COMPLAINT
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E. VANESSA ASSAE-BILLE (NY Bar #5165501)
(Pro hac vice application pending)
E-mail: [email protected]
Phone: (202) 435-7688
COLIN REARDON (NY Bar #4945655)
(Pro hac vice application pending)
E-mail: [email protected]
Phone: (202) 435-9668
1700 G Street, NW
Washington, D.C. 20552
Fax: (202) 435-5471
LEANNE E. HARTMANN (CA Bar #264787) – Local Counsel
E-mail: [email protected]
Phone: (415) 844-9787
301 Howard St., Suite 1200
San Francisco, CA 94105
Fax: (415) 844-9788
Attorneys for Plaintiff Bureau of Consumer Financial Protection
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Bureau o
f
Consumer F
i
nanc
i
a
l
Protect
i
on,
Plaintiff,
vs.
Chou Team Realty, LLC f/k/a Chou Team
Realty, Inc., d/b/a Monster Loans, d/b/a
MonsterLoans; Lend Tech Loans, Inc.;
Docu Prep Center, Inc., d/b/a DocuPrep
Center, d/b/a Certified Document Center;
Document Preparation Services, LP, d/b/a
DocuPrep Center, d/b/a Certified
Document Center; Certified Doc Prep, Inc.;
Certified Doc Prep Services, LP; Assure
Direct Services, Inc.; Assure Direct
Services, LP; Direct Document Solutions,
Inc.; Direct Document Solutions, LP;
Secure Preparation Services, Inc.; Secure
Preparation Services, LP; Docs Done
Right, Inc.; Docs Done Right, LP; Bilal
Abdelfattah, a/k/a Belal Abdelfattah, a/k/a
Bill Abdel; Robert Hoose; Eduardo “Ed”
Martinez; Jawad Nesheiwat; Frank
Anthony Sebreros; and David Sklar,
Defendants,
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Case No.:
COMPLAINT
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COMPLAINT
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Thomas “Tom” Chou; and Sean Cowell,
Defendants and
Relief Defendants,
Kenneth Lawson; Cre8labs, Inc.; XO
Media, LLC; and TDK Enterprises,
LLC,
Relief Defendants.
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JURISDICTION AND VENUE
1. This Court has subject-matter jurisdiction over this action because
it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1),
presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of
the United States, 28 U.S.C. § 1345.
2. Venue is proper in this district because Defendants and Relief
Defendants are located, reside, or do business in this district. 12 U.S.C.
§ 5564(f).
INTRODUCTION
3. The Bureau of Consumer Financial Protection (Bureau) brings this
action to address unlawful conduct by several companies and individuals in
connection with providing debt-relief services to consumers with student loans.
4. Between 2015 and 2017, a mortgage company known as Monster
Loans unlawfully obtained consumer reports from the consumer-reporting
agency Experian. Monster Loans provided the reports to other companies that
used the reports to market debt-relief services to consumers with student loans.
From August 2017 through at least January 2019, a sham entity known as Lend
Tech also unlawfully obtained consumer reports from Experian and provided
them to other companies, including companies that used the lists to market
student-loan debt-relief services.
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5. In direct-mailings and in telemarketing-sales calls, certain of these
debt-relief companies represented to consumers that: (1) the consumers would
obtain lower interest rates by consolidating their federal student loans, (2) the
consumers would improve their credit scores by consolidating their loans, and
(3) the United States Department of Education (ED) would become the “new
servicer” on their loans. All of this was false.
6. Additionally, several of these companies unlawfully charged and
collected their fees before consumers’ applications for loan consolidations, loan
repayment plans, and loan forgiveness plans were approved and before
consumers made payments under the altered terms of their student loans.
7. The Bureau brings this action to secure injunctive relief to stop
Defendants’ unlawful conduct, to obtain redress for harmed consumers, to
obtain penalties against Defendants for their violations of Federal consumer
financial law, and to require Relief Defendants to disgorge profits they received
due to those violations.
PLAINTIFF
8. The Bureau is an independent agency charged with enforcing
Federal consumer financial laws. 12 U.S.C. § 5491(a). The Bureau has
independent litigating authority, 12 U.S.C. § 5564(a)-(b), including the
authority to enforce prohibitions on unfair, deceptive, and abusive acts or
practices in the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C.
§§ 5531, 5536; the Fair Credit Reporting Act, 15 U.S.C. § 1681s; and the
Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310, as it applies to persons
subject to the CFPA, 15 U.S.C. §§ 6102(c), 6105(d).
9. The Bureau has authority to bring civil actions against persons
violating Federal consumer financial laws and to seek all appropriate legal and
equitable relief, including injunctive relief, refund of monies paid, damages,
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restitution, disgorgement, and civil money penalties. 12 U.S.C. §§ 5564(a),
5565(a)(2).
DEFENDANTS AND RELIEF DEFENDANTS
10. Chou Team Realty, Inc. was a California corporation registered on
July 18, 2003. Chou Team Realty, Inc. was registered and located at 3
Whatney, Irvine, CA 92618, and later moved to 25391 Commercentre Drive,
Suite 200, Lake Forest, CA 92630. In March 2018, Chou Team Realty, Inc. was
converted into Defendant Chou Team Realty, LLC. Chou Team Realty, LLC is
a California limited-liability company registered and located at 25391
Commercentre Drive, Suite 200, Lake Forest, CA 92630.
11. Chou Team Realty, LLC is a successor to Chou Team Realty, Inc.
12. Chou Team Realty, Inc. and Chou Team Realty, LLC (collectively,
Monster Loans) have held themselves out as doing business as Monster Loans
and MonsterLoans.
13. Since 2014, Monster Loans has operated as a mortgage lender. It is
licensed in at least 30 states, including California.
14. Defendant Lend Tech Loans, Inc. (Lend Tech) is a California
corporation registered on June 15, 2017. Lend Tech has held itself out as doing
business at 25391 Commercentre Drive, Suite 100, Lake Forest, CA 92630 and
1851 E. First St. #810, Santa Ana, CA 92705.
15. Lend Tech is licensed by the California Department of Real Estate
and has held itself out as doing business as a mortgage-brokerage company.
16. Defendant Docu Prep Center, Inc. registered as a California
corporation on February 3, 2015, and it has held itself out as doing business at 3
Whatney, Suite 100, Irvine, CA 92618.
17. Defendant Document Preparation Services, LP registered as a
California limited partnership on October 19, 2015, and it has held itself out as
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doing business at 3 Whatney, Suite 100, Irvine, CA 92618. Docu Prep Center,
Inc. was the general partner of Document Preparation Services, LP
(collectively, Docu Prep Center).
18. Docu Prep Center has held itself out as doing business as
DocuPrep Center and Certified Document Center.
19. Defendant Certified Doc Prep, Inc. registered as a California
corporation on October 14, 2015, and it has held itself out as doing business at
1015 E. Imperial Highway, Unit C8, Brea, CA 92821.
20. Defendant Certified Doc Prep Services, LP registered as a
California limited partnership on October 21, 2015, and it has held itself out as
doing business at 1015 E. Imperial Highway, Unit C8, Brea, CA 92821.
Certified Doc Prep, Inc. was the general partner of Certified Doc Prep Services,
LP (collectively, Certified Doc Prep Services).
21. Defendant Assure Direct Services, Inc. registered as a California
corporation on August 22, 2016, and it has held itself out as doing business at
23785 El Toro Road, Suite 467, Lake Forest CA 92630.
22. Defendant Assure Direct Services, LP registered as a California
corporation on August 17, 2016, and it has held itself out as doing business at 5
Oldfield, 2
nd
Floor, Irvine, CA 92618. Assure Direct Services, Inc. was the
general partner of Assure Direct Services, LP (collectively, Assure Direct
Services).
23. Defendant Direct Document Solutions, Inc. registered as a
California corporation on January 3, 2017, and it has held itself out as doing
business at 23785 El Toro Road, Suite 493, Lake Forest, CA 92630.
24. Defendant Direct Document Solutions, LP registered as a
California limited partnership on January 3, 2017, and it has held itself out as
doing business at 23785 El Road, Suite 493, Lake Forest, CA 92630 and 5
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Oldfield, 2
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Floor, Irvine, CA 92618. From January 2017 to March 2018,
Direct Document Solutions, Inc. was the general partner of Direct Document
Solutions, LP (collectively, Direct Document Solutions).
25. Defendant Secure Preparation Services, Inc. registered as a
California corporation on January 12, 2017, and it has held itself out as doing
business at 2500 E. Imperial Highway, Suite 201-396, Brea, CA 92821.
26. Defendant Secure Preparation Services LP registered as a
California limited partnership on January 12, 2017, and it has held itself out as
doing business at 2500 E. Imperial Highway, Suite 201-396, Brea, CA 92821
and 5 Oldfield, 2
nd
Floor, Irvine, CA 92618. From January 2017 to March 2018,
Secure Preparation Services, Inc., was the general partner of Secure Preparation
Services, LP (collectively, Secure Preparation Services).
27. Defendants Docu Prep Center, Certified Doc Prep Services, Assure
Direct Services, Direct Document Services, and Secure Preparation Services
(collectively, the Student Loan Debt Relief Companies) marketed and sold
debt-relief services to consumers with federal student loans.
28. Defendant Docs Done Right, Inc. registered as a California
corporation on October 22, 2015, and it has held itself out as doing business at
895 Dove Street, 3
rd
Floor, Newport Beach, CA 92660.
29. Defendant Docs Done Right, LP registered as a California limited
partnership on March 8, 2016, and it has held itself out as doing business at 3
Whatney, Suite 100, Irvine, CA 92618. Docs Done Right, Inc. was the general
partner of Docs Done Right, LP (collectively, Docs Done Right).
30. Relief Defendant TDK Enterprises, LLC registered as a California
limited-liability company on March 18, 2016, and it has held itself out as doing
business at 3 Whatney, Suite 200, Irvine, CA 92618.
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31. Relief Defendant Cre8labs, Inc. registered as a California
corporation on April 1, 2016, and it has held itself out as doing business at
24632 La Plata Drive, Laguna Niguel, CA 92677.
32. Relief Defendant XO Media, LLC registered as a California
limited liability company on March 2, 2010, and it has held itself out as doing
business at 26500 W. Agoura Road Suite 102-595, Calabasas, CA 91302.
33. Defendant and Relief Defendant Thomas “Tom” Chou was
Monster Loans’ president and owner between January 2015 and December
2017. Chou exercised substantial managerial responsibility for and control over
Monster Loans’ business practices.
34. Chou owned limited partnership interests in each of the Student
Loan Debt Relief Companies. At times, Chou has held those limited partnership
interests through Relief Defendant TDK Enterprises, LLC. Chou is the
president and sole member of TDK Enterprises, LLC.
35. Defendant Jawad Nesheiwat was the chief operating officer of
Monster Loans between January 2015 and April 2017. Nesheiwat exercised
substantial managerial responsibility for and control over Monster Loans’
business practices.
36. Nesheiwat owned limited partnership interests in each of the
Student Loan Debt Relief Companies.
37. Nesheiwat exercised substantial managerial responsibility for and
control over Docu Prep Center’s business practices, including its sales
practices, marketing practices, and fees.
38. Nesheiwat participated in the conduct of the affairs of Certified
Doc Prep Services, Assure Direct Services, Direct Document Solutions, and
Secure Preparation Services, including their marketing practices.
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39. Defendant and Relief Defendant Sean Cowell co-founded Monster
Loans and was its chief visionary officer between at least January 2015 and
February 2017. Cowell exercised managerial responsibility for Monster Loans
and participated in the conduct of its affairs.
40. Cowell registered Lend Tech in June 2017, and he was its sole
owner until November 2017.
41. Cowell owned limited-partnership interests in each of the Student
Loan Debt Relief Companies. At times, Cowell has held those limited-
partnership interests through Relief Defendant Cre8labs, Inc. Cowell is
Cre8labs, Inc.’s president and owner.
42. Defendant David Sklar was Docu Prep Center’s chief executive
officer. Sklar was the part-owner of Docu Prep Center, Inc. and owned a
limited-partnership interest in Document Preparation Services LP. Sklar
exercised substantial managerial responsibility for and control over Docu Prep
Center’s business practices, including its sales practices, marketing practices,
and fees.
43. Defendant Robert Hoose was Docu Prep Center’s chief operating
officer. Hoose was the part-owner of Docu Prep Center, Inc. and owned a
limited-partnership interest in Document Preparation Services, LP. Hoose
exercised substantial managerial responsibility for and control over Docu Prep
Center’s business practices, including its sales practices, marketing practices,
and fees.
44. Defendant Frank Anthony Sebreros was the president of Assure
Direct Services. Sebreros owned Assure Direct Services, Inc. and he owned a
limited-partnership interest in Assure Direct Services, LP. Sebreros exercised
substantial managerial responsibility for and control over Assure Direct
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Services’ business practices, including its sales practices, marketing practices,
and fees.
45. Sebreros was identified as a manager of Lend Tech in the
company’s application to Experian in June 2017.
46. Defendant Bilal Abdelfattah a/k/a Belal Abdelfattah a/k/a Bill
Abdel (Abdel) was a marketing manager at Monster Loans in 2015 and 2016.
47. Abdel was a marketing manager at Docu Prep Center and was an
employee of Assure Direct Services.
48. Abdel was identified as a manager of Lend Tech in the company’s
application to Experian in June 2017.
49. Defendant Eduardo “Ed” Martinez is the president of Docs Done
Right. Martinez exercised substantial managerial responsibility for and control
over Docs Done Right’s business practices, including its assistance in the
charging of fees to consumers.
50. Martinez represented that he was a manager or employee of Lend
Tech in communications with Experian in 2017 and 2018.
51. Relief Defendant Kenneth Lawson owned limited-partnership
interests in each of the Student Loan Debt Relief Companies. At times, Lawson
has held those interests through XO Media, LLC. Lawson is the manager and
owner of 90 percent of XO Media, LLC.
FACTS
Monster Loans’ Purchases of Prescreened Lists
52. Monster Loans and Lend Tech have purchased from Experian
prescreened consumer reports (also known as “prescreened lists”) that
contained information regarding consumers with student loans, including
consumers’ names, addresses, number of student loans, and aggregate student
loan balances.
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53. In 2015, Monster Loans applied for and received an account with
Experian, which enabled it to purchase prescreened lists.
54. In its application, Monster Loans certified to Experian that it
would use prescreened lists to make firm offers of credit for mortgage loans.
55. During and after the enrollment process, Monster Loans also
represented to Experian that it would use prescreened lists to market its
mortgage products.
56. Monster Loans did not disclose to Experian that prescreened lists
would be provided to other companies and used to market debt-relief services.
57. Between at least December 2015 and May 2017, Monster Loans
primarily used its account with Experian to obtain prescreened lists for use by
other companies that marketed student-loan debt-relief services, including the
Student Loan Debt Relief Companies.
58. In total, Monster Loans purchased prescreened lists containing
information about more than 7 million consumers with student loans.
59. The prescreened lists that Monster Loans purchased were used to
market debt-relief services, and not to make firm offers of credit or insurance.
60. Nesheiwat oversaw Monster Loans’ purchases of prescreened lists
from Experian for use by the Student Loan Debt Relief Companies in their
direct mailings.
61. Several other officers and employees of Monster Loans, including
Chou, Cowell, and Abdel, were aware of and participated in the company’s
efforts to purchase prescreened lists for the Student Loan Debt Relief
Companies through the company’s account with Experian.
62. Sklar and Hoose obtained prescreened lists through Monster
Loans’ account with Experian and used the lists to market Docu Prep Center’s
student-loan debt-relief services.
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63. In or around May 2017, Monster Loans stopped purchasing
prescreened lists for the Student Loan Debt Relief Companies through its
account with Experian.
Lend Tech’s Purchases of Prescreened Lists
64. In June 2017, Cowell registered Lend Tech as a purported
mortgage-brokerage company.
65. In fact, Lend Tech is a sham entity that has only ever been used to
obtain prescreened lists from Experian.
66. Lend Tech’s application to Experian certified that it would use
prescreened lists to make firm offers of credit for mortgage loans.
67. Lend Tech did not disclose to Experian that the prescreened lists
would be provided to other companies and used for the purpose of marketing
debt-relief services.
68. Monster Loans helped Lend Tech satisfy Experian’s due-diligence
review for new applicants so that Lend Tech could obtain an Experian account.
For example, Monster Loans purported to provide Lend Tech office space
under a sublease agreement, and also provided an approval letter agreeing to
fund the loans that Lend Tech was purportedly going to broker.
69. During August and September 2017, Lend Tech used its account
with Experian to order prescreened lists containing information regarding more
than 1.5 million consumers with student loans for the Student Loan Debt Relief
Companies.
70. Cowell, Abdel, Sebreros, and Chou were aware of and participated
in Lend Tech’s efforts to purchase prescreened lists for the Student Loan Debt
Relief Companies during August and September 2017.
71. In November 2017, Cowell transferred ownership of Lend Tech to
a friend of Martinez named Sergio Loza.
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72. At the time of the transfer, Lend Tech had no meaningful assets
other than the account with Experian.
73. Between November 2017 and at least January 2019, Abdel,
Sebreros, and Martinez controlled Lend Tech’s Experian account.
74. During that period, Lend Tech obtained prescreened lists
containing information regarding more than 11 million consumers.
75. Lend Tech continued representing to Experian that it would use the
prescreened lists for its own marketing of mortgage loans.
76. In fact, Lend Tech has never used the prescreened lists to market
mortgage loans.
77. Martinez, Sebreros, and Abdel resold the prescreened lists to
numerous other companies, including companies offering student-loan debt-
relief services.
78. Martinez, Sebreros, and Abdel also used the prescreened lists to
market student-loan debt-relief services through new companies created during
or after September 2017.
79. The student-loan debt-relief companies that received prescreened
lists purchased by Lend Tech between November 2017 and January 2019 did
not use the lists to make firm offers of credit or insurance.
Student Loan Consolidations, Repayment Programs,
and Forgiveness Programs
80. ED offers several federal student-loan repayment and forgiveness
programs. Some programs potentially offer lower monthly loan payments.
Some allow consumers to obtain loan forgiveness.
81. These programs are administered through third-party student-loan
servicers that handle the billing and other services on federal student loans.
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82. To access certain repayment and forgiveness programs, consumers
must first consolidate (i.e., combine) multiple federal student loans into one
loan. Consolidating results in, among other things, a single monthly payment
instead of multiple monthly payments.
83. Following consolidation or enrollment in a new repayment or
forgiveness program, the consumer’s loan continues to be serviced by a third-
party student-loan servicer.
The Student Loan Debt Relief Companies and Docs Done Right
84. The Student Loan Debt Relief Companies each offered, in
exchange for a fee, to assist consumers with consolidating their federal student
loans and with choosing between and enrolling in repayment and forgiveness
programs offered by ED. The Student Loan Debt Relief Companies did not
themselves offer or extend credit.
85. The Student Loan Debt Relief Companies primarily marketed their
debt-relief services through direct mail.
86. When consumers called in response to the direct-mail solicitations,
sales representatives purported to advise consumers about their eligibility for
and the potential benefits of consolidating their federal student loans and
enrolling in ED’s repayment and forgiveness programs.
87. After Docs Done Right was created in late 2015, its employees
participated in a portion of the telemarketing sales call regarding consumers’
understanding of the services.
88. Following enrollment, Docs Done Right handled communications
with consumers concerning the debt-relief services, the payment of fees, and
consumer complaints. Docs Done Right posed as the relevant Student Loan
Debt Relief Company in those communications. Docs Done Right also handled
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the preparation and submission of consumers’ applications to consolidate their
federal student loans and enroll in ED’s repayment and forgiveness programs.
Misrepresentations about Lower Interest Rates
89. In direct-mail solicitations and in sales calls, the Student Loan
Debt Relief Companies represented that consumers could obtain a lower
interest rate by consolidating their loans.
90. When a federal student loan is consolidated, the consolidated loan
has a fixed interest rate for the life of the loan. The fixed rate is the weighted
average of the interest rates on the consolidated loans, rounded up to the nearest
one-eighth of one percent.
91. As a result, after consolidation, the consumer’s new loan has either
the same effective interest rate as the prior loans or a higher rate.
92. The Student Loan Debt Relief Companies’ representations that
consolidation would lead to a lower interest rate were therefore false.
93. Consumers with federal student loans are generally eligible for an
interest rate reduction if they set up automatic monthly payments.
94. At times between 2015 and 2017, the Student Loan Debt Relief
Companies implied that consumers were required to consolidate their loans to
be eligible for the interest-rate reduction associated with setting up automatic
monthly payments.
95. But consumers can receive the interest-rate reduction associated
with setting up automatic monthly payments regardless of whether they
consolidate their loans.
Misrepresentations about Improved Credit Scores
96. Between 2015 and 2017, the Student Loan Debt Relief Companies
represented during sales calls that consolidating federal student loans would
improve consumers’ credit scores.
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97. In many instances, consolidating is not likely to improve a
consumer’s credit score, such as when the consumer is current on their student
loan payments.
98. By presenting themselves as experts on student loans and making
representations about credit score changes, the Student Loan Debt Relief
Companies implied that the Companies had a reasonable basis to represent that
consolidation would increase consumers’ credit scores.
99. Prior to making such representations, the Student Loan Debt Relief
Companies had no reason to believe that consumers’ credit scores would
improve following consolidation, and the Companies did not attempt to
measure thereafter whether consumers’ credit scores did in fact improve
following consolidation.
Misrepresentations that ED Would Become Consumers’ “New Servicer”
100. At times between 2015 and 2017, Docu Prep Center represented to
consumers that, after they consolidated their loans, ED would become their
“new servicer.”
101. Docu Prep Center also represented that student loan servicers did
not act in consumers’ best interests and implied that consumers would not have
to interact with third-party student loan servicers after consolidating their loans.
102. In fact, ED does not become the “new servicer” on loans that are
consolidated. ED contracts with third-party student-loan servicers that handle
federal student loans both before and after the loans are consolidated. Loan
consolidation does not enable consumers to avoid interacting with third-party
servicers.
Collection of Advance Fees
103. The Student Loan Debt Relief Companies charged consumers a fee
that ranged between $699 and $999.
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104. The Student Loan Debt Relief Companies charged and received
fees before consumers’ applications for loan consolidations, loan repayment
plans, and loan forgiveness plans were approved, and before consumers had
made the first payments under the altered terms of their student loans.
105. Docs Done Right participated in the charging of fees and received
its portion of the fees before consumers’ applications for loan consolidations,
loan repayment plans, and loan forgiveness plans were approved, and before
consumers had made the first payments under the altered terms of their student
loans.
106. Collectively, the Student Loan Debt Relief Companies and Docs
Done Right collected more than $15 million in illegal advance fees from
thousands of consumers nationwide between 2015 and at least 2017.
Role of Individual Defendants in Deceptive Representations
and Charging of Advance Fees
107. Nesheiwat, Sklar, and Hoose each participated directly in Docu
Prep Center’s making of the representations described in this Complaint or had
the authority to control them, and each had knowledge of the representations,
was recklessly indifferent to the truth or falsity of the misrepresentations, or
was aware of a high probability of fraud along with an intentional avoidance of
the truth.
108. Nesheiwat, Sklar, and Hoose each participated directly in the
charging of fees by Docu Prep Center or had the authority to control its
charging of fees, and each had knowledge of Docu Prep Center’s fee-charging
practices or was recklessly indifferent to those practices.
109. Sebreros participated directly in Assure Direct Services’ making of
the representations described in this Complaint or had the authority to control
them, and had knowledge of the representations, was recklessly indifferent to
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the truth or falsity of the misrepresentations, or was aware of a high probability
of fraud along with an intentional avoidance of the truth.
110. Sebreros participated directly in the charging of fees by Assure
Direct Services or had the authority to control its charging of fees, and had
knowledge of Assure Direct Services’ fee-charging practices or was recklessly
indifferent to those practices.
111. Martinez participated directly in the charging of fees by the
Student Loan Debt Relief Companies and Docs Done Right or had the authority
to control the charging of fees, and had knowledge of the Student Loan Debt
Relief Companies’ and Docs Done Right’s fee-charging practices or was
recklessly indifferent to those practices.
LEGAL BACKGROUND
FCRA
112. FCRA defines a “consumer report” to include:
any written, oral, or other communication of any information
by a consumer reporting agency bearing on a consumer’s
credit worthiness, credit standing, credit capacity, character,
general reputation, personal characteristics, or mode of living
which is used or expected to be used or collected in whole or
in part for the purpose of serving as a factor in establishing
the consumer’s eligibility for (A) credit or insurance to be
used primarily for personal, family, or household purposes;
(B) employment purposes; or (C) any other purpose
authorized under section 604 [§ 1681b].
15 U.S.C. § 1681a(d).
113. Monster Loans and Lend Tech purchased from Experian
prescreened lists containing information regarding consumers with student
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loans, including consumers’ names, addresses, number of student loans, and
aggregate student loan balances.
114. Information such as a consumer’s number of student loans and
their aggregate balance bears on, among other things, a consumer’s credit
worthiness and credit standing and is used or expected to be used or collected
for the purpose of serving as a factor in determining a consumer’s eligibility for
credit.
115. The prescreened lists that Monster Loans and Lend Tech
purchased from Experian are therefore “consumer reports” under § 603(d) of
FCRA. 15 U.S.C. § 1681a(d).
The TSR
116. The TSR is the implementing regulation of the Telemarketing and
Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C.
§§ 6101-6108.
117. The Bureau is authorized to enforce the Telemarketing Act and the
TSR with respect to the offering or provision of a consumer-financial product
or service subject to the CFPA. 15 U.S.C. § 6105(d).
118. The TSR defines “debt relief service” as “any program or service
represented, directly or by implication, to renegotiate, settle, or in any way alter
the terms of payment or other terms of the debt between a person and one or
more unsecured creditors or debt collectors, including, but not limited to, a
reduction in the balance, interest rate, or fees owed by a person to an unsecured
creditor or debt collector.” 16 C.F.R. § 310.2(o).
119. The TSR defines a “seller” as “any person who, in connection with
a telemarketing transaction, provides, offers to provide, or arranges for others to
provide goods or services to the customer in exchange for consideration.” 16
C.F.R. § 310.2(dd).
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120. The TSR defines “telemarketer” as “any person who, in connection
with telemarketing, initiates or receives telephone calls to or from a customer.”
16 C.F.R. § 310.2(ff).
121. The TSR defines “telemarketing” in relevant part as “a plan,
program, or campaign which is conducted to induce the purchase of goods or
services . . . by use of one or more telephones and which involves more than
one interstate telephone call.” 16 C.F.R. § 310.2(gg).
122. The Student Loan Debt Relief Companies offered services to
renegotiate, settle, or alter the terms of payments of consumers’ federal student
loans involving the preparation and submission of requests for loan
consolidations, loan forgiveness, and loan-repayment plans to consumers’
student-loan servicers.
123. The Student Loan Debt Relief Companies offered and provided
these services to consumers nationwide using the telephones and more than one
interstate telephone call.
124. The Student Loan Debt Relief Companies offered and provided
these services to consumers in exchange for payment of fees in connection with
a telemarketing transaction.
125. The Student Loan Debt Relief Companies are each a
“telemarketer” or “seller” offering a “debt relief service” under the TSR.
126. Docs Done Right provided services to renegotiate, settle, or alter
the terms of payments of consumers’ federal student loans by preparing and
submitting requests for loan consolidations, loan forgiveness, and loan-
repayment plans to consumers’ student-loan servicers, and by handling
communications with consumers concerning the services, payment of fees, and
complaints.
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127. Docs Done Right is a “seller” offering a “debt relief service” under
the TSR.
128. Nesheiwat, Sklar, and Hoose each arranged for Docu Prep Center
to provide debt-relief services to consumers in exchange for consideration.
Nesheiwat, Sklar, and Hoose are each “sellers” offering a “debt relief service”
under the TSR. 16 C.F.R. § 310.2(dd), (o).
129. Sebreros arranged for Assure Direct Services to provide debt-relief
services to consumers in exchange for consideration. Sebreros is a “seller”
offering a “debt relief service” under the TSR. 16 C.F.R. § 310.2(dd), (o).
130. Martinez arranged for Docs Done Right to provide debt-relief
services to consumers in exchange for consideration. Martinez is a “seller”
offering a “debt relief service” under the TSR. 16 C.F.R. § 310.2(dd), (o).
The CFPA
131. Sections 1031 and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531,
5536(a)(1)(B), prohibit “covered person[s]” from engaging in any “unfair,
deceptive, or abusive act or practice.”
132. A representation is deceptive under the CFPA if it is likely to
mislead consumers acting reasonably under the circumstances, and the
information is material to consumers.
133. The Student Loan Debt Relief Companies are each “covered
persons” under the CFPA because they offered or provided consumer-financial
products or services, including financial-advisory services such as assisting
consumers with debt-management or debt-settlement and modifying the terms
of any extension of credit. 12 U.S.C. § 5481(5), (6), (15)(A)(viii).
134. Docs Done Right is a “covered person” because it offered or
provided consumer-financial products or services, including financial-advisory
services such as assisting consumers with debt-management or debt-settlement
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and modifying the terms of any extension of credit. 12 U.S.C. § 5481(5), (6),
(15)(A)(viii).
135. Monster Loans is a “covered person” because it offers or provides
consumer-financial products or services, including extending credit for
mortgage loans. 12 U.S.C. § 5481(5), (6), (15)(A)(i).
136. Monster Loans is a “service provider” because it provided the
material service of obtaining and providing prescreened consumer reports for
use in marketing to the Student Loan Debt Relief Companies in connection with
the Student Loan Debt Relief Companies’ offering of a consumer-financial
product or service. 12 U.S.C. § 5481(26).
137. Lend Tech is a “covered person” because it purports to offer or
provide consumer-financial products or services, including extending credit by
brokering mortgage loans. 12 U.S.C. § 5481(5), (6), (15)(A)(i).
138. Section 1002(25) of the CFPA defines the term “related person” to
mean “any director, officer, or employee charged with managerial responsibility
for, or controlling shareholder of,” or “any . . . other person . . . who materially
participates in the conduct of the affairs of” a non-bank provider of a consumer-
financial product or service. 12 U.S.C. § 5481(25)(C). Section 1002(25) further
provides that a “related person” shall be “deemed to mean a covered person for
all purposes of any provision of Federal consumer financial law.” 12 U.S.C.
§ 5481(25)(B).
139. Chou is a “related person” and “covered person” because he was
Monster Loans’ president and had managerial responsibility for it.
140. Nesheiwat is a “related person” and “covered person” because he
was Monster Loans’ COO and had managerial responsibility for it. Nesheiwat
is also a “related person” and “covered person” because he materially
participated in the conduct of the Student Loan Debt Relief Companies.
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141. Cowell is a “related person” and “covered person” because he was
an officer of Monster Loans and because he materially participated in the
conduct of the company’s affairs. Cowell is also a “related person” and
“covered person” because he was Lend Tech’s owner and had managerial
responsibility for it.
142. Sklar is a “related person” and “covered person” because he was
Docu Prep Center’s CEO and had managerial responsibility for it.
143. Hoose is a “related person” and “covered person” because he was
Docu Prep Center’s COO and had managerial responsibility for it.
144. Sebreros is a “related person” and “covered person” because he
was president of Assure Direct Services and had managerial responsibility for
it. He is also a “related person” and “covered person” because he had
managerial responsibility for Lend Tech.
145. Abdel is a “related person” and “covered person” because he was a
marketing manager of Monster Loans and materially participated in the conduct
of its affairs. He is also a “related person” and “covered person” because he was
a marketing manager of Docu Prep Center and materially participated in the
conduct of its affairs. He is also a “related person” and “covered person”
because he was an employee of Assure Direct Services and materially
participated in the conduct of its affairs. He is also a “related person” and
“covered person” because he had managerial responsibility for Lend Tech.
146. Martinez is a “related person” and “covered person” because he
was president of Docs Done Right and had managerial responsibility for it. He
is also a “related person” and “covered person” because he had managerial
responsibility for Lend Tech.
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COUNT I
Violations of FCRA
(Against Student Loan Debt Relief Companies, Monster Loans, Lend Tech,
Chou, Nesheiwat, Cowell, Abdel, Sebreros, Martinez, Sklar, and Hoose)
147. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
148. FCRA prohibits persons from using or obtaining a consumer report
unless the person obtains it for a permissible purpose and the purpose is
certified by the prospective user of the report. 15 U.S.C. § 1681b(f).
149. FCRA provides that using or obtaining a prescreened consumer
report to make “a firm offer of credit or insurance” is a permissible purpose. 15
U.S.C. § 1681b(c). A “firm offer” is an offer that will be honored (subject to
certain exceptions) if the consumer continues to meet the pre-selected criteria
used to select them for the offer. 15 U.S.C. § 1681a(l).
150. Using or obtaining prescreened lists to send solicitations marketing
debt-relief services is not a permissible purpose under FCRA.
151. Monster Loans’ and Lend Tech’s certifications to Experian did not
state that the prescreened lists were being obtained for use by other companies
or for the purpose of sending solicitations marketing debt-relief services.
152. The Student Loan Debt Relief Companies, Monster Loans, Lend
Tech, Chou, Nesheiwat, Cowell, Abdel, Sebreros, Martinez, Sklar, and Hoose
have, directly or indirectly, used or obtained consumer reports without a
permissible purpose, and without a certification of the purpose by the
prospective user of the report, in violation of FCRA. 15 U.S.C. § 1681b(f).
Case 8:20-cv-00043 Document 1 Filed 01/09/20 Page 23 of 33 Page ID #:23
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COUNT II
Advance Fees in Violation of the TSR
(Against Student Loan Debt Relief Companies, Docs Done Right,
Nesheiwat, Sklar, Hoose, Sebreros, and Martinez)
153. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
154. Under the TSR, it is an abusive act or practice for a seller or
telemarketer to request or receive payment of any fee or consideration for any
debt-relief services unless and until (A) the seller or telemarketer has
renegotiated, settled, reduced, or otherwise altered the terms of at least one debt
pursuant to a settlement agreement, debt-management plan, or other such valid
contractual agreement executed by the customer; and (B) the customer has
made at least one payment pursuant to that settlement agreement, debt-
management plan, or other valid contractual agreement between the customer
and the creditor or debt collector. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).
155. In the course of providing, offering to provide, or arranging for
others to provide debt-relief services, the Student Loan Debt Relief Companies,
Docs Done Right, Nesheiwat, Sklar, Hoose, Sebreros, and Martinez charged
and received fees before consumers’ applications for loan consolidations, loan-
repayment plans, and loan-forgiveness plans were approved, and before
consumers had made the first payments under the altered terms of their student
loans, in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i)(A)-(B).
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COUNT III
Misrepresentations in Violation of the TSR – Lower Interest Rates
(Against Student Loan Debt Relief Companies,
Nesheiwat, Sklar, Hoose, and Sebreros)
156. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
157. It is a deceptive practice under the TSR for a seller or telemarketer
to misrepresent any material aspect of a debt-relief service, including the
amount of money or the percentage of the debt amount that a consumer may
save. 16 C.F.R. § 310.3(a)(2)(x).
158. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros misrepresented, directly or indirectly, expressly or by
implication, that:
a. consolidating would cause consumers to obtain a lower interest
rate on their student loans; and
b. consumers were required to consolidate their student loans to
obtain an interest-rate deduction.
159. The acts or practices of the Student Loan Debt Relief Companies,
Nesheiwat, Sklar, Hoose, and Sebreros, as set forth in Paragraph 158, are
deceptive acts or practices that violate the TSR, 16 C.F.R. 310.3(a)(2)(x).
COUNT IV
Misrepresentations in Violation of the TSR – Improved Credit Scores
(Against Student Loan Debt Relief Companies,
Nesheiwat, Sklar, Hoose, and Sebreros)
160. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
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161. It is a deceptive practice under the TSR for a seller or telemarketer
to misrepresent any material aspect of a debt-relief service, including the effect
of the service on a consumer’s creditworthiness. 16 C.F.R. § 310.3(a)(2)(x).
162. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros misrepresented, directly or indirectly, expressly or by
implication, that consolidating student loans would improve consumers’ credit
scores.
163. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros misrepresented, directly or indirectly, expressly or by
implication, that they had a reasonable basis for representing that consolidating
student loans would improve consumers’ credit scores.
164. The acts or practices of the Student Loan Debt Relief Companies,
Nesheiwat, Sklar, Hoose, and Sebreros, as set forth in Paragraphs 162 and 163,
are deceptive acts or practices that violate the TSR, 16 C.F.R. § 310.3(a)(2)(x).
COUNT V
Misrepresentations in Violation of the TSR – New Servicer
(Against Docu Prep Center, Nesheiwat, Sklar, and Hoose)
165. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
166. It is a deceptive practice under the TSR for a seller or telemarketer
to misrepresent any material aspect of a debt-relief service. 16 C.F.R.
§ 310.3(a)(2)(x).
167. Docu Prep Center, Nesheiwat, Sklar, and Hoose misrepresented,
directly or indirectly, expressly or by implication, that consolidating would
result in ED becoming consumers’ “new servicer” and that consolidating would
enable consumers to avoid interacting with third-party student-loan servicers.
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168. The acts or practices of Docu Prep Center, Nesheiwat, Sklar, and
Hoose, as set forth in Paragraph 167, are deceptive acts or practices that violate
the TSR. 16 C.F.R. § 310.3(a)(2)(x).
COUNT VI
Substantial Assistance in Violation of the TSR
(Against Monster Loans and Nesheiwat)
169. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
170. The TSR prohibits any person from providing substantial
assistance or support to any seller or telemarketer when that person knows or
consciously avoids knowing that the seller or telemarketer is engaged in any act
or practice that constitutes deceptive or abusive conduct under the Rule. 16
C.F.R. § 310.3(b).
171. Monster Loans and Nesheiwat knew, or consciously avoided
knowing, the material misrepresentations that the Student Loan Debt Relief
Companies made to consumers.
172. Monster Loans and Nesheiwat knew, or consciously avoided
knowing, that the Student Loan Debt Relief Companies charged and received
fees from consumers before consumers’ applications for loan consolidations,
loan-repayment plans, and loan-forgiveness plans were approved, and before
consumers had made the first payments under the altered terms of their student
loans.
173. Monster Loans and Nesheiwat provided substantial assistance to
the Student Loan Debt Relief Companies in their violations of the TSR. 16
C.F.R. § 310.3(b).
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COUNT VII
Deception in Violation of the CFPA – Lower Interest Rates
(Against Student Loan Debt Relief Companies,
Nesheiwat, Sklar, Hoose, and Sebreros)
174. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
175. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros misrepresented, directly or indirectly, expressly or by
implication, that:
a. consolidating would cause consumers to obtain a lower interest
rate on their student loans; and
b. consumers were required to consolidate to obtain an interest-rate
deduction.
176. These representations were material and likely to mislead
consumers acting reasonably under the circumstances.
177. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros have therefore engaged in deceptive acts or practices in
violation of §§ 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536.
COUNT VIII
Deception in Violation of the CFPA – Improved Credit Scores
(Against Student Loan Debt Relief Companies,
Nesheiwat, Sklar, Hoose, and Sebreros)
178. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
179. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros misrepresented, directly or indirectly, expressly or by
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implication, that consolidating student loans would improve consumers’ credit
scores.
180. These representations were material and likely to mislead
consumers acting reasonably under the circumstances.
181. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros misrepresented, directly or indirectly, expressly or by
implication, that they had a reasonable basis for representing that consolidating
student loans would improve consumers’ credit scores.
182. The Student Loan Debt Relief Companies, Nesheiwat, Sklar,
Hoose, and Sebreros have therefore engaged in deceptive acts or practices in
violation of §§ 1031 and 1036 of the CFPA, 12 U.S.C. §§ 5531, 5536.
COUNT IX
Deception in Violation of the CFPA – New Servicer
(Against Docu Prep Center, Nesheiwat, Sklar, and Hoose)
183. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
184. Docu Prep Center, Nesheiwat, Sklar, and Hoose misrepresented,
directly or indirectly, expressly or by implication, that consolidating would
result in ED becoming consumers’ “new servicer,” and that consolidating
would enable consumers to avoid interacting with third-party student-loan
servicers.
185. These representations were material and likely to mislead
consumers acting reasonably under the circumstances.
186. Docu Prep Center, Nesheiwat, Sklar, and Hoose have therefore
engaged in deceptive acts or practices in violation of §§ 1031 and 1036 of the
CFPA, 12 U.S.C. §§ 5531, 5536.
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COUNT X
Substantial Assistance in Violation of the CFPA
(Against Monster Loans and Nesheiwat)
187. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
188. Section 1036(a)(3) of the CFPA prohibits any person from
“knowingly or recklessly provid[ing] substantial assistance to a covered person
or service provider in violation of the provisions of section 1031” and states that
“the provider of such substantial assistance shall be deemed to be in violation of
that section to the same extent as the person to whom such assistance is
provided.” 12 U.S.C. § 5536(a)(3).
189. Monster Loans and Nesheiwat knew, or recklessly avoided
knowing, the material misrepresentations that the Student Loan Debt Relief
Companies made to consumers.
190. Monster Loans and Nesheiwat provided substantial assistance to
the Student Loan Debt Relief Companies in their deceptive acts or practices, in
violation of § 1036(a)(3) of the CFPA. 12 U.S.C. § 5563(a)(3).
COUNT XI
CFPA Violations Based on Violations of FCRA and TSR
(Against Student Loan Debt Relief Companies, Monster Loans,
Lend Tech, Docs Done Right, Chou, Nesheiwat, Cowell,
Abdel, Sebreros, Martinez, Sklar, and Hoose)
191. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
192. FCRA and the Telemarketing Act are “Federal consumer financial
laws” under the CFPA. 12 U.S.C. § 5481(12)(F), (14); 15 U.S.C. § 6105(d).
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193. The violations of FCRA committed by the Student Loan Debt
Relief Companies, Monster Loans, Lend Tech, Chou, Nesheiwat, Cowell,
Abdel, Sebreros, Martinez, Sklar, and Hoose are deemed to be violations of the
CFPA. 15 U.S.C. § 1681s(d).
194. Because the Student Loan Debt Relief Companies, Monster Loans,
Lend Tech, Chou, Nesheiwat, Cowell, Abdel, Sebreros, Martinez, Sklar, and
Hoose are “covered persons” who violated FCRA by, directly or indirectly,
using or obtaining consumer reports without a permissible purpose and without
a certification of the purpose by the prospective user of the report, they violated
§ 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
195. The violations of the TSR committed by the Student Loan Debt
Relief Companies, Docs Done Right, Nesheiwat, Sklar, Hoose, Sebreros, and
Martinez are treated as violations of a rule under § 1031 of the CFPA. 15
U.S.C. § 6102(c).
196. Because the Student Loan Debt Relief Companies, Docs Done
Right, Nesheiwat, Sklar, Hoose, Sebreros, and Martinez are “covered persons”
who violated the TSR by charging and receiving illegal advance fees from
consumers, they violated § 1036(a)(1)(A) of the CFPA. 12 U.S.C.
§ 5536(a)(1)(A).
197. Because the Student Loan Debt Relief Companies, Nesheiwat,
Sklar, Hoose, and Sebreros are “covered persons” who violated the TSR by
engaging in deceptive conduct, they violated § 1036(a)(1)(A) of the CFPA. 12
U.S.C. § 5536(a)(1)(A).
198. Because Monster Loans and Nesheiwat are “covered persons” who
substantially assisted violations of the TSR, they violated § 1036(a)(1)(A) of
the CFPA. 12 U.S.C. § 5536(a)(1)(A).
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COUNT XII
Relief Defendants
199. The allegations in Paragraphs 1 to 146 are incorporated here by
reference.
200. Chou, Cowell, Lawson, TDK Enterprises, LLC, Cre8labs, Inc., and
XO Media, LLC have received, directly or indirectly, distributions of profits
from the Student Loan Debt Relief Companies that are traceable to funds
obtained from consumers through the violations of the CFPA and TSR
described herein. They have no legitimate claim to such funds and would be
unjustly enriched if not required to disgorge the funds or the value of the
benefits they received.
DEMAND FOR RELIEF
The Bureau requests that the Court:
a. permanently enjoin Defendants from committing future violations
of the FCRA, TSR, and CFPA and enter such other injunctive relief as
appropriate;
b. permanently enjoin Defendants from advertising, marketing,
promoting, offering for sale, selling, or providing any form of assistance to any
debt-relief service;
c. grant additional injunctive relief as the Court may deem to be just
and proper;
d. order Monster Loans, the Student Loan Debt Relief Companies,
Docs Done Right, Nesheiwat, Sklar, Hoose, Sebreros, and Martinez to pay
redress to consumers harmed by their unlawful conduct;
e. award damages and other monetary relief against Defendants;
f. impose civil money penalties against Defendants;
g. order disgorgement of ill-gotten funds against Relief Defendants;
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h. order the rescission or reformation of contracts where necessary to
redress injury to consumers; and
i. award the Bureau the costs of bringing this action, as well as such
other and additional relief as the Court may determine to be just and proper.
Dated January 9, 2020 Respectfully Submitted,
/s/ Leanne E. Hartmann
Leanne E. Hartmann
E. Vanessa Assae-Bille (PHV pending)
Colin Reardon (PHV pending)
Bureau of Consumer Financial Protection
1700 G Street, NW
Washington, D.C. 20552
Attorneys for Plaintiff Bureau of
Consumer Financial Protection
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