IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE
JHASS GROUP L.L.C. aka J. HASS GROUP, LLC;
JASON D. HASS; JEREMY R. HASS; JEFFREY HASS,
Plaintiffs/Appellants
v.
ARIZONA DEPARTMENT OF FINANCIAL
INSTITUTIONS; LAUREN W. KINGRY,
Superintendent,
Defendants/Appellees.
No. 1 CA-CV 13-0546
FILED 10-20-2015
Appeal from the Superior Court in Maricopa County
No. LC2012-000639-001 DT
The Honorable Crane McClennen, Judge
AFFIRMED
COUNSEL
Timothy H. Barnes, P.C., Phoenix
By Timothy H. Barnes
Counsel for Plaintiffs/Appellants
Arizona Attorney Generals Office, Phoenix
By Natalia A. Garrett
Counsel for Defendants/Appellees

JHASS et al. v. AZDFI et al.

Opinion of the Court

OPINION
Judge Michael J. Brown delivered the Opinion of the Court, in which
Presiding Judge Peter B. Swann and Judge Kenton D. Jones joined.

B R O W N, Judge:
1
This appeal arises from a challenge to an administrative order
imposing a $150,000 fine for failure to comply with Arizona Revised
Statutes (A.R.S.) section 6-715, which requires a debt management
company operating in Arizona to obtain a license from the Arizona
Department of Financial Institutions (the Department).
A debt
management company is defined as a person or entity that for
compensation engages in the business of receiving money, or evidences
thereof, . . . as agent of a debtor for the purpose of distributing the same to
his creditors[.] A.R.S. 6-701(4). Because we conclude a company that
exercises substantial control over funds deposited by its client with a third
party falls within the definition of a debt management company, we affirm
the superior courts order upholding the administrative order.
BACKGROUND
2
J. Hass Group, LLC, owned by three brothers (Jason, Jeremy,
and Jeffrey Hass), was formed in February 2008.1 JHass engaged in the
business of negotiating debt settlements on behalf of its clients. The
company acquired many of its clients from an existing debt settlement
practice conducted by Jason D. Hass, PLC, a law firm owned by Jason Hass.
JHass also acquired clients through outside marketing companies that
recommended debt relief products to potential clients in exchange for a
portion of JHass fees.
3
The business model JHass developed was ostensibly quite
simple: JHass charged its clients various fees to enroll in its debt
settlement program and, in exchange, JHass negotiated with clients
creditors to achieve a reduced obligation that would allow clients to satisfy
their unsecured debts more quickly. Each client signed a Client
Partnership Agreement with JHass. In addition, clients executed a limited
Unless otherwise noted, we refer to all the plaintiffsJ. Hass Group,
LLC, JHass Group, L.L.C., and the three principalsas JHass.
1

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Opinion of the Court
power of attorney allowing JHass, among other things, to share information
regarding clients account balances with creditors and review client account
histories.
4
Prospective clients would often complete the Client
Partnership Agreement with the help of a marketing company, which
would then submit the signed documents directly to JHass through an
online system. Completion of the agreement required prospective clients
to disclose their existing debts and credit card information. The JHass
online system used this list of debts to calculate an estimated monthly
payment and the number of months to complete the debt settlement
program.
5
Enrollment in the program required clients to fund the
following: (1) a Monthly Professional Fee, which JHass charged for
continuing customer service and account administration, (2) a Monthly
Maintenance Fee, which JHass used to cover the cost of trust account
administration, and (3) Client Savings, to be used to settle debts.
According to the Client Partnership Agreement, JHass fees would be
deducted from the clients monthly savings. Clients were encouraged to
deposit more than the monthly payment amount when their budgets
allowed. JHass did not receive its fees directly from the clients. Instead, as
a condition of enrollment in the program, clients were required to establish
a trust or controlled account at a bank, Escrow Company, or other
financial institution or service company reasonably acceptable to [JHass].2
6
Although JHass did not have a contractual relationship with
any third-party account providers, many JHass clients set up accounts with
NoteWorld Servicing Center, LLC (NoteWorld), an escrow agent
independently licensed by the Department. When enrolling in the
program, a client seeking to establish an account with NoteWorld would
also execute a Sign-up Agreement authorizing NoteWorld to perform a
number of services related to JHass, the clients chosen debt settlement
Jason Hass testified at the administrative hearing that a third-party
account was not mandatory because clients had the option to use a selfsave model in which the client could open a personal savings account
specifically dedicated for use in the JHass program, rather than using a
third-party account. According to Jason, a handful of clients were selfsavers, but there were no business records to show (1) that any clients
actually used this method, or (2) how JHass would implement its debt
settlement model with a self-saver.
2

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Opinion of the Court
company (DSC). These services included receiving, processing and
posting payments, holding such payments in a trust account, disbursing
funds as authorized, and providing account and transaction information.
NoteWorld charged clients a monthly fee for its services, in addition to the
fees charged by JHass.
7
NoteWorld held client funds in a single trust account at an
FDIC-Insured bank, but kept a specific accounting of each clients
individual balance in a customer account. Once the Sign-up Agreement
was executed, the client received online access to monitor the account
balance. As part of the agreement, clients provided their bank account
information and authorized NoteWorld to debit their personal checking
accounts via monthly Automatic Clearing House (ACH) transfers
according to a schedule of debits provided by either JHass or the clients.
8
JHass was able to access the NoteWorld online system,
NoteWorld Reporter (NWR), to provide NoteWorld with instructions
regarding disbursements from client accounts to both creditors and JHass
itself. NoteWorld maintained a user interface that allowed DSCs like JHass
to use NWR to submit a clients personal bank account information and
payment plan, create and modify a schedule of debits, and trigger
disbursements from the clients account. For this purpose, JHass
maintained a Banking Department, which was responsible for entering
client information into the JHass internal systems and NWR. Although
JHass was able to create a schedule of debits in NWR, clients did not have
that authority, and NoteWorld treated payment requests from JHass as if
they came directly from the clients. However, if clients wanted to skip a
periodic debit from their personal bank accounts, they could contact
NoteWorld, which would cancel the debit up to two days before the
scheduled release date.
9
Each monthly debit from a clients private account
automatically triggered a disbursement to JHass in payment of the monthly
maintenance and professional fees charged for participation in the debt
settlement program. JHass would also allocate the total fee charged per
debit between JHass and any entities with which JHass had a fee-splitting
arrangement, such as the marketing companies.
Although clients
reviewing their account balances could see that a portion of their monthly
debit had been disbursed for fee payments, the clients could not control
the allocation or view how the total fee was allocated among JHass and its
affiliates.

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Opinion of the Court
10
Depending on the particular terms of the Client Partnership
Agreement, some of the clients initial payments were allocated entirely to
JHass as a down payment for the program. After the down payment,
clients continued to deposit funds into their NoteWorld accounts until
sufficient funds, or reserves, had accumulated so that JHass could begin
negotiating with creditors. If the creditors agreed to a proposed settlement,
JHass presented the offer to the client for consideration. If the client
accepted, JHass would access NWR to schedule a disbursement from the
clients account to that creditor.
11
Per the Sign-up Agreement, NoteWorld disbursed funds
from the clients account to creditors upon receipt of a settlement letter
from the [clients] DSC or a creditor. A representative of NoteWorld
clarified that even though NoteWorld required a settlement letter, if a
payment was scheduled in NWR, NoteWorld had no way to verify that a
settlement letter was received before the payment had been processed. In
NWR, disbursements to creditors were treated differently than the schedule
of debits from clients personal checking accounts to their NoteWorld
accounts and to DSCs. The terms of the Sign-up Agreement provided that
the client could approve or decline a disbursement to a creditor within 24
hours of NoteWorlds receipt of notice of settlement. If the client took no
action, the disbursement was deemed approved by the client and could not
be revoked. Once a disbursement was made to a creditor, NoteWorld could
not refund a clients account.
12
Throughout this process, JHass continued to collect its
monthly professional and maintenance fees in the form of scheduled debits
from the clients NoteWorld account. While the account was open, JHass
could modify the schedule of debits by accessing NWR. Clients had the
option to communicate directly with NoteWorld regarding their accounts
and disbursements, or to contact JHass, which would then relay the clients
requests to NoteWorld. However, if JHass gave a conflicting request,
NoteWorld would seek confirmation from both parties before taking any
action.
13
According to NoteWorld, a JHass client had the ultimate
authority to cancel an account entirely or request a refund for fees paid.
JHass could request a refund on behalf of the client, which, if granted,
NoteWorld would credit to the clients account after deducting any fees
owing to JHass or others. If JHass instructed NoteWorld to cancel a
particular account, NoteWorld would do so, apparently without any
explicit confirmation from the client.

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Opinion of the Court
14
By January 2011, both the Department and the Arizona
Attorney Generals Office had received a number of consumer complaints
against JHass. These complaints shared many common criticisms,
including that the JHass program was not clearly explained before
enrollment, JHass representatives were difficult to reach, and creditors
were never paid. One client asserted she had signed up for the program
through one of the marketing companies JHass used to acquire customers,
and did not know she had enrolled in a program with JHass until the
marketing representative disappeared. Although the JHass Client
Partnership Agreement does not require clients to stop paying creditors,
some clients complained that the marketing company representatives or
JHass employees instructed them to stop paying creditors as a condition of
enrollment. However, those that stopped paying creditors received
repeated phone calls from creditors or faced legal action because the clients
payments were being distributed to JHass to pay program fees rather than
to creditors. The complaints also alleged that when clients eventually
withdrew from the JHass program, they were not refunded the remaining
balance of their NoteWorld accounts because JHass claimed it was entitled
to all or some portion of the remainder for additional fees due, even though
JHass often had provided no services. All the complainants described their
financial circumstances at the conclusion of their dealings with JHass as
being significantly worse than before enrolling in JHass program.
15
The Department investigated JHass and its business practices
for possible unlicensed activity, starting with the substance of the JHass
contract as compared to that of a licensed debt management company.
Reading it in conjunction with assertions made on the JHass website and
the NoteWorld Sign-up Agreement, an agent for the Department
determined that the JHass Client Partnership Agreement raised several
red flags, particularly that JHass was charging a fee for trust account
administration. After several months of investigation, the Departments
agent made a written recommendation to the Superintendent that JHass
was engaged in unlicensed activity.
16
Because JHass had no debt management company license and
did not fall within any of the licensure exemptions listed in A.R.S. 6-702,
the Superintendent issued a cease and desist order, alleging JHass was
operating a debt management company in violation of A.R.S. 6-715. The
order also sought civil penalties from JHass and its principals. In its
subsequent notice of hearing and complaint, the Department alleged that
JHass was engaged in the business of a debt management company,
because for purposes of A.R.S. 6-701(4), the conduct of receiving money,
or evidences thereof includes the activity of exercising actual or
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Opinion of the Court
constructive control over another persons funds, bank or trust accounts(s)
for purposes of distributing the monies to creditors. The Department
further alleged that JHass access to client account information and
authority to give instructions to NoteWorld on behalf of clients
demonstrated that JHass assumed control over client funds held in
NoteWorld accounts.
17
During a five-day evidentiary hearing, the Department
presented testimony from the investigating agent and the Assistant
Superintendent of the Department about the nature of the consumer
complaints, the investigation, and the Departments interpretation of A.R.S.
6-701(4). A NoteWorld operations manager also testified at length about
the relationship between NoteWorld, JHass, and JHass clients, as well as
the specific authority that JHass had over NoteWorld accounts. Five
former JHass customers, all of whom had filed complaints, testified as to
their understanding of the JHass debt settlement program and as to which
entity controlled the funds they had paid into a NoteWorld account. All
three Hass brothers testified, and the Department submitted substantial
documentary evidence, including consumer complaints, correspondence
between JHass and its clients, NoteWorld representatives and the
Department, and thousands of pages detailing NoteWorlds records of
JHass client accounts.
18
The administrative law judge (ALJ) issued a decision
affirming the cease and desist order. Relying on cases from other
jurisdictions, as well as the Departments interpretation of the statute, the
ALJ concluded that receiving money as used in A.R.S. 6-701(4) includes
constructive receipt or possession. The ALJ then determined the weight of
the evidence established that JHass was in constructive receipt or
possession of its clients funds by virtue of the authority and control that it
was able to exercise over those funds. The ALJ pointed to the following
activities of JHass, which, viewed together, were tantamount to receiving
money for purposes of distributing the same to creditors:
a. receiving personal/banking information;
b. setting up a consumer trust account for its clients
with a third party (e.g., NoteWorld);
c. viewing and having access to [clients] account
information, including the ability to edit account
information;

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Opinion of the Court
d. the use and submission of clients ACH
information to NoteWorld and creditors of clients;
e. submitting debit instructions or scheduling of
debits, causing money to be deposited into or
transferred out of the account to creditors;
f. having managed, directed, administered,
[overseen] payments to creditors.

or

Based on these activities, the ALJ concluded that JHass acted as an agent of
the debtors by arranging to have and having access to debtors funds
through NoteWorlds system and exercise[ing] control through NoteWorld
over the debtors funds for the purpose of effectuating money transfers to
debtors creditors for compensation. The ALJ also determined that the
Departments request to impose a fine of $150,000 was reasonable and
supported by the evidence. The Superintendent adopted the ALJs decision
in whole and issued a final decision and order.
19
JHass sought judicial review in superior court. After briefing
and oral argument, that court affirmed the final decision and order, finding
the Department did not abuse its discretion and its actions were neither
contrary to law nor arbitrary and capricious. The court also concluded that
substantial evidence supported the Departments decision. JHass then
timely appealed to this court.
DISCUSSION
20
In reviewing an administrative agencys decision, the
superior court examines the record to determine whether the agencys
action was contrary to law, arbitrary, capricious, or an abuse of discretion.
A.R.S. 12-910 (E); Gaveck v. Ariz. State Bd. of Podiatry Examrs, 222 Ariz. 433,
436, 11 (App. 2009). On appeal, this court must determine whether the
record contains substantial evidence to support the superior courts
judgment. Carley v. Ariz. Bd. of Regents, 153 Ariz. 461, 466 (App. 1987).
Neither the superior court nor this court may substitute its judgment for
that of the agency on factual questions or matters of agency expertise.
DeGroot v. Ariz. Racing Commn, 141 Ariz. 331, 336 (App. 1984). As to
questions of statutory interpretation, however, we are not bound by the
superior courts or the agencys legal conclusions. Siegel v. Ariz. State Liquor
Bd., 167 Ariz. 400, 401 (App. 1991).

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Opinion of the Court
A.

Arizonas Regulation of Debt Management Companies

21
The Department is charged with the execution of the law of
[Arizona] relating to financial institutions and enterprises. A.R.S. 6-110.
In addition to debt management companies, the Department also regulates
banks, credit unions, escrow agents, mortgage brokers, consumer lenders
and other institutions. The primary responsibility of the Department,
acting through its chief officer, the Superintendent, is to license or certify
financial institutions and to oversee periodic examinations of the business
affairs of the institutions within its purview. See A.R.S. 6-122, -123.
22
As provided in A.R.S. 6-701 through -716 (Chapter 6),
debt management companies operating in Arizona must obtain and renew
annually a license to operate. A.R.S. 6-703, -707, -715. Section 6-701(4)
defines a debt management company as:
a corporation, company, firm, partnership, association or
society, as a well as a natural person, that for compensation
engages in the business of receiving money, or evidences thereof, in
this state or from a resident of this state as agent of a debtor
for the purpose of distributing the same to his creditors in
payment or partial payment of his obligations.
(Emphasis added.) Various entities are exempt from the licensing
requirement, such as attorneys who provide debt management incidental
to other legal services, certain nonprofit organizations, and institutions
licensed pursuant to other Arizona or federal laws. See A.R.S. 6-702(1),
(2), (4), (5), (7), (8).
23
If an entity is engaged in the business for compensation of
receiving money . . . for the purpose of distributing the same to creditors,
the entity must first obtain a license. A.R.S. 6-703. Debt management
companies must submit a written application and post a bond of $5000 or
more, depending on the amounts disbursed by the company. See A.R.S.
6-704(A) and (B). Applicants must also submit a blank copy of the contract
to be used with debtors, which must be updated with any post-license
changes or amendments. A.R.S. 6-704(E).
24
Licensure is not automatic. Once an applicant submits an
application, the Superintendent begins an investigation of the company.
A.R.S. 6-707(A). Only if the Superintendent finds that the financial
responsibility, experience, character and general fitness of the applicant are
such as to command the confidence of the community to warrant belief that
the business will be operated fairly and honestly and within the purposes
9

JHASS et al. v. AZDFI et al.

Opinion of the Court
of [Chapter 6] will the Superintendent issue the applicant a license to
operate as a debt management company in Arizona. A.R.S. 6-707(A).
25
The operations of licensed debt management companies are
extensively regulated by the Department. The statutes strictly limit the
amount of fees a company may charge. See A.R.S. 6-709(C) (authorized
fees are (1) a retainer fee of thirty-nine dollars, or (2) a monthly fee of threequarters of one per cent of the total indebtedness or fifty dollars, whichever
is less)). Once licensed, a debt management company has multiple
obligations, including: (1) maintaining a minimum amount of liquid assets;
(2) entering a written contract with the debtor that can be terminated at any
time and without penalty; (3) maintaining a trustee checking account at an
Arizona bank into which all debtor payments must be deposited; (4)
keeping business records enabling the Superintendent to determine
whether the company is in compliance with Chapter 6; and (5) filing annual
reports with the Superintendent. See A.R.S. 6-709(A), (B), (I), (J), and (M).
The statutes also make it unlawful for a licensed debt management
company to (1) [a]ccept an account unless it appears . . . that the debtor can
reasonably meet the payments or (2) pay others for referring debtors to the
company. A.R.S. 6-710(1), (7).
26
It is undisputed that JHass did not obtain a debt management
company license from the Department while conducting operations in
Arizona. The question we must resolve is whether the Department
properly determined that the JHass business model, as demonstrated by its
practices, falls within the scope of Chapter 6s licensing requirements.
B.

Meaning of the Term Receiving Money

27
We interpret statutes to give effect to the legislatures intent,
looking first to the statutory language itself. Baker v. Univ. Physicians
Healthcare, 231 Ariz. 379, 383, 8 (2013). We construe words and phrases
according to the common and approved use of the language. A.R.S. 1
213. In determining the ordinary meaning of a word, we may refer to an
established and widely used dictionary. State v. Mahaney, 193 Ariz. 566,
568, 12 (App. 1999). When the language of a statute is subject to more
than one reasonable meaning, we attempt to determine legislative intent
by interpreting the statutory scheme as a whole and consider the statutes
context, subject matter, historical background, effects and consequences,
and spirit and purpose. Hughes v. Jorgenson, 203 Ariz. 71, 73, 11 (2002)
(citation and internal quotations omitted).

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Opinion of the Court
28
JHass argues it acted merely as a debt settlement company and
therefore had no obligation to obtain a license to operate a debt management
company. Neither Arizona statutes nor case law define a debt settlement
company. JHass describes its business model as one that allowed
consumers to maintain control over their funds. More specifically,
because deposits were made into a client-controlled third party trust
account at NoteWorld or a similar provider, JHass asserts it did not
receive any money for the purpose of distributing to creditors, as
required by 6-701(4). Thus, JHass essentially contends that its business is
a unique entity that escapes all regulation by the Department, despite
providing a service that bears an uncanny resemblance to the type of
organization contemplated by the statutes governing debt management
companies.
29
A debt management company is one that is in the business
of receiving money, or evidences thereof, for the purpose of distributing
such funds to a clients creditors. A.R.S. 6-701(4). JHass argues the
Department erred in concluding that JHass business operations constitute
a debt management company within the meaning of 6-701(4) because its
plain language unmistakably states that for its application one must be in
receipt of money or other forms of value. The Department also maintains
that 6-701(4) is not ambiguous. According to the Department, however,
the statute covers the activity of receiving banking information if that
information is used to grant the receiving party access to monies, even when
no actual monies are received. (Emphasis added.)
30
The common meaning of receive is to acquire or take.
Websters II New College Dictionary 946 (3d ed. 2005). In a legal context,
particularly in the realm of criminal law, receiving can often mean
acquiring or controlling property, as in receiving stolen property. See
Blacks Law Dictionary 1461 (10th ed. 2009) (receiving stolen property
means the criminal offense of acquiring or controlling property known to
have been stolen). Given the variation in these definitions, both parties
interpretations of receiving money are plausible. Because the statute is
ambiguous, we turn to alternative methods of statutory construction.3

JHass also argues that the phrase receiving money, or evidences

thereof means receiving money or other forms of value. The
Department argues in its brief, and the Assistant Superintendent testified
at the administrative hearing, that receiving evidences thereof means
receipt of information that gives the debt management company access to money,
3

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Opinion of the Court
31
Unlike other statutes found in Title 6, the provisions of
Chapter 6 do not include an express declaration of purpose. Cf. A.R.S. 6181 (declaration of purposes for the chapter on Bank Organization and
Regulation). In 1968, the legislature enacted A.R.S. 6-701 as part of a larger
bill providing for the licensing and regulation of debt management
companies. See Arizona State Senate, Minutes of State Government
Committee, H.B. 38, 28th Leg., 2d. Reg. Sess. (March 4, 1968). A House Fact
Sheet from a subsequent Chapter 6 amendment indicates that the purpose
of the debt management statutes is to provide protection for consumers
from unscrupulous debt management companies. See House Fact Sheet,
H.B. 2552, 41st Leg., 2d Reg. Sess. (February 15, 1994).
32
Absent a clear statement of purpose, legislative intent can be
gleaned from the statutory scheme itself. Hughes, 203 Ariz. at 73, 11. As
noted, Chapter 6 includes a listing of entities that are exempt from the
licensing requirements. A.R.S. 6-702. Section 6-702 states that a bill
paying service provider is exempt from the licensing requirements as long
as the provider does not take physical possession of any debtor monies
except for fees and charges for services rendered, among other
requirements. A.R.S. 6-702(9)(f). If, as JHass argues, the phrase receiving
money, as it is used in 6-701(4) means taking actual possession of, then
this exemption would be redundant; bill paying service providers who
merely control, but do not actually possess, debtors funds would not
constitute debt management companies within the language of 6-701(4)
and would not require a license to operate anyway. Likewise, if the
legislature intended receiving to mean only actual physical possession,
then presumably it would have used receiving money in 6-702(9)(f), or
it would have used take physical possession in 6-701(4) to create a
mirror image of the rule and the exception. See Williams v. Thude, 188 Ariz.
257, 259 (1997) (recognizing that each word and phrase of a statute must
be given meaning so that no part of it will be void, inert, redundant, or
trivial). The legislature did not draft the statutes in that manner; thus, we
presume it intended the phrase receiving money to mean something
broader than taking physical possession.

that is, puts the debt management company in constructive receipt of

funds. (Emphasis added.) Because we conclude that receiving money
includes the situation in which a DSC exercises substantial control over a
clients funds, we need not decide the precise meaning of or evidences
thereof.

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Opinion of the Court
33
This reading of the statute is supported by the few
jurisdictions that have addressed the meaning of receiving money. In
construing a similarly worded debt settlement statute, the California Court
of Appeal held that receiving money means actual or constructive
receipt.4 Nationwide Asset Servs., Inc. v. DuFauchard, 79 Cal. Rptr. 3d 844, 848
(App. 2008) (If plaintiffs indeed have managed to receive the money of
their customers in all but name, then their conduct is precisely that which
the statute has targeted.); see also Estrella v. Freedom Fin. Network, LLC, 778
F. Supp. 2d 1041, 1045 (N.D. Cal. 2011) (The level of control exercised over
a customers money is central to the definition of a prorater.). Similarly,
the Washington Supreme Court concluded that a debt adjustment statute
applied to a company that, like NoteWorld, was engaged in the business of
receiving consumer funds on behalf of separate debt relief companies even
though consumers retained nominal control over their accounts.5 Carlsen v.
Global Client Solutions, LLC, 256 P.3d 321, 325, 12 (Wash. 2011) (It is
unreasonable to suggest that the legislature intended to allow companies
whose activities fit the broad statutory definition of debt adjusting to
nonetheless escape regulation by splitting the traditional functions of a debt
adjuster between multiple entities.). Despite the companys argument in
Carlsen that it did not receive funds because the consumers maintained
control over their accounts and authorized every transaction, the court held
that the company was engaging in debt adjusting because [the company]
receives funds into a custodial account in its own name and, after a [debt
relief company] negotiates a settlement, [the company] distributes money
Californias Financial Code refers to proraters rather than debt
management companies. See Cal. Fin. Code 12000-12404 (West 2014).
The pertinent statute defines a prorater as a person who, for
compensation, engages in whole or in part in the business of receiving money
or evidences thereof for the purpose of distributing the money or evidences
thereof among creditors in payment or partial payment of the obligations
of the debtor. Cal. Fin. Code 12002.1 (West 2014) (emphasis added).
4

The Washington statute reads: Debt adjusting means the managing,

counseling, settling, adjusting, prorating, or liquidating of the indebtedness
of a debtor, or receiving funds for the purpose of distributing said funds
among creditors in payment or partial payment of obligations of a debtor.
Wash. Rev. Code 18.28.010(2) (2014). This section was amended in 2012
to exempt third-party account administrators like NoteWorld from the
definition of debt adjuster. Compare Wash. Rev. Code 18.28.010(1)(b)
(2014) with Wash. Rev. Code 18.28.010(1)(b) (2011); see also Wheeler v.
NoteWorld, LLC, CV 10-0202, 2012 WL 3061489, at 1, 2 (E.D. Wash. July 26,
2012).
5

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Opinion of the Court
to the creditor in payment or partial payment of the consumers debt. Id.
at 324, 10. In so holding, the court noted that the debt adjusting statute
should be construed liberally in favor of the consumers it aims to protect.
Id. at 326, 17.
34
Consistent with the Washington Supreme Courts reasoning
in Carlsen, it would be unreasonable to construe A.R.S. 6-701(4) to allow a
company to avoid licensure simply by splitting its operations into multiple
entities, then putting one in charge of receiving money and another in
charge of distribution. See Carlsen, 256 P.3d at 325, 12; see also Browne v.
Nowlin, 117 Ariz. 73, 77 (1977) (holding a lender could not circumvent a
statutory prohibition against collecting certain fees by using a third-party
escrow agent as a camoflauge); Perini Land & Dev. Co. v. Pima County, 170
Ariz. 380, 383 (1992) (If enforcing the clear language of the constitution
results in an absurd situation, the court may look behind the bare words of
the provision to discern its intended effect.). And it is no consolation to
say, as JHass has argued, that client funds were deposited first into thirdparty trust accounts that the client could cancel at any time, because
Chapter 6 expressly requires all licensed debt management companies to do
the same. A.R.S. 6-709(B), (I). Moreover, as the Department observed
during its investigation, JHass charged clients a monthly maintenance fee
which, by the very terms of the Client Partnership Agreement, was used to
cover the cost of trust account administration. Thus, JHass not only
controlled the allocation and disbursement of client funds held in thirdparty trust accounts, but also received a fee for such services.
35
The burdens of licensure for a debt management company are
the benefits to the consumer. Continued licensure with the Department
requires comprehensive recordkeeping. A.R.S. 6-709(J). Licensed
companies are required to be bonded and maintain a designated amount of
liquid assets in excess of liabilities. A.R.S. 6-704(B), -709(A). Licensed
companies may not charge exorbitant fees, and must evaluate a consumers
ability to pay before accepting an account. A.R.S. 6-709(C), -710(1). With
these strictures in place, the Department can monitor business practices to
prevent fraud and mishandling of consumer funds, while also ensuring a
company has sufficient resources to settle claims with consumers should
something go awry. In sum, Arizonas statutes require that debt
management companies be licensed to operate for the purpose of protecting
consumers. We therefore hold that for purposes of determining whether a
particular entity requires licensing as a debt management company, that
entity receives money if it exercises substantial control over client funds.

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Opinion of the Court
C.

Substantial Evidence

36
JHass also argues the ALJ erred in finding that JHass was a
debt management company because the Department introduced no
evidence that funds were actually disbursed by JHass to a creditor. We
disagree with JHass suggested interpretation of 6-701(4). The statute
defines a debt management company as a company engaged in the business
of receiving money for the purpose of distributing such funds to
creditors. A.R.S. 6-701(4). It does not mandate that the company actually
distribute funds to creditors. If a company were to receive monthly
payments directly from clients under the promise that those funds would
be used to pay creditors, that companys activities would undeniably come
within the purview of 6-701(4), even if the company had not disbursed
the funds collected. By extension, the same must be true then for companies
that receive money by exerting control over client funds held in a thirdparty account to which the company has substantial access. The ALJ
correctly found that 6-701(4) applies to companies which constructively
receive client funds for the purpose of distributing the same to creditors.
Thus, the Department was not required to prove JHass actually distributed
any funds to creditors; that JHass substantially controlled the funds held in
NoteWorld accounts deposited by clients, intending that those funds be
used to pay creditors, is sufficient evidence to support the Departments
order.
37
JHass further argues that evidence presented at the hearing
established that clients actually retained significant control over their own
accounts and therefore insufficient evidence exists in the record to support
the ALJs finding of JHass control. In this administrative appeal, we do not
weigh the evidence; instead, our role is only to determine whether there
was substantial evidence to support the administrative decision. Carondelet
Health Servs. v. Ariz. Health Care Cost Containment Sys. Admin., 182 Ariz. 502,
504 (App. 1995). If an agencys decision is supported by the record,
substantial evidence exists to support the decision even if the record also
supports a different conclusion. Gaveck, 222 Ariz. at 436, 11.
38
In concluding JHass acted as a debt management company
under 6-701(4), the ALJ made separate findings of fact, which the
Department adopted in full when issuing its final order. The ALJ heard
testimony from a NoteWorld Operations Manager who testified
regarding JHass access to clients NoteWorld accounts and ability to
modify, cancel, and refund disbursements from those accounts to itself and
to creditors. The ALJ also heard from former JHass clients who testified
that they (1) did not know that the company holding their money was
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Opinion of the Court
NoteWorld; (2) believed NoteWorld and JHass were part of the same entity;
or (3) knew their money was held in NoteWorld, but they resolved their
money management issues by dealing directly with JHass. Addressing the
issue of whether JHass received money, the ALJ ultimately concluded that
the weight of the evidence of record established that JHass [] was in
constructive receipt or possession of its clients funds by virtue of the
authority and control that it was able to exercise over those funds.
39
JHass relies on NoteWorlds stated policy that it would not
disburse any funds without a written settlement letter from a creditor.
However, a NoteWorld representative testified that while NoteWorlds
policy was to disburse only if a settlement letter was actually received,
NoteWorld in fact did not have any mechanism in place to verify that a
settlement letter was received. Moreover, once a credit was scheduled by
JHass, the disbursement to creditors would go forward unless the client
notified NoteWorld within 24 hours that he or she did not wish to have
those funds disbursed.
What JHass describes as the ability to
countermand any transfer is, according to the testimony of a NoteWorld
representative and the NoteWorld Sign-up Agreement itself, actually a
much more limited right to cancel a disbursement pre-scheduled by JHass.
40
Finally, JHass argues the ALJ erred because the
Departments overreaching description of [JHass] access to the NoteWorld
system is not supported by the record. In doing so, JHass directs us to
various points in the record where former JHass clients testified to
contacting NoteWorld directly, or to accessing their NoteWorld accounts
online. However, the record also includes substantial testimony describing
the extent of JHass access to clients accounts and the limited recourse
clients had for clawing back disbursements to creditors, as well as a letter
from NoteWorlds counsel to the Department agent describing JHass
authority and access. In fact, JHass does not dispute it had some control
over clients NoteWorld accounts, at least for the purposes of scheduling
debits to pay its own fees. Thus, even if JHass clients did have some ability
to countermand a payment, we find substantial evidence within the record
supporting the ALJs conclusion that the totality of the evidence, including
the authorizations JHass does not dispute it had, demonstrated that JHass
exercised substantial control over clients accounts and the funds therein.
CONCLUSION
41
Substantial evidence supports the ALJs finding that JHass
was engaged in the business of a debt management company in Arizona.
The Department did not act arbitrarily, capriciously, or in an abuse of

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Opinion of the Court
discretion in imposing a civil penalty and ordering JHass to cease its
unlicensed operations as a debt management company. We therefore
affirm the judgment of the superior court.

:ama

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