As with home mortgage lenders and brokers, laws governing all consumer lenders have become more exacting since the 2008 financial crisis. In 2019, Washington Department of Financial Institutions | DFI fielded 1210 complaints resulting in 116 enforcement actions. With about 200 employees and the backing of the Washington State Office of the Attorney General for litigation support, this is an active State administrative agency. Consumer loan licensees alleged to have violated Washington consumer loan statutes or regulations can face liability from two primary avenues: DFI enforcement actions and private civil litigation. This page pertains to DFI enforcement actions.
DFI Enforcement Actions
DFI enforcement actions against consumer loan companies based on alleged violations of the Consumer Loan Act increased dramatically in the last several years. Whereas before 2007, DFI averaged less than 5 enforcement actions based on violations of the Consumer Loan Act that resulted in Final Orders each year, the number of such orders each year now averages between 25 and 30.
Most administrative actions start from a filed complaint or administrative investigation. Unlike a private civil complaint which may be filed without prior notice, administrative investigations often start with requests for information from DFI, audits, or inquiries from different state or federal agencies. At some point in the investigative process, individuals or companies will be made aware that they have become the focus of State or Federal attention.
It is wise to start anticipating how best respond to such attention before receiving formal requests. A prompt response to requests for information or action from a State or Federal licensing agency is generally a good idea. Most State and Federal agencies have the power to utilize a host of discovery tools including administrative subpoenas that can be quite powerful. Failure to be truthful and cooperative with the agency in the course of an investigation may result in an increase in punishment.
From the agency’s point of view, cooperation and compliance is part of the cost of keeping a license. It is one thing to make a mistake, it is another to compound it. If DFI finds the licensee violated statutes or regulations alleged, penalties may include having to pay restitution, monetary fines, costs of prosecution, and investigation costs—all of which may be converted into formal judgments. The amount of restitution, fines, and costs DFI has levied following an enforcement action ranges from a few hundred dollars
to hundreds of thousands of dollars
In addition, DFI may order the Surrender of a consumer loan license and a prohibition from participating in mortgage brokering or consumer lending permanently or for a specified for a period of time or the complete revocation of a license and a prohibition against doing business as a consumer loan company in Washington in the future.
In some instances, fines or portions of fines may be stayed pending compliance with other conditions DFI has imposed. https://dfi.wa.gov/sites/default/files/consumer-services/enforcement-actions/S%20%26%20S%20Financial%20Partners%20LLC%20dba%20Netcashman%3B%20George%20Tim%20Shields%3B%20Robert%20Richard%20Sullivan%20C-20-2833-22-CO01_web.pdf
A business or individual that has been notified of a pending investigation or enforcement action by DFI should move quickly to get in front of the issues and potential problems rather than take a “hope” or “wait” or “hide” or “wing it” approach. The ways in which cases or investigations are positioned from the start can influence outcomes. It is important that a licensee or anyone working with a licensee respond to investigation promptly and with the help of an experienced attorney. In many cases, an early and well thought out response can prevent an investigation from escalating to an enforcement action or can prevent a dispute from becoming a lawsuit.
Ari Brown has litigated a variety of issues involving lending, loan origination, loan servicing, and debt collection for nearly twenty-five years. He has handled seminal cases involving the Real Estate Settlement Procedures Act, Truth in Lending Act, Washington Consumer Loan Act, Washington Mortgage Broker Practices Act, Escrow Agent Registration Act, and the Washington Consumer Protection Act. Years of litigating cases pertaining to banking, lending, and mortgage practices both on individual bases and as class actions have informed Mr. Brown’s approach to dealing with alleged violations. Such litigation has refined his ability to mitigate common mistakes and to help financial licensees avoid actions that DFI may perceive as misconduct.
Robert Rhodes works with Mr. Brown on an as-needed basis. He has handled hundreds of administrative and licensing investigations and enforcement actions in various forums. He often draws on his extensive background in criminal and whistleblower law that occasionally becomes useful. Other team members are available as necessary.