ALJDEC decisions subject to certification as final

24A-025-FIN · Department of Insurance and Financial Institutions - Financial · 2024-10-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of:

Summit Lending Solutions, LLC

(License No. MB-0944661)

Petitioner.

No. 24A-025-FIN

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: September 20, 2024 at 1:00 PM.

APPEARANCES: Assistant Attorney General Zachary Howard, Esq. appeared on behalf of the Arizona Department of Insurance and Financial Institutions (“Department”) with Alicia Preston as a witness. Craig Pribyl appeared on behalf of Summit Lending Solutions (“Petitioner”). Tammy Soto and Laura Reyes observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing, August 13, 2024, Hearing Order, Department Exhibits 1-10, and Petitioner Exhibits C and F were admitted into the evidentiary record.

_____________________________________________________________________

Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the Department.

FINDINGS OF FACT

Background and Procedure

The Department was created and enabled by the State of Arizona to administer enumerated State laws by protecting the public interest through licensure and regulation of the consumer lender profession.

On October 12, 2017, the Department issued Mortgage Broker License No. MB-0944661 to Petitioner. Petitioner’s license was last renewed on December 19, 2023, and is set to expire on December 31, 2024.

Administrative Notice is taken that Petitioner also holds licenses in the additional jurisdictions, as follows:

Colorado mortgage company registration on October 12, 2017.

Idaho mortgage broker/lender license MLB-9449.

Oregon mortgage lending license ML-5637 issued March 15, 2018.

Washington consumer loan company license CL-1678996 issued October 31, 2017.

Wyoming mortgage lender/broker license 3129 issued February 01, 2018.

On September 16, 2022, Mr. Pribyl updated Petitioner’s main and mailing address(es) with the Department from 2980 E. Northern Ave., Ste. C Phoenix, AZ 85026 to 3195 S. Price Rd., Ste. 26 Chandler, AZ 85248.

On February 19, 2023, Mr. Pribyl updated Petitioner’s main and mailing address(es) with the Department from 3195 S. Price Rd., Ste. 26 Chandler, AZ 85248 to 4280 Dark Hallow Rd. Medford, OR 9751.

Hearing Evidence

The Department called Alicia Preston as a witness. Petitioner called Craig Pribyl as a witness. The substantive evidence of record is as follows:

On April 18, 2024, the Department commenced a routine Mortgage Broker Report of Examination for License No. MB-0944661, regarding statutory compliance, supervision and organization, and operations and controls. By the time the examination concluded on May 09, 2024, Petitioner had been found in violation of three (3) State of Arizona statutes, rules, and/or regulations.

Petitioner was cited for violation of Ariz. Rev. Stat. § 6-904(H) for allegedly soliciting and/or originating Arizona mortgage loans from 3195 S. Price Rd., Ste. 26 Chandler, AZ 85248, which did not possess a branch license. Petitioner originated eleven (11) mortgage loan applications from the Chandler location. It was further determined that Petitioner was without a licensed branch office location from January 20, 2023, through April 30, 2023.

Petitioner was also cited for violation of Ariz. Admin. Code. R20-4-917(C) for allegedly failing to provide reconciled bank statements for operating accounts ending in 1158 and 4703 for years 2022 through 2024, though it was later determined that at least ten (10) transactions occurred during that period.

In 2018, Petitioner was cited by the Department for the same violation during that examination.

Petitioner was also cited for violation(s) of Ariz. Rev. Stat. §§ 6-903(W) and 6-991.03(J) for allegedly failing to submit its Mortgage Call Report (“MCR”) within forty-five (45) days of the end of 2022’s 3rd quarter, due November 14, 2022, as required by the National Multistate Licensing System (“NMLS”). Petitioner filed the MCR at issue a day late on November 15, 2022.

On April 30, 2024, the Department approved Petitioner for an Arizona Mortgage Branch License. A customer service representative, Mary Cisneros, reached out to Mr. Pribyl on behalf of the Department to advise that the issuance of a license number and certificate to Petitioner would be delayed due to the implementation of a new state system.

On May 09, 2024, Mr. Pribyl with Ms. Cisneros as to why, after he updated Petitioner’s address(es) to Oregon, the Department was not triggered or otherwise compelled to notify him of his requirement to obtain a branch license for the Chandler, Arizona location.

On May 10, 2024, Ms. Cisneros replied that the issue was two-fold: (1) a Department employee should have taken a second look, as no automated system is in place, and noticed; and (2) Mr. Pribyl, as a licensee, should have been familiar with the Department’s “brick and mortar” requirement.

On an unknown date, the Department advised Petitioner of its intent to assess a $5,000.00 Civil Penalty against it pursuant to Ariz. Rev. Stat. § 6-132.

On an unknown date, Mr. Pribyl submitted a timely appeal to the Department on behalf of Petitioner.

Additional Evidence

Mr. Pribyl testified that because he did not receive a response from the Department to his reply regarding the Ariz. Admin. Code. R20-4-917(C) citation after Petitioner’s 2018 examination, he thought his explanation was sufficient and that no further action need be taken by either party. Mr. Pribyl testified that after he was made aware of his requirement to obtain a branch license he did so, and would have done so earlier had he been aware of the requirement sooner. Mr. Pribyl conceded that he did, in fact, file Petitioner’s Q-3 2022 MCR a day late.

Ms. Preston testified that because of Petitioner’s prior branch license history, Mr. Pribyl knew or should have known that a branch license was required for the Chandler, Arizona location. Ms. Preston opined that, at a minimum, Mr. Pribyl should have utilized the NMLS Resource Center’s comprehensive checklist compiler which details information regarding Mortgage Broker Branch Licensing on its website.

Closing Arguments

In closing, Petitioner argued that each alleged violation had been remedied, and that there was no ill-intent on its part not to comply with the Department’s regulations. Petitioner noted that the issues were circumstantially related to Mr. Pribyl’s need to relocate to Oregon for familial reasons, and opined that no similar circumstances would occur in the future now that those issues have been resolved. Per Mr. Pribyl, neither he nor Petitioner could afford the Department’s proposed assessment.

In closing, the Department argued that it had sustained its burden of proof which thusly warranted the assessment of a civil penalty against Petitioner as disciplinary action.

CONCLUSIONS OF LAW

The Department was created and enabled to administer certain laws of the State of Arizona by protecting the public interest through the regulation of financial institutions and enterprises.

The Director of the Department is vested with the authority to regulate all persons engaged in mortgage banking and has the duty to enforce statutes and rules relating to these activities. The matter was properly brought before OAH for adjudication.

The Department bears the burden of proof to establish that cause to levy a civil penalty against Petitioner’s license by a preponderance of the evidence. Petitioner bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Ariz. Rev. Stat. § 6-132 provides that the Department may assess a civil penalty of no more than $5,000.00 against a licensee for any knowing violation of any provision of a statute or adopted rule.

Ariz. Rev. Stat. § 6-904(H) provides, in pertinent part, that every licensed mortgage broker shall designate and maintain a principal place of business within the State of Arizona for the transaction of business. If a licensee wishes to maintain one or more locations in addition to a principal place of business, the licensee shall first obtain a branch office license.

Ariz. Rev. Stat. § 6-903(W) provides that a licensee who employs a loan originator shall comply with section 6-991.03.

Ariz. Rev. Stat. § 6-991.03(J) provides that a mortgage broker shall submit reports of condition to the NMLS that that contain required information.

Ariz. Admin. Code. R20-4-917(C) provides that if a licensee shall reconcile and update all records monthly if more than ten (10) transactions occurred during the prior calendar quarter, but if ten (10) or fewer transactions occurred during the prior calendar quarter a licensee shall reconcile and update all records at least once each calendar quarter.

Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.”

Statutes should be interpreted to provide a fair and sensible result. “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result.

Here, the material facts are not in dispute.

The credible evidence of record reflects that Petitioner committed violations of Ariz. Rev. Stat. §§ 6-904(H), 6-903(W), 6-991.03(J), and Ariz. Admin. Code. R20-4-917(C), and that as such, the Department established grounds to levy a civil penalty against Petitioner.

Therefore, the only issue remaining is whether Petitioner raised a sufficient justification for the reduction or nullification of the proposed civil penalty. This is an affirmative defense that Petitioner bears the burden to establish. Here, Petitioner established that it had remediated all of the underlying actions that resulted in the citations received, as well as provided reasonable explanations as to why certain courses of action were taken that resulted in the underlying actions at issue. Mr. Pribyl also expressed remorse for his prior misunderstandings and untimeliness, evincing Petitioner’s regulatability and willingness to acquiesce to the Department’s authority.

Notably, the Department did not provide any explanation whatsoever as to how the amount of the proposed civil penalty was calculated, only establishing its statutory authority to levy said penalty against its licensees.

Because the Department established Petitioner’s violations of Ariz. Rev. Stat. §§ 6-904(H), 6-903(W), 6-991.03(J), and Ariz. Admin. Code. R20-4-917(C) by a preponderance of the evidence, it also established grounds to discipline MB-0944661 by way of civil penalty. However, based on the credible evidence of record and given the totality of the circumstances, the Tribunal is not in agreement with the amount of the Department’s proposed civil penalty in this matter. As such, it is the recommendation of this Tribunal that the Department’s proposed $5,000.00 civil penalty against Petitioner be reduced to more appropriately correspond with the conduct in this case.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Petitioner Summit Lending Solutions, LLC, Mortgage Broker License No. MB-0944661 be assessed a seven hundred fifty dollar ($750.00) civil penalty by the Department.

IT IS FURTHER RECOMMENDED that if the assessed civil penalty is not paid in full within thirty (30) days of effective date of the Final Order in this matter, the Arizona Attorney General, on request of the Deputy Director, shall bring an action in Superior Court, Maricopa County against Petitioner for the recoupment of the assessment.

NOTICE

Pursuant to Ariz. Rev. Stat. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the Final Decision by the Office of Administrative Hearings.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be forty (40) days from the date of that certification.

Pursuant to Ariz. Admin. Code R4-46-306.01 Respondent may submit a written request for rehearing to the Department pursuant to guidelines outlined in Ariz. Rev. Stat. § 41-1092.09, specifying the reason for the request. It is not necessary to request a rehearing prior to filing an appeal to Superior Court.

Done this day, October 07, 2024.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Barbara D. Richardson, Director

c/o Ana Starcevic, Paralegal

Deian Ousounov, Chief Financial Deputy Director

Alena Carraveta Regulatory Legal Affairs Officer

Tammy Seto, Assistant Director

Nancy Inserra Regulatory Compliance Officer

Jefferey Rahn, Staff Investigator – Appraisal Investigations

Mayra Kariem, Investigator and Administrative Assistant

Alicia Preston, Examiner in Charge

Arizona Department of Insurance and Financial Institutions, Complainant

100 N. 15th Ave., Ste. 261

Phoenix, AZ 85007-2630

[email redacted]

[email redacted]

[email redacted]

Zachary Howard, Esq., Assistant Attorney General

Lynette Evans, Esq., Assistant Attorney General

Office of the Attorney General, Counsel for DIFI

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

[email redacted]

[email redacted]

Summit Lending Solutions, LLC, Petitioner

Attn: Craig Pribyl, Agent

4280 Dark Hallow Rd.

Medford, OR 97501

[email redacted]

By: OAH Staff