the executive committee of the Bank of Everglades from 1948 through 1951. Proposed director, Hendry P. Albrecht, is president of Gale-Realty, Inc., which is involved in investments, including rental property. Although most of the proposed board of directors appear to be successful businessmen, none of them has had direct savings and loan association experience. On June 30, 1975, commercial banks in Collier County had total deposits of $245,086,000 of which $152,499,000 were time and savings deposits. On June 30, 1976, commercial banks in Collier County had total deposits of $301,664,000, of which $193,488,000 were time and savings deposits. On June 30, 1978, commercial banks in Collier County had total deposits of $369,928,000 of which $224,982,000 were time and savings deposits. On June 30, 1979, commercial banks in Collier County had total deposits of $423,365,000 of which $266,668,000 were time and savings deposits. In March of 1979, Protestant held more than three quarters of all moneys on deposit with savings and loan associations in Collier County. At that time, $141,996,000 was on deposit at the Protestant's home office; $10,890,000 at its Tamiami North branch, even though this office first opened in September of 1977; $26,989,000 at its Lely branch; $4,728,000 at its Tamiami South satellite; and $5,537,000 at its Golden Gate facility. In March of 1979, Coast Federal's Tamiami North branch held $56,667,000. On deposit at First City Federal's Tamiami North branch was $6,855,000 in March of 1979. At the same time, Gulf Federal's Fifth Avenue branch had deposits of $7,018,000. In March of 1979, First Federal of Fort Myers had $10,256,000 on deposit at its Tamiami North branch and $235,000 at its Olde Naples facility, which opened in February of 1979. Time and savings deposits in savings and loan associations and commercial banks in Collier County amounted to $552,839,000 in 1978, up 55.62 percent from 1976. At the time of the hearing, there was commercial activity in Naples and residential development, particularly to the north of the PSA. Some thirteen financial institutions were in operation in the western part of Collier County, north of Applicant's proposed site, at the time of the hearing. Applicant has projected savings deposits at the end of the first, second and third years of operation to be $10,000,000, $15,000,000 and $20,000,000, respectively. Applicant also presented a pro forma budget which projected net profit for the first three years to be $191,700, $256,000 and $319,100, respectively. The Deputy Comptroller, Gerri Raines Dolan, and the Director of the Division of Banking, Ryland Terry Rigsby, as advisory staff members to the Comptroller, reviewed the application and the Department's entire file relating to the application. They assisted and concurred with the Comptroller in the ultimate determination of the application.
Conclusions As set forth in Rule 3C-20.45, Florida Administrative Code, when an application for authority to organize and operate a new state savings and loan association is filed pursuant to Chapter 3C-9, Florida Administrative Code, it is the applicant's responsibility to prove that the statutory criteria warranting the grant of authority are met. The Department shall conduct an investigation pursuant to Subsection 665.031(3), Florida Statutes, which was done in this case, and then approve or disapprove the application in its discretion. This discretion is neither absolute nor unqualified, but is instead conditioned by a consideration of the criteria listed in Subsection 655.031(4), Florida Statutes, wherein it is provided that: The Department shall approve the application upon such terms and conditions as it determines necessary to protect the public interest or disapprove the application at its discretion, but it shall not approve such application, unless in its opinion: Public convenience and advantage will be promoted by the establishment of the proposed thrift institution; Local conditions assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community; The proposed officers and directors have good character, sufficient financial standing, and adequate experience and responsibility to assure reasonable promise of successful operation of the thrift institution; and The proposed savings account capital and organization expense fund or capital stock subscriptions comply with the requirements of this chapter. and Subsection 665.051(1), Florida Statutes, wherein it is provided that, The name of every association shall include either the words "savings association" or "savings and loan association." If in the opinion of the Department, any one of the above criteria has not been met and cannot be remedied by the applicant, it cannot approve the application. An applicant can, however, take corrective action in most circumstances to meet the criteria set forth in Subsections 665.031(4)(c), or (d), and 665.051(1), Florida Statutes, if any of these are found to be lacking. For example, if all other statutory criteria are met, the applicant may increase capital, or make certain changes in the board of directors, or change the name, or alter the provisions for suitable quarters, because these factors, at least to some degree, are within its control. It is the Department's policy to allow applicants to make certain changes to meet these criteria if all other criteria are met; to do otherwise would be to subject applicants to unnecessary red tape. However, it is the Department's opinion that there is little, if anything, that an applicant can do to alter its ability to meet the criteria set forth in Subsections 665.031(4)(a) and (b), Florida Statutes, since applicants CANNOT readily change the economic and demographic characteristics of an area. Therefore, if either one or both of these criteria are not met, the Department cannot approve the application. For purposes of applications for authority to organize and operate a new state savings and loan association, Rule 3C-20.45(1), Florida Administrative Code, defines PSA as the "smallest area from which the proposed association expects to draw approximately seventy-five percent of its deposits. It should be drawn around a natural customer base, should not be unrealistically delineated to exclude competing financial institutions or to include areas of concentrated population." Based upon, traffic patterns, natural and manmade geographic barriers and the location of other existing offices of financial institutions in the area, the Department concludes that the Applicant's PSA is realistically delineated. It is the opinion and conclusion of the Department that public convenience and advantage will be promoted by the establishment of the proposed savings and loan association. Therefore, the criterion in Subsection 665.031(4)(a), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(a), Florida Administrative Code, the location and services offered by existing savings and loan association offices in a service area are indicative of the competitive climate of the market and should be considered. Other financial institutions such as banks and credit unions may be considered competing institutions to the extent their services parallel those of a new savings and loan association. Also, the traffic patterns in the area, as well as the general economic and demographic characteristics of the area, must be considered in evaluating this statutory criterion. Because it is recognized that the establishment of a new savings and loan association ANYWHERE would promote the convenience and advantage for at least a few people, SUBSTANTIAL convenience and advantage for a SIGNIFICANT number of people must be shown; otherwise, a new savings and loan association could be justified for every street corner in the state. Clearly, such a result was not the legislative intent in regulating entry into the savings and loan association industry, nor is it in the public interest. Based upon the facts set forth above, the Department has determined that the establishment of the proposed savings and loan association will substantially increase convenience to a significant number of residents of the PSA. This is particularly true in view of the significant growth of the various financial institutions in the area since 1976, as well as the past and projected population growth in the PSA. The Protestant, which is the only other savings and loan association with a main office in Collier County, held more than seventy-five percent of all savings and loan deposits in the County in March, 1979. Consequently, the proposed institution will served as a needed competitive alternative. The site is easily accessible and traffic patterns are favorable. Furthermore, the Applicant intends to offer a variety of new services not generally offered by other financial institutions within the PSA. Therefore, the criterion of public convenience and advantage is met. It is the opinion and conclusion of the Department that local conditions do assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community. Therefore, the criterion in Subsection 665.031(4)(b), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(b), Florida Administrative Code, current economic conditions and, to a lesser extent, the growth potential of the area in which the new savings and loan association proposes to locate are important considerations in determining the association's probable success. Essential to the concept of thrift institution opportunity is that there does and will exist a significant volume of business for which the new savings and loan association can realistically compete. The growth rate, size, financial strength and operating characteristics of savings and loan associations and other financial institutions in the service area are also important indicators of economic conditions and potential business for a new savings and loan association. It is noted that the statutory standards require that " . . . local conditions ASSURE reasonable PROMISE of successful operation of the proposed thrift institution and those thrift institutions already established in the community . . ." (E.S.), NOT merely that local conditions INDICATE a POSSIBILITY of such success. Thrift institutions involve a public trust. Unlike private enterprise establishments generally, a savings and loan association operates on the public's capital and therefore, the Legislature has vested in the Comptroller the responsibility to protect that public interest. Furthermore, the failure of a savings and loan association, as opposed to private enterprise establishments generally, may have an unsettling effect on the overall economic welfare of the community and that is why the Florida Legislature and the United States Congress have imposed stringent requirements for the industry. This Department is responsible for enforcing this legislative standard. Public interest is best served by having a thrift institution system whereby new competition is encouraged where appropriate, yet, at the same time, ensuring that the financial resources of the residents in the community are stable and safe. That was the obvious intent of the Legislature in regulating entry into the thrift institution industry. The Applicant's estimated 1979 PSA population of 47,000 and its projections for the near future seem more than reasonable in view of the latest official estimates by the University of Florida. The population base is healthy, a balanced mixture of residents, local businessmen and commuters, with a steady recent history of growth and projections for significant future growth. Although there are other savings and loan offices already existing in or near the PSA, the Department has concluded that the total savings potential within the PSA will readily support a new institution. The Department further concludes that the extensive deposit and loan growth of the existing financial institutions within the PSA justifies the establishment of another competitive alternative. The increasing population, the high per capita income, and the business and residential mix of the PSA point to an expanding and stimulated economy in the PSA for the present as well as the near future. Clearly, these factors are conducive to assuring the reasonable promise of success for the proposed savings and loan association and for those thrift institutions already established in the community. It is the opinion and conclusion of the Department that the proposed directors, as a group, have good character, sufficient financial standing and responsibility, but do not have sufficient experience in the savings and loan field to assure reasonable promise of successful operation of the proposed association. Therefore, one of the criteria of Subsection 665.031(4)(c), Florida Statutes, IS NOT met. As set forth in Rule 3C-20.45(2)(c), Florida Administrative Code, the organizers, proposed directors and officers shall have reputations evidencing honesty and integrity. They shall have employment and business histories demonstrating their responsibility in financial affairs. At least one member of a proposed board of directors, other than the chief managing officer, shall have experience in the savings and loan field or in a business directly related thereto such as mortgage banking, real estate finance and commercial banking where real property lending has constituted an integral part of such banking experience. The organizers, proposed director's and officers shall meet the requirements of Sections 665.131 and 665.703, Florida Statutes, as applicable. A majority of the organizers and directors of a proposed thrift institution shall be, whenever possible, from the local community and shall represent a diversification of occupation and experience commensurate with the position for which proposed. Members of the initial management group, which includes directors and officers, shall require prior approval of the Department. Changes of directors or chief managing officer during the first year of operation shall also require prior approval of the Department. While it is not necessary that the names of proposed officers he submitted with an application to organize a new savings and loan association, the chief managing officer and operations officer must be named and their names submitted for departmental approval at least sixty (60) days prior to the association' opening. In addition, interlocking directorships involving existing financial institutions competitively near the proposed site of a new institution are discouraged. Such interlocking directorships could possibly restrict competition and create fiduciary problems. Although the proposed directors have, as a group, good character, sufficient financial standing and responsibility, none of the proposed directors has any direct experience in the savings and loan field. Only Robert E. Talley, as a proposed director, has demonstrated that he has the requisite related business experience by virtue of his background in commercial banking, real estate, and mortgage brokerage. Because the selection of directors for a proposed new savings and loan association is generally within an applicant's control, the Department wilt, in this case, allow the Applicant to remedy the above inadequacy in the proposed board of directors by the addition of one director with sufficient experience in the savings and loan field or in a business directly related thereto or by further demonstrating that one of the proposed board members already has the requisite related business experience. While the department has noted that Robert E. Talley has been proposed as the chief managing officer, the Department does not approve or disapprove an applicant's proposed chief managing officer until the association makes an application for insurance of its accounts. It is the opinion and conclusion of the Department that the proposed savings account capital and the organization expense fund or capital stock subscriptions comply with the requirements of Chapter 665, Florida Statutes. Therefore, the criteria of Subsection 665.031(4)(d), ARE met. As set forth in Rule 3C-20.45(2)(d), Florida Administrative Code, capital should be adequate to enable the new savings and loan association to provide the necessary services of promoting thrift and home financing to meet the needs of prospective customers. Capital should be sufficient to purchase, build or lease a suitable permanent facility complete with equipment. Generally, the initial capital (withdrawable savings for a mutual association applicant and total stock and paid-in surplus for a stock association applicant) for a new savings and loan association should not be less than $1.5 million in non- metropolitan areas and $2.0 million in metropolitan areas. To encourage community support, a wide distribution of stock ownership is desirable. A majority of the stock should be issued wherever possible to local residents of the community, persons with substantial business interests in the community, or others who may reasonably be expected to utilize the services of the association. Subscribers to five (5) percent or more of the stock may not finance more than fifty (50) percent of the purchase price if the extension of credit is predicated in any manner on the stock of the new association, whether or not such stock is pledged. Generally, all proposed stock for-a stock savings and loan association shall be subscribed to at the time the application is submitted to the Department. The organizers may initially subscribe to all proposed stock, but should disclose the anticipated amount of individual stock to be retained. It is the opinion and conclusion of the Department that the name, Marine Savings and Loan Association, meets the criterion of Subsection 665.051(1), Florida Statutes, and is not so similar as to cause confusion with the name of an existing financial institution. As set forth in Rule 3C-20.45(4), Florida Administrative Code, the Department will consider the possibility that a name similar to that of another financial institution may cause confusion in the minds of the public or be misleading and may deny the use of such name, with the exception of names specifically authorized under Subsection 665.051(1), Florida Statutes. The Department concludes that the name Maring Savings and Loan Association is not so similar as to cause confusion with the name of an existing financial institution. It is the opinion and conclusion of the Department that provision has been made for suitable quarters. Therefore, the provisions of Rule 3C- 20.45(6)(d), Florida Administrative Code, ARE met. As set forth in Rule 3C-20.45(6)(d), should temporary quarters be contemplated by an applicant until a permanent facility is completed, permission to open in temporary quarters may be granted, generally not to exceed one year. The permanent structure of a new savings and loan association should generally contain a minimum of 5,000 square feet unless the applicant satisfactorily shows that smaller quarters are justified due to the performance of certain auxiliary services off-premises. It shall be of sufficient size to handle the projected business for a reasonable period of time. The facility shall be of a nature to warrant customer confidence in the association's security, stability and permanence. Other pertinent factors include availability of adequate parking, an adequate drive-in facility if such is contemplated and possibilities for expansion. The Applicant presently plans permanent quarters in a building containing 4,285 square feet, which will have adequate parking and drive-in facilities. No temporary quarters are contemplated. Since adequate provision has been made for expansion up to 6,700 square feet, the Department considers that provision has been made for suitable quarters. It is the opinion and conclusion of the Department that the proposed acquisition of the association's proposed site has been fully disclosed and does not constitute an insider transaction. Therefore, the provisions of Rule 3C- 20.45(3) ARE met. Rule 3C-20.45(3), Florida Administrative Code, provides that any financial arrangement or transaction involving the organization of a proposed association and its organizers, directors, officers and shareholders owning five (5) percent or more of the stock, or their relatives, their associates or interests should ordinarily be avoided. Should there be transactions of this nature, they must be fair and reasonable, fully disclosed and comparable to similar arrangements which could have been made with unrelated parties. It is the opinion and conclusion of the Department that the provisions of Rule 3C-20.45(6)(e), Florida Administrative Code, have NOT been met. Pursuant to Rule 3C-20.45(6)(e), Florida Administrative Code, appraisals of land and improvements thereon shall be made by an independent qualified appraiser and be dated no earlier than six months from the filing date of the application. In those instances where the application involves a lease arrangement, the appraisal should be directed to the comparability of the proposed lease with other leasing arrangements for similar business property. The application involves a lease arrangement and, although the Applicant has submitted an acceptable appraisal as to the fair market value of the leased premises, it has not submitted an appraisal directed to the comparability of the proposed lease with other leasing arrangements for similar business property. However, since this is a criterion that is within the control of the Applicant, the Department may approve the application upon the condition that this deficiency is remedied.
Recommendation Based on the foregoing Stipulated Facts, Supplemental Findings Of Fact and Conclusions Of Law, it is recommended that Respondent, Department of Banking and Finance, enter a final order that the following disbursements from the Mortgage Broker Guaranty Fund be made Payee on the claims against Polk Investments, Inc.: Amount Amendolaro $ 2,661,22 Victorias 10,000.00 Fournier, Janice 10,000.00 Wilson 1,334.71 Ledfords 6,573.09 Fournier, Robert 10,000.00 Murphy 4,715.49 Murphy as Trustee 4,715.49 Total $50,000.00 RECOMMENDED this 13th day of November, 1986 in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSON, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 1986. COPIES FURNISHED: Paul C. Stadler, Jr., Esquire Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 Dennis P. Johnson, Esquire SHELNUT AND JOHNSON, P.A. Suite One Belvedere Professional Center 1525 South Florida Avenue Lakeland, Florida 33806-2436 Cristy F. Harris, Esquire HARRIS, MIDYETTE & CLEMENTS, P.A. Post Office Box 2451 Lakeland, Florida 33806-2451 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 Charles Stutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32301
The Issue Whether petitioner should impose fines and other administrative sanctions against respondents, and order them "to cease and desist from further violating Florida laws and take appropriate corrective action," for the reasons alleged in the administrative complaint?
Findings Of Fact Credicorp, Incorporated (Credicorp) is a Texas corporation whose principal place of business is located in Dallas, Texas. Credicorp is not licensed pursuant to Chapter 520, Florida Statutes, and never has been. Originally incorporated in 1990 under the name FAFCO, Credicorp began mailing solicitations to Florida in November of 1990. John Rheinfrank was president of Credicorp from November of 1990 until October of 1992. T. at 15. Since then, Stevan Brown, who has been corporate secretary at all pertinent times, has served as president. Credicorp has no employees or agents in Florida, and owns no property in Florida. Credicorp has not registered to do business in Florida and does not collect Florida sales or use taxes. Credicorp mails solicitations, also called invitations, to Florida residents and others. Before the corporate name change, invitations sent to prospects read as follows: TELEGRAM APPROVAL NO: [account number specified] APPROVAL EXPIRATION DATE: [date specified] [Name and address of targeted individual] YOU HAVE BEEN PRE-APPROVED FOR A GOLD CARD WITH A $10,000.00 LINE OF CREDIT. *MAIL YOUR $29.95 ANNUAL FEE BY CHECK OR MONEY ORDER BY (specified date) ALONG WITH THIS SIGNED NOTICE TO ACTIVATE YOUR CREDIT IMMEDIATELY. FAILURE TO DO SO WILL RESULT IN OUR REEVALUATION OF YOUR ELIGIBILITY. PLEASE RETURN THIS TELEGRAM WITH PAYMENT BY (date specified). MAKE CHECK OR MONEY ORDER PAYABLE TO FAFCO GOLD CARD. SINCERELY, ROBERT J. ARMSTRONG, NEW ACCOUNTS MANAGER RESPOND TODAY! Petitioner's Exhibit No. 19. Robert J. Armstrong, the putative accounts manager, does not exist. T. at 121. Recently invitations have included a 60- day money-back guarantee and a disclaimer in small type disclosing Credicorp's lack of affiliation with a financial institution. Petitioner's Exhibit No. 19. The solicitation arrives in an envelope stamped "DATED MATERIAL: YOUR IMMEDIATE REPLY REQUESTED," and the return address is shown as "CREDIT APPROVAL DEPT." Petitioner's Exhibits Nos. 8 and 21; Admission No. 13. Ordinarily the solicitation contains all the information an individual receives before paying money to Credicorp to secure its services. Respondents offer potential customers residing in Florida a "Gold Card" with "a $10,000 line of credit" at a 12 percent annual interest rate, in exchange for a $29.95 fee. Petitioner's Exhibits Nos. 19 and 20; Admission 46. The services Credicorp in fact provides to members are offers to sell merchandise, loans for purchasing the merchandise that Credicorp sells, assorted coupons, and hotel and rental car discounts. Petitioner's Exhibits Nos. 15 and 29, line 23. Not one of these services is clearly identified on the initial solicitation sent to potential members. Petitioner's Exhibit No. 19; T. at 120- 121. After the customer submits a pre-approved application and pays the membership fee, Credicorp mails a "fulfillment package." Petitioner's Exhibit No. 15, p.77, line 22. The customer must pay a $29.95 fee before Credicorp performs any service on the customer's behalf. Petitioner's Exhibit No. 20; Admission No. 47. The fulfillment package contains a letter that states, in part: WELCOME TO CREDICORP, YOUR LINE OF CREDIT IS $10,000 HERE IS YOUR CREDICORP MEMBERSHIP CARD! ACCOUNT # START USING YOUR CREDICORP MEMBERSHIP AND BONUS COUPONS IMMEDIATELY TO PURCHASE NAME BRAND PRODUCTS FROM OUR HOME VALUES AND GIFT CATALOG. ENCLOSED IS OUR GIFT TO YOU, YOUR PREFERRED MEMBER SAVINGS COUPON BOOKLET WORTH UP TO $1,000.00 IN COUPONS REDEEMABLE IN YOUR AREA. ALSO SEE INFORMATION ENCLOSED ABOUT 50 percent DISCOUNTS AT THOUSANDS OF LOCATIONS THROUGH OUT THE U.S. Petitioner's Exhibit No. 6. This letter is the first notice Credicorp gives the "new member" that he or she has joined a catalogue shopping club. The fulfillment package also contains a second letter addressed "Dear New Credicorp Member," a copy of the Credicorp Rules and Regulations, a collection of Home Values and Gifts Bonus Coupons, a booklet of Super Saver coupons, and the Home Values and Gifts catalogue. For the past six months or so, Petitioner's Exhibit No. 16, p.44, the package has contained an application for a "Privilege Card." Petitioner's Exhibits Nos. 1, 2 6, and 15, p. 78 1. 22. A member can purchase merchandise listed in the Home Values and Gifts catalogue by completing order forms contained in the catalogue and mailing them, along with payment, to Credicorp. T. at 108. Credicorp extends members a line of credit of up to $10,000 to purchase this merchandise. T. at 108, 111. The member's "Gold Card" number must be included when ordering products from the catalogue. Petitioner's Exhibit No. 15, p. 83, line 9. A member cannot use the "Gold Card" to purchase goods or services from retail sellers other than Credicorp. T. at 111-114. Members cannot use their "Gold Cards" or their membership to obtain cash from anybody. The Better Business Bureau of Texas received over 34,000 inquiries in 1992 regarding Credicorp's activities. T. at 122-123. Credicorp receives a mark-up on the merchandise it sells members. Petitioner's Exhibit No. 16, p.60, line 5. Members who purchase merchandise on credit must initially submit a specified down payment with the order. Petitioner's Exhibits Nos. 1, 2 and 14. Two prices are available to a Credicorp member, a cash price and a "credit price," which reflects a 12 percent financing fee. Petitioner's Exhibits Nos. 1, 2, 14. Merchandise purchased on credit arrives with an installment coupon book for each item ordered. Petitioner's Exhibit No. 6, Credicorp Rules and Regulations p. 2. The Credicorp Rules and Regulations, the order forms contained in the catalogue, and all other materials Credicorp provides members make no mention of any contingency once the member completes, signs and sends in a form order for merchandise with the amount of money required. Petitioner's Exhibits Nos. 1, 2, 6, 12, 14, 17. Many Florida residents complete and sign these order forms in Florida. Petitioner's Exhibit No. 17. Credicorp has received at least 378 form orders for merchandise from Florida residents. Id. Approximately 1,600,000 individuals have submitted to Credicorp membership applications, each accompanied by $29.95. New members' names and addresses are entered into a computer data base and "batch edit sheets," each listing 100 names of new members, are printed. Petitioner's Exhibits Nos. 4 and 5; Petitioner's Exhibit No. 15, page 73, line 1; T. at 47. Sample batch edit sheets obtained from Credicorp by the Department listed the names of 640 Florida residents who had sent a membership application form and $29.95 to Credicorp to obtain membership. Petitioner's Exhibit Nos. 4, 5, 18. On a single day, June 24, 1992, money and membership application forms from 243 residents of Florida reached Credicorp. Petitioner's Exhibit No. 18.
Recommendation It is, accordingly, RECOMMENDED: That petitioner order respondents Credicorp, John Rheinfrank and Stevan Brown to cease and desist violating Chapter 687, Florida Statutes. That petitioner levy an administrative fine against Credicorp in the amount of three million five hundred seventy-eight thousand dollars ($3,578,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent John Rheinfrank in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent Stevan Brown in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30 days of entry of the final order. DONE AND ENTERED this 4th day of October, 1993, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-911 Petitioner's proposed findings of fact Nos. 1-22, 24-38, 40, 41, 42, and 43 have been adopted, in substance, insofar as material. With respect to petitioner's proposed findings of fact Nos. 23 and 39, extrapolation is problematic. Respondent's proposed findings of fact Nos. 1, 2, 3, 5, 7, 8, 9, 11, 16, 24, 25, 26, and 27 have been adopted, in substance, insofar as material. Respondent's proposed findings of fact Nos. 4 and 21 pertain to matters that are not material to petitioner's allegations. Respondent's proposed findings of fact Nos. 6, 22 and 23 pertain to subordinate matters. With respect to respondent's proposed finding of fact No. 10, it is clear from all the circumstances that it was Credicorp's intent to mislead recipients into believing that there was no such restriction. With respect to respondent's proposed finding of fact No. 12, Credicorp lends money to finance merchandise it sells on credit. With respect to respondent's proposed findings of fact Nos. 13 and 14, it is clear from all the circumstances that Credicorp used the term "Gold Card" to mislead recipients of its solicitations into believing they were being offered a credit card. With respect to respondent's proposed finding of fact No. 15, the evidence did not show that the "Credicorp Gold Card is useful to members as a reminder of their membership." With respect to respondent's proposed finding of fact No. 17, the word card does appear. With respect to respondent's proposed findings of fact Nos. 18 and 19, Credicorp so held itself out. With respect to respondent's proposed finding of fact No. 20, the sales contract comes into existence when the member mails the order and payment. COPIES FURNISHED: Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Bridget L. Ryan, Esquire Department of Banking & Finance Suite 1302, The Capitol Tallahassee, Florida 32399 William E. Williams, Esquire Rex Ware, Esquire 106 East College Avenue Post Office Box 1794 Tallahassee, Florida 32301
The Issue The issues in this matter are whether Respondent poses an immediate, serious danger to the public health, safety, or welfare, and, if so, whether Petitioner has cause to immediately suspend Respondent's loan originator license.
Findings Of Fact At all times relevant to this case, Respondent was licensed with the Office to conduct business as a loan originator in the State of Florida. Respondent holds certificate of licensure NMLS No. LO19773. As a loan originator in Florida, Respondent is governed by chapter 494. The Office is the state agency charged with licensing, regulating, and supervising loan originators in Florida pursuant to chapter 494. On March 24, 2015, Respondent was arrested for the following crimes by the Sarasota County Sheriff's Office: Occupied Burglary--pursuant to section 810.02(2)(a), Florida Statutes,3/ a first-degree felony; Battery on a person 65 years or older-- pursuant to section 784.08(2)(c), Florida Statutes,4/ a third-degree felony; and Simple Battery (two counts)--pursuant to section 784.03(1)(a)1.,5/ first-degree misdemeanors. On May 12, 2015, Respondent was charged with these crimes in Sarasota County, Florida, in Case No. 2015-CF-004817-NC. Respondent's criminal case is currently pending disposition in Sarasota County. At the final hearing, Respondent described her actions which led to her arrest on March 24, 2015.6/ The incident began with a dispute over money. According to Respondent, an individual allegedly stole $258.00 from Respondent's friend who was staying at her house. Respondent, together with the friend and three other individuals, drove to the suspected thief's house to demand the money's return. Upon arrival at the house, Respondent walked up to and knocked on the front door. Two individuals, the suspected thief and the suspected thief's mother, answered. The confrontation quickly became physical. Respondent claims that the suspected thief's mother started the fight by jumping on her from out of the front door. Rapidly, upwards of five individuals were involved in hitting, pushing, tackling, and wrestling. The scrum ranged from the front door to the house's garage. Respondent recounted that she was battered, punched, slammed to the ground, and beaten with a cane. (The cane-wielder was the suspected thief's grandfather, who is over 65 years old, which apparently led to Respondent's felony charge of battery on a person 65 years or older.) Respondent claimed she suffered injuries to her chin, neck, heart, and scalp. At the final hearing, Respondent testified that she did not enter the suspected thief's home. However, Respondent did admit that at some point during the encounter, she entered the open garage with the intent to access the house through the side door. (This action evidently led to Respondent's felony charge of burglary.) Eventually, the Sarasota County Sheriff's Office was called and responded. The fight broke up. No serious injuries were reported. No information was presented regarding the fate of the $258.00. Respondent testified that she did not start the fight. She claimed that because of her small frame, she was never a serious danger to anyone. Nevertheless, the Sarasota County Sheriff indisputably arrested Respondent for her alleged role in the altercation. As of the date of the final hearing, Respondent understood that she will have a court date in August 2015 for the pending criminal case. Based on Respondent's arrest, on April 8, 2015, the Office issued the Emergency Order. The Office issued the Emergency Order pursuant to sections 120.60(6) and 494.00255(8). The Emergency Order states that the Office found Respondent's activities posed an immediate and serious danger to the public welfare. The Emergency Order ordered Respondent to immediately cease and desist from engaging in the business of loans and any activities in violation of chapter 494 and Office rules. Through the Emergency Order, the Office suspended Respondent's loan originator's license, effective April 13, 2015. Respondent's loan originator license is suspended "until such time as [Respondent] complies with the terms of this order." As described in the Emergency Order, the Office determined that Respondent's actions that led to her arrest posed an immediate, serious danger to the public based on several factors. The Emergency Order declares that the Office found that an emergency suspension and a cease and desist order was necessary to protect Florida consumers from Respondent's "apparent unpredictable and irrational behavior." Furthermore, Respondent's "apparent volatility, unpredictability, and lack of impulse control" calls into question her "trustworthiness and character." The Emergency Order also states that "[c]ommitting felony battery over a financial matter demonstrates that Respondent lacks the character or general fitness necessary to command the confidence of the community." To emphasize the seriousness of the alleged crimes, the Office points to the fact that the felony burglary charge carries a possible maximum penalty of life in prison. The Office included provisions and terms in the Emergency Order to meet the fairness requirement of section 120.60(6). The Emergency Order contained detailed factual findings in order to adequately notify Respondent of the basis for the Office's intended action. The Emergency Order included a Notice of Rights which provided Respondent the point of entry to request an expedited administrative hearing pursuant to chapter 120 to contest the Emergency Order (which Respondent pursued in the present matter). The Emergency Order also informed Respondent of her opportunity to seek to stay the Office's action through an appellate proceeding under section 120.68. Further, the Emergency Order stated that Respondent's loan originator's license is subject to reinstatement, if the criminal charges are ultimately dismissed or not prosecuted. At the final hearing, Respondent conceded that she made the wrong decision to confront the suspected thief. She expressed that she was not thinking clearly at the time. Nevertheless, Respondent asserts that she is falsely accused and has done nothing wrong. She pleads to keep her license during the time it takes Sarasota County to process her criminal case. Respondent proclaims that she should be considered and treated as innocent of all charges up to and until such time as the allegations against her are proven. Respondent asserts that her loan origination business is her sole source of financial support. Based on the facts produced at the final hearing and further discussed below, the undersigned finds that the Office has not met its burden of demonstrating by clear and convincing evidence that immediately suspending Respondent's license to conduct business as a loan originator is an action "necessary to protect the public interest," as required by section 120.60(6)(b).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Office of Financial Regulation, enter a final order rescinding the Emergency Order to Cease and Desist and Suspending License issued to Respondent, Frankie Damiano, on April 8, 2015. DONE AND ENTERED this 21st day of July, 2015, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 2015.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Administrative Complaint filed against the respondent on September 9, 1981 be DISMISSED. Respectfully submitted and entered this 11th day of May, 1982, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11th day of May, 1982. COPIES FURNISHED: Robert F. Jordan, Esquire CONRAD, SCHERER & JAMES 707 Southeast Third Avenue Post Office Box 14723 Ft. Lauderdale, Florida 33302 Philip Jansen, Esquire JANSEN & DE GANCE, P.A. Post Office Box 7375 Ft. Lauderdale, Florida 33304 Mr. C. B. Stafford Executive Director Florida Real Estate Commission Post Office Box 1900 Orlando, Florida 32801 Frederick H. Wilsen, Esquire Assistant General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner, Department of Banking and Finance, (Department), was the state agency in Florida responsible for the regulation and licensing of mortgage brokers in this state, and Respondent, Harriet Ijames, was a licensed mortgage broker. On February 17, 1989, Respondent entered into a Stipulation, Consent Agreement and Final Order with the Department whereby she was placed on probation for 2 years for misconduct relating to the misappropriation of mortgage application fees, with the further requirement that she not act independently but under the supervision of a broker acceptable to the Department. On October 2, 1991, the Department filed a complaint against the Respondent alleging she had violated the terms of the prior Consent Order by conducting business as a mortgage broker without the requisite supervision. Thereafter, on April 29, 1992, Respondent entered into another Stipulation, Consent Agreement and Final Order with the Department regarding the October, 1991 complaint by which she was again placed on probation conditioned upon her operating only under the supervision of an approved broker. This latter Order provided that any violation thereof would be automatic grounds for immediate and summary revocation of her license and also imposed an administrative fine of $2,000.00. The Final Order incorporating that agreement was issued by the Department on July 13, 1992. In May, 1992, Respondent was contacted by Rhudine M. McGhee, a resident of Tampa, who had been referred to her by a mutual acquaintance. Mrs. McGhee indicated she was interested in purchasing another house. Somewhat later, Respondent contacted Mrs. McGhee and told her of a friend who had a house for sale. She also gave Mrs. McGhee the addresses of some other houses in the area which were for sale. Mrs. McGhee did not like any of them. Thereafter, Respondent advised Mrs. McGhee that she was a mortgage broker and not a real estate broker, and that she would have a real estate broker contact her. Respondent also offered to provide Mrs. McGhee with listings of Resolution Trust Corporation foreclosures in the desired price range. Some time later, the broker referred by Respondent showed Mrs. McGhee a house she liked and she signed a contract to buy it. In the interim, Respondent had taken a credit application from the McGhees over the phone and followed up with a visit to the McGhee home. On May 13, 1992, during the visit to the McGhee residence, Respondent had Mrs. McGhee sign a loan application. On that same visit, she solicited and received from Mrs. McGhee a check for $300.00, payable to the Respondent and subsequently endorsed and cashed by her, which reflected the check was the application fee for a loan. She specifically asked that the check be made to her, personally. When Mrs. McGhee asked Respondent about the check, she was told it would be credited to the purchase price at time of closing. This was not done and it was only later, after a complaint was filed with the Department, that Mr. Brigliadora, the mortgage broker with whom she was affiliated, repaid the fee from his company's funds. Though at hearing Respondent denied she took a loan application fee or that the check she received was for that purpose or bore any notation to that effect when received, Mrs. McGhee is quite certain she put that notation on the check at her husband's direction at the time she gave it to Respondent. Respondent claimed the check was for finding the house but Mr. McGhee specifically recalls Respondent indicating the check was to be an application fee to be credited against the purchase price. It is so found. On June 1, 1992, Respondent again returned to the McGhee home to have them sign a second loan application. This time Mr. McGhee was not at home and Respondent suggested to Mrs. McGhee that she sign her husband's name to the application. This was done. Respondent did not give the McGhees copies of the applications they signed but said she would bring them copies at a later date. This was never done. Though Respondent also denies soliciting the second application, her apparent signature appears on both application forms and it is found she did both solicit and sign the forms and the application fee check. The first application was for a loan of $80,000.00 at 8.5 percent. The second was for $36,000.00 at 8.625 percent. At the time of the solicitation, Respondent was employed by Frank Brigliadora, a licensed mortgage broker and owner of the Money Tree Mortgage Co. However, neither Respondent nor Mr. Brigliadora had notified the Department of their arrangement or obtained Departmental approval of the supervisory relationship. Clearly, Respondent knew the taking of an application fee, as the evidence indicates she did here, was inappropriate. Sometime in mid 1992, Respondent approached George Banks, a licensed mortgage broker in Tampa and owner of his own brokerage company, with a view toward working for him. In their conversation about that, they discussed the practice of application fees. Respondent indicated she wanted to take a fee of $200.00 to $300.00 up front, but Banks felt this was not proper, advised her so, and declined to accept her as a broker. Even when she claimed that other brokers took fees of this nature, he demurred, claiming he did not endorse the practice. Respondent worked for Mr. Brigliadora, a licensed mortgage broker, at his firm, Money Street Mortgage, for approximately 3 months during 1992. At the time she went to work for him, Respondent did not tell him she was under sanctions by the Department to have strict supervision and at no time did he agree to the Departmental supervision program. Mr. Brigliadora did not receive the $300.00 check Respondent obtained from the McGhees nor did he ever get the money it represented from the Respondent. It was only just before or at the closing on the property that he first became aware of the deposit. When he refunded the money to the McGhees, Respondent agreed to reimburse him but she never did. Normally, Money Street Mortgage does not take application fees on residential loans, and Mr. Brigliadora denies he ever approved or suggested to Respondent that she solicit them. When Respondent gave him the documentation on the McGhee loan application it did not include the required good faith estimate found in the brokerage agreement nor did the application form or any other document make the required disclosures. The application he got from Respondent does not constitute a brokerage agreement and Mr. Brigliadora never got one from the Respondent on this loan. What he received is no more than an application for a loan. Mr. James, the Department's Area Financial Manager, whose job includes the assignment of examiners and the review of investigations by examiners, knows Respondent as a licensed mortgage broker under Chapter 494, Florida Statutes. He is aware of prior complaints received by the Department about the Respondent in the past. Two of them relate to the Final Orders previously mentioned herein. In the instant case, he recalls receiving a telephone call regarding a deposit of $300.00 given to Respondent and commenced an investigation into the incident. The current Administrative Complaint which resulted in this hearing was the outcome of that investigation. Based on his evaluation of the matters discovered in the investigation, he concluded that Respondent took a fee from a client without having a brokerage agreement with that client; failed to make the required full disclosure to a client; and misappropriated a fee which she received from a client; all of which are violations of various provisions of Chapter 494. In his official capacity with the Department, Mr. James had the duty to approve a supervisory mortgage broker for the Respondent as called for in the two prior Final Orders referred to previously herein. Neither Money Street Mortgage nor Mr. Brigliadora were submitted by Respondent for approval by the Department even though Respondent knew she was required to do so. Respondent claims she made it very clear to Mrs. McGhee that she was a mortgage broker and not a real estate broker. Nonetheless, Mrs. McGhee, she claims, insisted Respondent help her and offered to pay her for her efforts. Respondent claims that all Petitioner's witnesses lied about her and forged documents relating to her alleged activities. She denies she would ever cheat or disobey the rules because she knows she would lose her license if she did. Claiming she is well respected in the community, she asserts the Department did not thoroughly investigate the allegations against her and is, therefore, destroying her reputation over something which did not happen as alleged. Her assertions are not accepted, however.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: Recommended that a Final Order be entered in this case finding her guilty of the offenses alleged in the Administrative Complaint filed herein; revoking Harriett Ijames' license as a mortgage broker in Florida; and imposing an administrative fine of $5,000.00. RECOMMENDED this 24th day of May, 1993, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of May, 1993. COPIES FURNISHED: Lisa L. Elwell, Esquire Office of the Comptroller 1313 Tampa Street, Suite 615 Tampa, Florida 33602-3394 Harriett Ijames 8341 Paddlewheel Street Tampa, Florida 33617 Gerald Lewis Comptroller State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance Room 1302 The Capitol Tallahassee, Florida 32399-0350
The Issue The issue for determination is whether Respondents engaged in loan transactions with Florida consumers in which the combined rate of interest for each of the loans exceeded 18 percent in violation of Subsection 516.02(2)(a), Florida Statutes (2007).1
Findings Of Fact Petitioner is the state agency responsible for the enforcement of Chapter 516 (the Florida Consumer Finance Act) and Chapter 560, part IV (the Deferred Presentment Act). The Florida Consumer Finance Act regulates consumer lending transactions of amounts less than $25,000. The Deferred Presentment Act regulates deferred presentment transactions and provides an exception to the requirements of Chapter 516 for entities registered thereunder. Neither of the respondents is registered with Petitioner pursuant to Chapters 516 or 560, or any other chapter regulated by Petitioner. Respondent, EZPawn Florida, Inc. (EZPawn), is a Delaware corporation with its principal offices located at 1901 Capital Parkway, Austin, Texas 78746. EZPawn is licensed in Florida as a credit services organization (CSO), operating pursuant to Chapter 817, Part III, the Credit Service Organizations Act (CSO Act). Respondent, Integrity Florida Funding, L.P. (Integrity), is a Florida Limited Partnership with its principal place of business located at 84 Villa Road, Greenville, South Carolina 29615. Integrity lends money to Florida residents in consumer finance transactions. EZPawn and Integrity are independent entities. The entities are not affiliated entities and do not otherwise share common ownership, control, or management. Neither entity discloses to the other information regarding their cost of funds, profit margins, or overhead expenses. On November 30, 2005, EZPawn and Integrity entered into a business arrangement pursuant to written contract. The contract is identified in the record as the Credit Services Organization and Lender Agreement (the CSO/Lender Agreement). The CSO/Lender Agreement, in relevant part, authorizes EZPawn to take loan applications from Florida residents and submit them to Integrity for approval. Integrity charges an interest rate of 18 percent on each loan. EZPawn charges a fee of either $15.00 or $30.00 for each $100.00 loaned by Integrity. If Integrity approves a loan, Integrity funds the loan through the local EZPawn office. The EZPawn fee is added to the loan amount. If the fee charged by EZPawn was aggregated with the interest charged by Integrity, the rate of interest for the loan would exceed 18 percent. The factual issue is whether the fee charged by EZPawn is a "cost of obtaining a consumer finance loan" (cost of the loan) within the statutory definition of interest in Subsection 516.01(5). The quoted statutory phrase is not defined by statute or rule. Nor did the parties cite any controlling judicial decisions defining the quoted phrase in Florida. The trier-of-fact finds the evidence to be clear and convincing that the fee charged by EZPawn is a cost of the loan and must be aggregated with the interest charged by Integrity to determine the total amount of interest. Although EZPawn structures the legal form of its services as those provided by a CSO, the legal form is without economic substance. Economic reality demonstrates that the EZPawn fee is a cost of the loan. EZPawn casts its fee in the form of a charge for CSO services. The CSO agreement between EZPawn and each of its customers states that EZPawn will assist customers in preparing applications and compiling documentation necessary to apply for loans, will issue letters of credit (LOCs) on behalf of the customer to improve the customer's creditworthiness, will assist the customer in obtaining a loan, and will enroll customers in a credit reporting service, identified in the record as the PRBC, to report their loan payments. The enumerated CSO services are expressly authorized in the CSO Act. EZPawn does not share any of its fee with Integrity, and Integrity does not share any of the loan principal or interest with EZPawn. The two entities have separate rating, or underwriting requirements, and they do not share that proprietary information. Integrity determines the total amount of loans it will make and funds the loans out of its own capital. The LOC issued by EZPawn does not eliminate the risk of loss to Integrity. The economic substance of the loan transactions is substantially different than the legal form in which Respondents have chosen to cast the transactions. The legal form of the transactions has no economic effect. The EZPawn fee is not a fee for separate CSO services. EZPawn does not receive a fee unless Integrity funds a loan. If Integrity does not fund a loan, nothing happens, the EZPawn customer owes EZPawn nothing, and there are no loan payments to be reported by PRBC to improve the customer's creditworthiness. The EZPawn customer owes EZPawn no fee for separate CSO services unless Integrity funds a loan. No customer of EZPawn obtains a loan from Integrity unless the customer agrees to pay the EZPawn fee. Each of the approximately 36,000 loans at issue in this case share meaningful characteristics of payday loans. Each loan is a short-term single payment loan for a relatively low dollar amount that is more than $100.00 and less than $1,000.00. Payment is due on the next day the customer is paid between seven and 37 days after the date of the loan. Integrity charged an annualized percentage rate of interest of 18 percent on each of the loans. The EZPawn fee varies directly with the amount borrowed. Payment of the EZPawn fee is financed and is due and payable at the same time the principal and interest is due and payable to Integrity. The fee charged by EZPawn is an economic function of the amount and term of the loan from Integrity. EZPawn charges a fee on loans with a term of seven to 23 days in an amount equal to $15.00 per $100.00 borrowed. For loans with a term of 24 to 37 days, EZPawn charges a fee of $30.00 per $100.00 borrowed. EZPawn charges an additional fee, in addition to the accumulated interest charged by Integrity, each time a borrower refinances his or her loan. A borrower may refinance a loan up to six times. The first six refinances result in no payment on the loan principal. After refinancing a loan six times (a rollover loan), a borrower may continue to roll the loan over. However, the borrower must pay $50.00 toward principal for each rollover loan after six. An economically significant amount of the fees that EZPawn charged for titular CSO fees consist of rollover fees. Of the total fees that EZPawn charged for denominated CSO services, approximately 28,829 transactions were charged in rollover loans and approximately 11,631 transactions were for first-time loans. EZPawn charges a fee for every loan that Integrity makes. Integrity has not made any loans to any Florida borrowers to whom EZPawn did not provide alleged CSO services. Each note conditions the loan on the agreement to pay the 18 percent interest to Integrity and the charge identified as a CSO fee to EZPawn. Each note requires the borrower to, “promise to pay [Integrity] the Total of Payments in 1 payment on the due date indicated.” The "Total of Payments" includes the reputed CSO fee. Customers do not pay the alleged CSO fee to EZPawn independently from the loan made by Integrity. Rather, the EZPawn fee is included on the face of each loan note as part of the finance charge and total of payments. The EZPawn fees are payable only through an electronic debit transaction that deducts the money from the borrowers bank account automatically on payday (ACH). The loan documents processed by EZPawn treat the so- called CSO fee as an interest charge for federal reporting and disclosure requirements. The documents that memorialize the loans are substantially the same in substantive form for each of the approximately 36,000 loans. The note treats the CSO fee as a finance charge for purposes of the federal Truth in Lending Act (TLA). The note specifically recognizes that the CSO fee is part of, “[t]he dollar amount the credit will cost you [the borrower].” The CSO fee is also included in the TLA calculation of the actual percentage rate (APR) of finance charge. The loan documents acknowledge the charge to be part of, “[t]he cost of your credit as an annual percentage rate.” The economic substance of the charge identified in the loan documentation as a CSO fee, in relevant part, is a charge by EZPawn for its extension of credit to the borrower. The extension of credit is cast in the form of an LOC. The charge for the extension of credit by EZPawn, in the form of an LOC, is not for a separate loan of a different sum of money. The charge by EZPawn and the interest charged by Integrity are each part of the aggregate economic cost of the loan to the borrower. EZPawn agrees in the LOC to pay Integrity principal, interest, and a non-sufficient funds fee in the event of default by the borrower. In every one of the loan transactions at issue, EZPawn issued an LOC. In response to over 36,000 loan applications, Integrity made a loan every time EZPawn issued an LOC. Integrity never made a loan without an LOC. EZPawn applies its own loan guidelines or underwriting requirements. Once EZPawn approves a loan application, EZPawn issues an LOC in favor of Integrity in an amount not to exceed principal, interest, and dishonored item fee as applicable to the loan arranged by EZPawn. The LOC provides that EZPawn will pay Integrity the principal and interest owed upon the loan: (1) becoming past due and unpaid, (2) the dishonoring of any ACH debit or other payment device, and (3) not more than three days elapses since the latter of the above things occurs. Upon default, Integrity collects on the LOC automatically. Integrity immediately receives payment of its principal along with any accrued interest and a non-sufficient funds fee. The economic reality of each loan transaction is that the risk of loss and burden of collection is on EZPawn. Any risk of loss shouldered by Integrity is limited to the financial health of EZPawn, which has been significantly enhanced after entering into the CSO/Lender agreement with Integrity. Integrity requires EZPawn to issue an LOC as a prerequisite for each loan. An LOC is an underwriting requirement that a borrower must satisfy to obtain the loan. Integrity will not approve a loan without an LOC. EZPawn controls the distribution of loan proceeds to the borrower. Integrity sends an electronic direct draft to EZPawn (the draft). EZPawn prints the draft, which is payable to the borrower. EZPawn then immediately provides cash to the borrower in exchange for the draft. EZPawn employees instruct borrowers that the draft can only be cashed with EZPawn or Integrity. No borrower ever leaves an EZPawn store without cash. The Operation Manual adopted by EZPawn contains specific instructions emphasizing that EZPawn employees should not give a draft to a borrower. The economic effect of each loan transaction is that two lenders charge for the same loan. Integrity funds the loan and charges interest as a cost of the loan. EZPawn charges a fee for extending credit to the borrower, assuming the risk of loss, and undertaking the burden of collection. The economic reality is that the charges imposed by both lenders are aggregated to determine the cost of the loan to the borrower. EZPawn’s Operations Manual identifies the "CSO fee" as interest in Florida. In the table identifying “Interest Rates by State” the entry for the Interest Rate in Florida includes “18% APR Lender Fee + $15 per hundred broker fee.” A determination that the charge imposed by EZPawn is part of the cost of the loan to the borrower is made based on the finding that EZPawn and Integrity are separate and independent businesses which are not associated, affiliated, or engaged in a joint venture. If two separate lenders charge interest for the same loan, and the aggregate interest exceeds the legal amount, neither party informed the ALJ of any legal authority that exonerates the two lenders. A determination that the charge imposed by EZPawn is part of the cost of the loan is not dependent on a determination that EZPawn is a loan broker for Integrity. However, the trier- of-fact considers findings relevant to the broker issue to be appropriate given the ample hearing time and evidence that the parties devoted to the issue. EZPawn is a loan broker. In addition to maintaining the exclusive contractual right to market, offer, and promote Integrity loans, EZPawn performs numerous functions on behalf of Integrity pursuant to the CSO/Lender Agreement. The CSO/Lender Agreement identifies EZPawn customers as joint customers of both entities. EZPawn is permitted to use Customer Information to market and sell other loan products without Integrity’s consent. However, Integrity must obtain written consent from EZPawn before using Customer Information in a similar fashion. Similarly, EZPawn may assign its rights or obligations to an affiliate without written consent from Integrity, but Integrity must obtain EZPawn’s permission to do so. A borrower completes one four-page application for both the stated CSO services from EZPawn and the loan from Integrity. Customers complete the application at one of EZPawn’s stores located in Florida. Before the loan is ever evaluated by Integrity, EZPawn uses the information on the application to make an independent determination based on its own underwriting criteria of whether to issue an LOC. EZPawn gives each borrower a document entitled a Credit Services Organization Disclosure Statement (CSO2). The CSO2 lists the services EZPawn will provide to the borrower for the fee identified as a CSO fee. The services include all collection functions related to the loans, maintaining substantially all records, issuing all adverse action notices on behalf of Integrity, and delivering all legally required disclosures on behalf of Integrity. The third document that EZPawn provides to a borrower is the Credit Services Organization Agreement (CSO3). The CSO3 is the actual agreement between EZPawn and the borrower regarding the services identified as CSO services. The CSO3 identifies the same CSO services as those disclosed in the CSO2. The fourth document that EZPawn provides to a borrower is the promissory note, which includes the TLA disclosure (the CSO4). The CSO4 prescribes the terms of the loan from Integrity. The cost of each loan at issue in this proceeding exceeds 18 percent. The details of the 36,000 loan transactions are well documented in the record. At the hearing, Petitioner introduced paper copies of files that contain loan documents for two representative borrowers as sample documents. The sample documents were also attached to the Amended Administrative Complaint. Respondents also introduced paper copies of representative loan documents. Petitioner’s Exhibit N is a printout of a spreadsheet file listing the name and other pertinent information of each customer. Each customer on the spreadsheet is associated with a unique Customer identification (ID) number. Petitioner’s Exhibit GG contains an electronic spreadsheet with a number of pieces of data associated with each of the loans. The information includes the customer ID number and loan number for each transaction. The disclosed APR for each of the loans is far in excess of 18 percent. The APR listed for every loan exceeds 18 percent by hundreds of percentage points. The APRs range from 210.31 percent to 1,472.23 percent. The loan made to borrower Y.M. on June 7, 2006, carries an APR of 439.18 percent. The loan made to borrower N.H. on June 6, 2006, carries an APR of 626.34 percent. The loan made to the borrower in the example loan note provided by Respondents carries an APR of 515.85 percent. On June 6, 2006, N.H. obtained a loan of $1,000.00 that matured on June 15, 2006. On May 15, 2006, N.H. obtained a rollover loan of $270.00 that matured on May 30, 2006. In the first loan to N.H., the cost of the loan included an annualized rate of interest of 18 percent, or $4.44, payable to Integrity and a stated CSO fee of $150.00 payable to EZPawn. The cost of the loan for the rollover loan to N.H. included an annualized rate of interest of 18 percent, or $1.86, payable to Integrity and a stated CSO fee of $40.50 payable to EZPawn. The TLA disclosure in the first loan to N.H. stated that the true cost of her credit was an APR of 626.34 percent. The TLA disclosure in the rollover loan stated the true cost to be an APR of 409.03 percent. The loan documents in each of the loans to N.H. required N.H. to authorize Integrity to execute an ACH debit transaction from the borrower’s checking account. The cost of the $1,000.00 loan to N.H. was $154.44, which was financed and rolled into the loan amount. The loan documents authorize EZPawn to collect a fee of $150.00 from the $154.44, or 97.1 percent of the cost of the loan. The balance of $4.44 represented interest payable to Integrity at an annualized rate of 18 percent. The rollover loan did not result in the distribution of any loan proceeds to N.H. Rather, the loan amount of $270.00 was paid on the existing account. Nevertheless, loan documents authorize EZPawn to collect $40.50 and Integrity to collect $1.86 in annualized interest. EZPawn collected approximately 95 percent of the cost of the rollover loan. The workings of the original and rollover loan to N.H. are illustrative of those in the other borrower files Petitioner entered into evidence. On May 26, 2006, Y.M. obtained a loan of $500.00 that matured on June 8, 2006. On June 7, 2006, Y.M. obtained a rollover loan of $500.00 that matured on June 22, 2006. The cost of the first loan included $3.21 charged by Integrity at an annualized rate of interest of 18 percent and a charge of $75.00 by EZPawn for a stated CSO fee. The cost of the rollover loan included a charge by Integrity of $3.45 at an annualized interest rate of 18 percent and a charge of $75.00 by EZPawn for a stated CSO fee. The TLA disclosure for the first loan to Y.M. disclosed that the true cost of credit was 439.18 percent. The true cost of credit for the rollover loan was 409.06 percent. A preponderance of the evidence showed intent to violate the statute. However, the trier-of-fact finds the evidence less than clear and convincing that Respondents intentionally violated Florida law. The legal structure of the business conducted in Florida is fashioned after a similar mechanism that is lawful in Texas. Although the statutes in the two states are different, there is ample evidence that Respondents undertook reasonable due diligence, including appropriate legal opinions, to ensure that the mechanism used in Florida complies with Florida law. This proceeding is apparently the first enforcement effort of this type by Petitioner in the state. Petitioner has not previously advised either of the respondents that Petitioner considers their business practice to be unlawful. Petitioner has not promulgated a rule, has not issued a written policy, has not issued a personal letter of advisement, and has not conducted public seminars to publish its statutory interpretation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order requiring Respondents to cease and desist the business practices proven in this proceeding. DONE AND ENTERED this 25th day of March, 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of March, 2008.
