Orion answer and counterclaims - Colorado Attorney General

ADAMS COUNTY, DISTRICT COURT, COLORADO
1100 Judicial Center Drive
Brighton, CO 80601
Plaintiff:
ORION FINANCIAL GROUP, INC.
v.
Defendants:
JOHN W. SUTHERS, COLORADO ATTORNEY
GENERAL, and LAURA E. UDIS, ADMINISTRATOR,
UNIFORM CONSUMER CREDIT CODE, FIRST
ASSISTANT ATTORNEY GENERAL
v.
Additional Defendant on Counterclaims:
ERIC THOMPSON
Attorneys for Defendants:
JOHN W. SUTHERS
Attorney General
JEANINE M. ANDERSON, Atty. Reg. No. 28206*
Senior Assistant Attorney General
1525 Sherman Street, 7 th
Floor
Denver, CO 80203
Phone Number: 303-866-2030
FAX Number: 303-866-5474
*Counsel of Record
COURT USE ONLY
Case No.: 11CV1834
Division: A
ANSWER AND COUNTERCLAIMS

Defendants and Counter-Plaintiffs, the State of Colorado ex rel. John W. Suthers,
Attorney General for the State of Colorado, and Laura E. Udis, Administrator of the Uniform
Debt-Management Services Act (together, the “State”), by and through the undersigned senior
assistant attorney general, file the following Answer and Counterclaims:
ANSWER TO COMPLAINT FOR DECLARATORY JUDGMENT
PARTIES
1. The State is without sufficient knowledge to form a belief as to the truth or falsity
of the allegations contained in paragraph 1 of Orion Financial Group, Inc.’s (“Orion”) Complaint
and therefore denies them.
2. The State admits the allegations contained in paragraph 2 of Orion’s Complaint.
JURISDICTION AND VENUE
3. Paragraph 3 of Orion’s Complaint constitutes a legal conclusion to which no
response is required. To the extent the paragraph is construed to require a response, however,
the State admits that the Court has subject matter jurisdiction over this action.
4. Paragraph 4 of Orion’s Complaint constitutes a legal conclusion to which no
response is required. To the extent the paragraph is construed to require a response, however,
the State admits that venue is proper in this Court.
FACTUAL ALLEGATIONS
5. The State is without sufficient information to form a belief as to the truth or
falsity of Orion’s averment as to why Orion was created and therefore denies it.
6. Orion’s allegation that it acted as a “stated agent” for a registered debtmanagement
services company constitutes a legal conclusion to which no response is required.
To the extent the allegation is construed to require a response, however, the State denies it. The
State is without sufficient information to form a belief as to the truth or falsity of the remaining
allegations contained in paragraph 6 of Orion’s Complaint and therefore denies them.
7. The State admits that it is the Administrator’s opinion that the services Orion
contracts to provide are debt-management services under the Colorado Uniform Debt-
Management Services Act (the “DMSA”). The State is without sufficient information to form a
belief as to the truth or falsity of the remaining allegations contained in paragraph 7 of Orion’s
Complaint and therefore denies them.
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8. The State states that the March 8, 2010 letter speaks for itself. To the extent that
the allegations concerning the content of that letter can be construed as inconsistent with the
letter, the State denies them. The State is without sufficient information to form a belief as to the
truth or falsity of the remaining allegations contained in paragraph 8 of Orion’s Complaint and
therefore denies them.
9. The State denies the allegations contained in paragraph 9 of Orion’s Complaint.
10. The State states that the September 2, 2011 letter speaks for itself. To the extent
that the allegations contained in paragraph 10 of Orion’s Complaint can be construed as
inconsistent with the letter, the State denies them.
11. The State denies the allegations contained in paragraph 11 of Orion’s Complaint.
12. The State is without sufficient information to form a belief as to the truth or
falsity of the allegations contained in paragraph 12 of Orion’s Complaint and therefore denies
them.
13. The State admits that it has not resolved its issues with Orion. The State is
without sufficient information to form a belief as to the truth or falsity of Orion’s allegation that
it has negotiated in good faith and therefore denies it. The remainder of paragraph 13 of Orion’s
Complaint constitutes a prayer for relief to which no response is required.
COUNT: I
14. Paragraph 14 of Orion’s Complaint violates C.R.C.P. 10(b), which requires that
the contents of each numbered paragraph be limited to a statement of a single set of
circumstances. The State admits that Orion quoted C.R.S. §§ 12-14.5-204(b) and 12-14.5-231
correctly. The State denies the remaining allegations in paragraph 14 of Orion’s Complaint.
COUNT: II
15. Paragraph 15 of Orion’s Complaint violates C.R.C.P. 10(b), which requires that
the contents of each numbered paragraph be limited to a statement of a single set of
circumstances. The State admits that Orion quoted C.R.S. §§ 12-14.5-225(b), 12-14.5-225(c),
and 12-14.5-235(a) and (b) correctly. The State denies that the Administrator claimed to have
the authority to void Orion’s contracts with consumers, as implied by Orion. The remainder of
paragraph 15 constitutes a legal conclusion to which no response is required. To the extent the
allegations are construed to require a response, however, the State denies them.
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COUNT: III
16. Paragraph 16 of Orion’s Complaint violates C.R.C.P. 10(b), which requires that
the contents of each numbered paragraph be limited to a statement of a single set of
circumstances. The State admits that Orion quoted C.R.S. § 12-14.5-232(a) and Black’s Law
Dictionary correctly. The remainder of paragraph 16 constitutes a legal conclusion to which no
response is required. To the extent the allegations are construed to require a response, however,
the State denies them.
The paragraph immediately following paragraph 16 of Orion’s Complaint constitutes a
prayer for relief to which no response is required. To the extent the paragraph is construed to
require a response, however, the State denies the allegations contained therein.
All allegations not specifically admitted are denied.
DEFENSES
1. Orion’s Complaint fails to state a claim upon which relief can be granted.
2. Orion failed to exhaust its administrative remedies.
COUNTERCLAIMS
NATURE OF THE COUNTERCLAIMS
1. In these difficult economic times, some Colorado consumers have turned to debtmanagement
providers for help. Debt-management providers encourage consumers to default on
their debts and then promise to assist the consumers by settling the consumers’ debts for pennies
on the dollar. But after paying thousands of dollars to a debt-settlement provider, consumers
often discover that the provider has done nothing – or very little – to improve the consumers’
financial situation. Recognizing the problems with the industry, the National Conference of
Commissioners on Uniform State Laws (the “NCCUSL”) approved and recommended for
enactment in all states the Uniform Debt-Management Services Act in 2005, which Colorado
adopted, with revisions, in 2008. The Colorado Uniform Debt-Management Services Act (the
“DMSA”) protects Colorado consumers by requiring that those who “offer to provide, contract to
provide, or provide” debt-management services in Colorado be registered with the Administrator
of the Uniform Consumer Credit Code and refrain from certain activities.
2. In March 2010, the Administrator launched an investigation into Orion’s business
practices in Colorado. Through that investigation, the State learned that Orion provides debtmanagement
services to Colorado residents, but it has failed to register as a provider with the
Administrator and its business practices violate various provisions of the DMSA. As a result of
the investigation, the State proposed a Stipulation and Final Agency Order (the “Stipulation”) to
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Orion, which Orion rejected. Before the State could file its lawsuit (indeed, while its offer was
still open, per Orion’s request), however, Orion filed its Complaint for Declaratory Judgment.
Therefore, the State brings the following counterclaims seeking to enjoin Counter-Defendants
Orion’s and Eric Thompson’s unlawful business practices in the state of Colorado, and seeking
consumer restitution, disgorgement, damages, civil penalties, and attorneys’ fees and costs.
PARTIES AND JURISDICTION
3. Defendant and Counter-Plaintiff John W. Suthers is the duly elected Attorney
General of the State of Colorado. He is authorized under C.R.S. § 6-1-103 to enforce the
Colorado Consumer Protection Act (the “CCPA”) by bringing civil actions against those that
engage in deceptive trade practices. In such actions, the State may seek injunctive relief,
consumer restitution, disgorgement, civil penalties, damages, and attorneys’ fees and costs. See
C.R.S. §§ 6-1-110, 6-1-112, and 6-1-113.
4. Defendant and Counter-Plaintiff Laura E. Udis (“Udis”) is the Administrator of
the Uniform Consumer Credit Code. She is authorized under C.R.S. § 12-14.5-232 to enforce
the DMSA by bringing civil actions against those that violate the act. In such actions, the
Administrator may seek injunctive relief, consumer restitution, disgorgement, civil penalties,
damages, and attorneys’ fees and costs. See C.R.S. § 12-14.5-233.
5. Plaintiff and Counter-Defendant Orion is a Colorado corporation with its office
and principal place of business located at 5005 West 81 st
Place, Suite 100, Westminster,
Colorado 80030. Orion has provided “debt-management services” to Colorado residents under
C.R.S. § 12-14.5-202(10).
6. Upon information and belief, Counter-Defendant Eric Thompson (“Thompson”)
was, at all pertinent times, an owner and officer of Orion and, acting alone or in concert with
others, he has formulated, directed, controlled, had the authority to control, or participated in the
acts and practices of Orion, including the acts and practices alleged in these counterclaims.
GENERAL ALLEGATIONS
a. The Debt-Management Services Act.
7. Udis is the Administrator of the Uniform Consumer Credit Code in Colorado.
The Administrator is responsible for, among other things, ensuring that those providing “debtmanagement
services” to residents of Colorado (“provider” or “providers”) are properly
registered to conduct business in Colorado and comply with the provisions of the DMSA.
8. Under the DMSA, “debt-management services” means “services as an
intermediary between an individual and one or more creditors of the individual for the purpose of
obtaining concessions . . . .” C.R.S. § 12-14.5-202(10).
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9. To provide debt-management services to residents of Colorado, a provider must
obtain a certificate of registration from the Administrator. C.R.S. § 12-14.5-204. To obtain a
certificate, a provider must supply information about itself, must meet specified requirements of
competency, must obtain insurance against employee dishonesty, and must post a surety bond to
ensure its compliance with the DMSA. C.R.S. §§ 12-14.5-205 through 12-14.5-214.
10. In addition, the DMSA establishes requirements for providers to meet in
connection with their interaction with the individuals they serve. C.R.S. § 12-14.5-217
prescribes detailed information that must be provided before a provider may enter into an
agreement with an individual. C.R.S. §§ 12-14.5-219 through 12-14.5-224 and § 12-14.5-228
govern the content of the agreement, including cancellation rights and limitations on the fees that
may be charged. Other provisions address the performance and termination of agreements and
miscellaneous other matters. C.R.S. §§ 12-14.5-225, 12-14.5-226, and 12-14.5-228. Providers
must comply with these requirements as to all transactions entered into on or after January 1,
2008. C.R.S. § 12-14.5-240.
b. Counter-Defendants’ Business Practices.
11. Orion is not registered to provide debt-management services in Colorado.
12. In March 2010, the State launched an investigation into Orion’s business practices
to determine whether Orion was providing debt-management services to Colorado and, if so,
whether its business practices complied with the DMSA.
13. That investigation found that Orion has contracted to provide debt-management
services to 165 Colorado residents and has provided debt-management services as a “back-end”
provider to approximately 125 additional Colorado residents for Prestige Financial Solutions,
Inc., but its business practices violate various requirements of the DMSA.
14. To start, the agreements 1
under which Orion contracted to provide debtmanagement
services to Colorado consumers from August 8, 2009 through March 10, 2010 did
not comply with the following subsections of C.R.S. § 12-14.5-219:
a. (a)(2), providing that agreements must be signed and dated by the
provider;
b. (a)(6)(C), requiring that agreements disclose the schedule of
payments to be made by or on behalf of the individual;
1 Orion used at least two different agreements during this time period. Each of the violations
detailed below was in at least one of the agreements. Neither of Orion’s agreements was fully
compliant with the DMSA.
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c. (a)(6)(E), requiring that agreements disclose the creditors the
provider believes will not participate in the plan;
d. (a)(6)(F), requiring that agreements disclose that the provider will
issue periodic accounting reports to the consumer;
e. (d)(1)(A), (B), and (C), requiring that agreements disclose the
consumer’s right to terminate the agreement without penalty or
obligation; that the provider will refund 65 percent of any portion
of the set-up fee that has not been credited against the settlement
fee; and that following termination, all powers of attorney granted
by the individual are revoked and ineffective 2
; and
f. (d)(3)(A) and (B), requiring that agreements disclose that within
five days of learning of a creditor’s decision to withdraw from a
program, the provider would disclose the identity of the creditor
and the consumer’s right to modify or withdraw from the
agreement.
15. Further, the Colorado consumers on whose behalf Orion performs debtmanagement
services were not provided with the “Notice of Right to Cancel” disclosures in the
form mandated by C.R.S. § 12-14.5-220.
16. Still further, Orion collected charges and payments from Colorado consumers
despite the fact that its contracts did not comply with the DMSA, in violation of C.R.S. § 12-
14.5-223(b).
17. In addition, Orion does not comply with prerequisites for providing debtmanagement
services as detailed in the following subsections of C.R.S. § 12-14.5-217:
a. (d) and (g), requiring that providers provide the “Important
Information for You to Consider” disclosure;
b. (b)(3)(B), prohibiting a provider from providing debt-management
services unless the provider, through the services of a certified
counselor or certified debt specialist, has made a determination,
based on the provider’s analysis of the information provided by the
individual and otherwise available to it, that the plan is suitable for
2
This section was amended effective July 1, 2011. The alleged violations relate to Counter-
Defendants’ pre-July 1, 2011 conduct.
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the individual and the individual will be able to meet the payment
obligations under the plan; and
c. (c)(3)(B), (C), and (D), providing that before an individual assents
to an agreement to engage in a plan, a provider shall, with respect
to all creditors identified by the individual or otherwise known by
the provider to be creditors of the individual, provide the
individual with a list of creditors that the provider expects to
participate but not grant concessions; creditors not expected to
participate; and all other creditors.
18. In addition, Orion’s powers of attorney did not contain the requisite limitation that
Orion could settle debts for not more than 50 percent of the actual balance of the debt owed a
creditor at the time of settlement, in violation of C.R.S. § 12-14.5-228(a)(3). 3
19. Finally, Orion’s internet website does not disclose on the home page, or on a page
that is clearly and conspicuously connected to the home page, the names of Orion’s principal
officers, in violation of § 12-14.5-218(g)(3).
20. As a result of these violations, the State proposed a Stipulation to Orion.
21. Orion rejected the proposed Stipulation.
FIRST COUNTERCLAIM FOR RELIEF
VIOLATIONS OF COLORADO DEBT-MANAGEMENT SERVICES ACT (C.R.S. § 12-
14.5-204)
22. The State incorporates by reference the allegations of paragraphs 1 through 21
above as if fully set forth herein.
23. To provide debt-management services to residents of Colorado, a provider must
obtain a certificate of registration from the Administrator. C.R.S. § 12-14.5-204.
24. Orion contracts to provide and provides debt-management services to residents of
Colorado.
25. Orion has failed to obtain a certificate of registration from the Administrator.
26. Therefore, Orion has violated the DMSA.
3 See footnote 2 above.
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27. Thompson caused Orion to violate the DMSA and therefore is liable for its
violations. See C.R.S. § 12-14.5-233.
28. As a result of Counter-Defendants’ violations of the DMSA, the Administrator is
entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See id.
SECOND COUNTERCLAIM FOR RELIEF
VIOLATIONS OF COLORADO DEBT-MANAGEMENT SERVICES ACT (C.R.S. § 12-
14.5-219)
29. The State incorporates by reference the allegations of paragraphs 1 through 28
above as if fully set forth herein.
30. The DMSA sets forth specific requirements concerning the content of agreements
to provide debt-management services. C.R.S. § 12-14.5-219.
31. The agreements under which Orion provides services do not contain the requisite
content.
32. Therefore, Orion has violated the DMSA.
33. Thompson caused Orion to violate the DMSA and therefore is liable for its
violations. See C.R.S. § 12-14.5-233.
34. As a result of Counter-Defendants’ violations of the DMSA, the Administrator is
entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See id.
THIRD COUNTERCLAIM FOR RELIEF
VIOLATIONS OF COLORADO DEBT-MANAGEMENT SERVICES ACT (C.R.S. § 12-
14.5-220)
35. The State incorporates by reference the allegations of paragraphs 1 through 34
above as if fully set forth herein.
36. The DMSA provides for specific cancellation rights that consumers shall have,
and sets forth the procedures providers must comply with in notifying consumers of their right to
cancel an agreement. C.R.S. § 12-14.5-220.
37. Orion does not comply with the requirements set forth in C.R.S. § 12-14.5-220.
38. Therefore, Orion has violated the DMSA.
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39. Thompson caused Orion to violate the DMSA and therefore is liable for its
violations. See
C.R.S. § 12-14.5-233.
40. As a result of Counter-Defendants’ violations of the DMSA, the Administrator is
entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See id.
FOURTH COUNTERCLAIM FOR RELIEF
VIOLATIONS OF COLORADO DEBT-MANAGEMENT SERVICES ACT (C.R.S. § 12-
14.5-223)
41. The State incorporates by reference the allegations of paragraphs 1 through 40
above as if fully set forth herein.
42. The DMSA prohibits providers from imposing fees if their agreements do not
comply with the DMSA.
43. Orion imposes fees despite the fact that its agreements do not comply with the
DMSA.
44. Therefore, Orion has violated C.R.S. § 12-14.5-223(b) of the DMSA.
45. Thompson caused Orion to violate the DMSA and therefore is liable for its
violations. See C.R.S. § 12-14.5-233.
46. As a result of Counter-Defendants’ violations of the DMSA, the Administrator is
entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See id.
FIFTH COUNTERCLAIM FOR RELIEF
VIOLATIONS OF COLORADO DEBT-MANAGEMENT SERVICES ACT (C.R.S. § 12-
14.5-217)
47. The State incorporates by reference the allegations of paragraphs 1 through 46
above as if fully set forth herein.
48. The DMSA requires that providers provide consumers with certain cautionary
disclosures and information, fully described in C.R.S. § 12-14.5-217.
49. Orion does not provide the requisite disclosures and information.
50. Therefore, Orion has violated the DMSA.
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51. Thompson caused Orion to violate the DMSA and therefore is liable for its
violations. See
C.R.S. § 12-14.5-233.
52. As a result of Counter-Defendants’ violations of the DMSA, the Administrator is
entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See id.
SIXTH COUNTERCLAIM FOR RELIEF
VIOLATIONS OF COLORADO DEBT-MANAGEMENT SERVICES ACT (C.R.S. § 12-
14.5-228(a)(3))
53. The State incorporates by reference the allegations of paragraphs 1 through 52
above as if fully set forth herein.
54. Under the DMSA, if a provider takes a power of attorney that authorizes the
provider to settle a debt, the power of attorney must expressly limit the provider’s authority to
settle the debt for not more than 50 percent of the actual balance of the debt owed at the time of
settlement. C.R.S. § 12-14.5-228(a)(3). 4
55. Orion’s powers of attorney fail to include the required limitations.
56. Therefore, Orion has violated the DMSA.
57. Thompson caused Orion to violate the DMSA and therefore is liable for its
violations. See C.R.S. § 12-14.5-233.
58. As a result of Counter-Defendants’ violations of the DMSA, the Administrator is
entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See id.
SEVENTH CLAIM FOR RELIEF
VIOLATIONS OF COLORADO DEBT-MANAGEMENT SERVICES ACT (C.R.S. § 12-
14.5-218(g)(3))
59. The State incorporates by reference the allegations of paragraphs 1 through 58
above as if fully set forth herein.
60. Under the DMSA, a provider that maintains an internet website shall disclose on
the home page of its website, or on a page that is clearly and conspicuously connected to the
4 See footnote 2 above.
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home page by a link that clearly reveals its contents: the names of its principal officers. § 12-
14.5-218(g)(3).
61. Orion’s website does not make such a disclosure.
62. Therefore, Orion has violated the DMSA.
63. Thompson caused Orion to violate the DMSA and therefore is liable for its
violations. See C.R.S. § 12-14.5-233.
64. As a result of Counter-Defendants’ violations of the DMSA, the Administrator is
entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See id.
EIGHTH COUNTERCLAIM FOR RELIEF
VIOLATIONS OF COLORADO CONSUMER PROTECTION ACT (C.R.S. § 6-1-
105(1)(z))
65. The State incorporates by reference the allegations of paragraphs 1 through 64
above as if fully set forth herein.
66. Under the CCPA, a person engages in a deceptive trade practice when, in the
course of such person’s business, such person “[r]efuses or fails to obtain all governmental
licenses or permits required to perform the services . . . as agreed to or contracted for with a
consumer.” See C.R.S. § 6-1-105(1)(z).
67. Orion has failed or refused to obtain from the Administrator the requisite
certificate of registration to provide debt-management services, in violation of C.R.S. § 6-1-
105(1)(z).
68. Therefore, Orion has violated the CCPA.
69. Thompson caused Orion to violate the CCPA and therefore is liable for its
violations. See C.R.S. § 6-1-112.
70. As a result of Counter-Defendants’ violations of the CCPA, the Attorney General
is entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, and attorneys’
fees and costs. See C.R.S. §§ 6-1-110, 6-1-112, and 6-1-113.
PRAYER FOR RELIEF
ACCORDINGLY, the State prays for entry of judgment in its favor, and against Counter-
Defendants, and requests the Court provide the following relief:
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from:
A. Issue a preliminary and permanent injunction, enjoining Counter-Defendants
1. Providing debt-management services to residents of Colorado
without obtaining from the Administrator the requisite certificate
of registration;
2. Providing debt-management services to Colorado residents in
violation of the DMSA’s requirements; and
3. Engaging in deceptive trade practices, in the course of their
business activities, in violation of the CCPA.
B. Impose civil penalties against Counter-Defendants under C.R.S. § 12-14.5-233
and C.R.S. § 6-1-112;
C. Order Counter-Defendants to make restitution of money to the persons aggrieved
by the violations;
D. Order Counter-Defendants to disgorge all profits from their unlawful activities in
the state of Colorado;
E. Award costs, expenses, and attorneys’ fees incurred by the State;
F. Award pre- and post-judgment interest; and
G. Award such other relief as the Court deems proper and just.
DATED: Denver, Colorado
January 6, 2012
JOHN W. SUTHERS
Attorney General
s/ Jeanine M. Anderson
JEANINE M. ANDERSON, 28206*
Senior Assistant Attorney General
Consumer Credit Unit
Consumer Protection Section
Attorneys for Defendants and Counter-Plaintiffs
*Counsel of Record
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Pursuant to C.R.C.P. 121 § 1-26(7), the original of this document with original signatures is
maintained in the Offices of the Colorado Attorney General, 1525 Sherman Street, Seventh
Floor, Denver, Colorado 80203, and will be made available for inspection by other parties or
the Court upon request.
CERTIFICATE OF SERVICE
This is to certify that a true and correct copy of the within Answer and Counterclaims,
dated January 6, 2012, was duly served this 6th day of January, 2012 upon the following parties:
Brad M. Daybell, Esq.
The Law Office of Brad M. Daybell, PC
11001 West 120th Avenue, Suite 400
Broomfield, CO 80021
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s/ Michele A. Kendall