A District Court judge in Kansas has denied a motion to dismiss filed by a husband and wife who are being sued by the Consumer Financial Protection Bureau for fraudulently trying to hide $13 million in assets as a means of avoiding having to use them to settle $40 million in fines and penalties that were assessed in an earlier enforcement order.
A copy of the ruling in the case of Consumer Financial Protection Bureau v. James R. Carnes, Melissa C. Carnes, et al. can be accessed by clicking here.
The CFPB filed this lawsuit back in April, accusing the Carnes’s of violating the Federal Debt Collection Procedures Act. A month after learning that his companies were being investigated by the CFPB, Carnes started initiating the transactions in question, which were made into a trust. James Carnes also transferred the titles to five vehicles, $800,000 worth of jewelry, and $1.4 million in artwork into the trust. The trust also purchased a property at an exclusive ski mountain resort in Montana. Despite all of this activity, the one thing Carnes hasn’t done, according to the CFPB, is make any payments on what he owes the Bureau.
Back in 2015, the CFPB sued Integrity Advance and James Carnes, accusing the company of deceiving consumers about the cost of the payday loans they were obtaining and for using remotely created checks to withdraw funds from the consumers’ accounts even after the consumers revoked their permission for the withdrawals. The lawsuit resulted in fines, penalties, and restitution in excess of $50 million. The company and Carnes appealed the ruling, and the Court of Appeals for the Tenth Circuit affirmed it.
James Carnes alleged in his motion to dismiss that he is no longer associated with the trust and that his wife has removed him as a trustee. But the CFPB questioned the authenticity of the documents removing James Carnes from the trust and Judge Daniel D. Crabtree of the District Court for the District of Kansas said he was unable to consider the evidence at the motion-to-dismiss stage of the trial.
The Carnes’s also sought to have the Court stay the proceedings of this case pending the outcome of Consumer Financial Protection Bureau v. Community Financial Services Association of America, which is before the Supreme Court, as well as a petition for the Supreme Court from James Carnes to hear arguments in the underlying enforcement action. “The court is concerned that a stay would help James Carnes in his efforts to thwart or delay the Bureau’s efforts to collect a valid judgment,” Judge Crabtree wrote in denying the motion.
