STATE OF ILLINOIS IN THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT SANGAMON COUNTY. Plaintiff, Defendant.

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1 EFILED 4/18/ :40 AM Paul Palazzolo 7th Judicial Circuit Sangamon County, IL STATE OF ILLINOIS IN THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT SANGAMON COUNTY THE PEOPLE OF THE STATE OF ILLINOIS, v. Plaintiff, FUTURE INCOME PAYMENTS, LLC, a foreign corporation not authorized to transact business in the State of Illinois Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) NO. 2018CH COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF NOW COMES the Plaintiff, THE PEOPLE OF THE STATE OF ILLINOIS, by LISA MADIGAN, Attorney General of the State of Illinois, and brings this action for injunctive and other relief against Defendant FUTURE INCOME PAYMENTS, LLC for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. and the Consumer Installment Loan Act, 205 ILCS 670/1 et seq. SUMMARY OF THE CASE In this case the People of the State seek to hold a company accountable for cheating Illinois retirees and veterans out of the pension benefits they have earned. Although the Defendant, Future Income Payments, LLC ("FIP"), paints its products as "pension sales," they are in reality nothing more than predatory loans with usurious i of ic

2 interest rates that reach 200%. FIP regularly saddled Illinois consumers with these high-interest, illegal loans by exploiting their urgent need of cash for healthcare and other immediate demands. Ifconsumers realized the cost and tried to cancel the deal, FIP took money from their bank accounts anyway. Twelve other regulators have taken action against FIP, deeming FIP's products to be illegal loans. The Attorney General now brings this case on behalf of the People of Illinois alleging the unfair and deceptive business practices FIP has perpetrated against Illinois residents. PUBLIC INTEREST 1. The Illinois Attorney General believes this action to be in the public interest of the citizens of the State of Illinois and brings this lawsuit pursuant to the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS SOS/7(a). JURISDICTION AND VENUE 2. This action is brought for and on behalf of THE PEOPLE OF THE STATE OF ILLINOIS, by LISA MADIGAN, Attorney General of the State of Illinois, pursuant to the provisions of the Consumer Fraud and Deceptive Business Practices Act ("Consumer Fraud Act"), 815 ILCS 505/1 et seq. and her common law authority as Attorney General to represent the People of the State of Illinois. 3. Venue for this action properly lies in Sangamon County, Illinois, pursuant to Section and 2-102(a) ofthe Illinois Code of Civil Procedure, 735 ILCS 5/2-101, S/2-102(a), in that the Defendant is a foreign corporation not authorized to do business in this State. PARTIES 4. Plaintiff, THE PEOPLE OF THE STATE OF ILLINOIS, by LISA MADIGAN, the Attorney General of the State of Illinois, is authorized to enforce the 2of19

3 Consumer Fraud Act and the Consumer Installment Loan Act. 5. Defendant Future Income Payments, LLC is a Nevada limited liability companywith an agent address of 2505 Anthem Village Drive, #E-599, Henderson, Nevada. Delaware Secretaryof State records also indicate that Future Income Payments, LLC is a Delaware LLC with an agent address of 3535 E Coast Highway #119, Corona Del Mar, California TRADE AND COMMERCE 6. Trade and Commerce under subsection iff) of the Consumer Fraud Act, 815 ILCS 505/l(f) mean: the advertising, offering for sale, sale, or distribution of any services and any property, tangible or intangible, real, personal, or mixed, andany otherarticle, commodity, or thing of value wherever situated, and shall include any trade or commerce directly or indirectly affecting the people of this State. 7. Future Income Payments, LLC, was at all times relevant to this Complaint engaged in trade and commerce in the State of Illinois by advertising and offering pension financing arrangements, lending money to, and collecting payments from the bank accounts of Illinois residents. BACKGROUND 8. Pensions provide a critical source of steady income for retirees and reduce the risk of poverty and material hardships connected with food, shelter, and healthcare shortages. 9. There are nearly a half-million active beneficiaries of state and local retirement plans in Illinois, which include the police officers, firefighters, teachers, and librarians who have supplied critical services throughout the state. 30f19

4 10. Other Illinois residents are active beneficiaries of federal retirement plans, including retirement plans for prior military service. Beyond retirement plans, there are also over 100,000 Illinois veterans who receive disability or pension compensation benefits from the federal government. 11. Similarly, close to halfof all Illinoisans participate in private sector retirement plans. 12. Pension payments, including VA disability or non-service connected pension compensation, are typically protected assets and, in numerous cases, the law explicitly prohibits them from being sold or transferred to someone else. 13. For instance, with respect to the Illinois Municipal Retirement Fund, a pension program that covers the benefits of roughly 3,000 units of Illinois local government, the Pension Code provides that "the right of any person to receive an annuity or other benefit... or a refund or return of contributions, shall not be subject to... sale, pledge, mortgage or other alienation, and shall not be assignable." 40 ILCS5/7 217; 14. Analogous restrictions to those above are standard throughout pension plans in Illinois. See e.g., 40 ILCS 5/8-244 (municipal pensions in cities over 500,000); 40 ILCS 5/ (State Employee Retirement System); 40 ILCS 5/2-154 (General Assembly Retirement System); 40 ILCS5/6-213 (Firefighters in cities over 500,000); 40 ILCS 5/ (Teachers Retirement System). 15. Along with restrictions on transfers, Illinois law protects retirement benefits from the reach of judgment creditors. The Code of Civil Procedure broadly provides that "[b]enefits and refunds payable by pension or retirement funds or systems and any assets of employees held by such funds or systems, and any monies an 40f19

5 employee is required to pay to such funds or systems are exempt and are not subject to garnishment or deduction orders." 735 ILCS 5/12-804; 735 ILCS 5/12-704; 735 ILCS 5/ DEFENDANT'S COURSE OF CONDUCT A. FIP's Dealings With Illinois Consumers 16. FIP claims it leads the nation in creating pension-based funding products. It advertises over the Internet and places sales calls to Illinois consumers. 17. Some Illinois consumers have found FIP through searches for payday and other short term loan products and are directed to websites such as When a consumer fills out an inquiry form on FIP's website or a related site, he or she will receive a call from a FIP salesperson who attempts to sell FIP's services to the consumer. 19. Consumers who speak to an FIP salesperson report having believed they were agreeing to take out a loan with the Defendant. Consumers also believed that there was no restriction on paying back the loan early. 20. When the amount the consumer will borrower is agreed between the consumer and FIP, FIP returns transaction paperwork to consumers by FIP's paperwork deems its product a "PURCHASE AND SALE AGREEMENT" for a consumer's pension stream. (Exhibit A). 22. The agreement calls the consumer the "Seller" and FIP the "Buyer." FIP buys the "Purchased Asset," which is a stream of the consumer's pension payments. 23. FIP requires consumers to provide the bank account information into which their pension benefits or other fixed income stream are deposited and makes 50f 19

6 monthly electronic funds transfers from that bank account. 24. Once "purchased," the agreement says that FIP will sell and assign the consumer's pension payments to a "subsequent purchaser" who will then receive the consumer's pension payments from FIP. 25. As part of the application, consumers provide FIP details of their pension plan or other fixed income stream, including the company or agency they receive it from and the amount they get paid monthly. (Exhibit A). 26. In exchange for their pension or fixed income stream, consumers receive a lump sum "Purchase Price" from FIP. The "Purchase Price" reflects a fraction of value of the monthly installments FIP will receive from the consumer's pension. 27. For example, in one instance where an Illinois consumer did business with FIP, FIP "purchased" a series of her 48 pension payments of $350 dollars each for a total of $2,100. The cash value ofthose 48 payments is $16,800 ($350*48), and that is what she was required to pay back to FIP over 48 months. (Exhibit A). 28. FIP makes money by retaining the difference between the amount it advances the consumer and the amount it receives in payments from the consumer's pension stream. In this example, the difference is $14,700 ($16,800-$2,100). Expressed as an Annual Percentage Rate ("APR"), this transaction costs the consumer approximately 200%. 29. FIP does not quote consumers an APR, and the cost of the consumer to finance the transaction is buried at the end of an exhibit to the transaction documents. 30. The transaction documents contain an automatic debit form. Once a consumer executes the authorization for automatic debit, it becomes virtually impossible to change his or her mind about going through with the transaction. FIP 6 of 19

7 prohibits a borrower form altering the automatic withdrawal information provided by the borrower without FIP's permission. 31. In fact, there are instances in which FIP continues to debit a consumer's account even after the consumer has told them not to. In some cases, once Illinois consumers realized the exorbitant cost of the transaction and tried to cancel or give FIP back its "lump sum," FIP told them they cannot change their minds and continued to take money from their bank accounts anyway. To stop FIP from taking their money, Illinois consumers have had to close their existing bank accounts and open new ones. 32. While FIP represents that an electronicfund transfer is a necessary part of the transaction, Illinois law prohibits conditioning the extension of credit on the electronic transmission of funds. 205 ILCS 616/ Once the borrower electronically signs the transaction agreement identifying their pension holder and electronic debit form identifying their bank account, the consumer sends the forms electronically to FIP. 34. Then, like any other credit transaction, the terms of FIP's transaction call for a credit check and a comprehensive review of the consumer's credit ratings, employment history, and bankruptcies. 35. When the consumer meets the required underwriting steps to FIP's satisfaction, FIP sends the lump sum to consumers' bank accounts and will start to draw funds from consumers' accounts monthly. 36. FIP typically requires borrowers to pay a $300 additional "setup fee." 37. Once the transaction is completed, FIP provides the borrower with an IRS 1099 form and directs the borrower to declare the proceeds of the "sale" as income. B. FIP's pension sales are a subterfuge to cover thefact its products are 70f 19

8 illegal loans 38. FIP claims the "agreement is not a loan or other financing transaction, and neither Seller nor FIP intend this agreement to be regarded as a loan or other financing instrument." 39. The self-serving labels FIP affixes to its products are not determinative of what its transactions actually are. 40. FIP's pension sales constitute loans under the Consumer Installment Loan Act. FIP is the lender and the Seller is the borrower. 41. Illinois consumers who have entered into agreements with FIP have understood that FIP's products were loans and they found FIP by searching for loan products to meet their short-term financial needs. 42. As part of the transaction, FIP represents it conducts credit and background checks and evaluates the creditworthiness of consumers who enter into transactions with FIP. 43. FIP claims it has the right to collect on and foreclose on the pension payments in the event the borrower does not pay. 44. The States of Colorado, California, Massachusetts, North Carolina, New York, Washington, Iowa, Pennsylvania, Minnesota, Virginia, and the City of Los Angeles have taken action against FIP, alleging that FIP makes unlicensed and usurious loans. 45. Throughout the application process, FIP represented to Illinois consumers that its receipt of the sale of pension proceeds is legitimate; namely, FIP had the right to purchase an Illinois consumer's pension stream and consumers have the right to sell it. FIP's agreement states explicitly the "[a]greement constitutes a valid transfer, sale and conveyance" of the borrower's pension payments. 8 of io

9 46. There are key instances where FIP's receipt of a transfer of rights to an Illinois consumer's pension payments are prohibited under Illinois law and the pension regulations that implement them. For instance, FIP entered into a transaction with a beneficiary of the Illinois Municipal Retirement Fund, which restricts the sale or transfer of pension benefits. 40 ILCS 5/ In at least one case, FIP misrepresented orally to a consumer that her pension company had approved the transaction even after the pension company had told the consumer that she could not take out a loan based on her pension payments. 48. Furthermore, FIP's transaction document implies FIP can satisfy its contractual rights by legal action in court to enforce a consumer's failure to transmit pension payment amounts to FIP, rendering the consumer liable for damages in the amount of pension payments due to FIP. 49. In most cases, pension and retirement benefits remain exempt from garnishment and attachment through court processes. Thus, if FIP were to proceed in litigation to enforce a breach of the contract, FIP would likely lack any right in Illinois law for a court to award FIP the turnover of pension funds it claims are obligated to it because they are exempt from attachment. 735 ILCS5/12-804; 735 ILCS 5/12-704; 735 ILCS 5/ C. The Defendant Should Be Licensed Under The Consumer Installment LoanAct 50. Illinois law requires lenders like FIP to obtain a license from the Department of Financial and Professional Regulation under the Consumer Installment Loan Act. 51. Such a license allows for oversight by the Department to ensure that 90f19

10 lenders are properly adhering to the requirements of the law. 52. Among other things, the Consumer Installment Loan Act prohibits deceptive advertising of loans. 53. The Consumer Installment Loan Act also limits the finance charge a lender may impose on a consumer to 99% APR on a small consumer loan of $1,500 or less and 36% APR on a loan up to $40, FIP's products consistentlybearaprs that are over 100%. 55. FIP has not obtained a proper license to extend consumer installment loans in Illinois. 56. Lending without a proper license or authority is illegal underillinois law. 57. On February 20,2018, the Illinois Department of Financial and Professional Regulation ordered FIP to cease and desist from lending in violation of the Consumer Installment Loan Act. (Exhibit B). The Department found that FIP violated the Consumer Installment Loan Act in the following ways: FIP made loans without a proper license; FIP charged APRs in excess of 99%; FIP charged impermissible setup fees; FIP's loans did not fully amortize over a period of months; FIP failed to properlydisclose the "amountfinanced," "finance charge," "total payments;" and, FIP conditioned repayment on preauthorized electronic transfers. 58. The Department determined that FIP's loans are null and void and they have no right to receive payments from them. 59. FIP, therefore, misrepresents to consumers that its loans are legal. 10 of 19

11 D. Consumer Illustrations 60. The Office of the Attorney General has received complaints from consumers relating to FIP's business practices. FIP's unlawful conduct is ongoing and continuous. Therefore, any examples of specific consumer experiences are simply illustrations and should not be taken to mean they are the only instances where an Illinois consumerwas harmed or could potentiallybe harmed by FIP. Plaintiffreserves the right to introduce evidence of other instances of FIP's unfair or deceptive acts or practices, including those about consumers other than those who have complained to the Office of the Attorney General. 61. V.W. is a retired customer service agent who worked for the railroad. In urgent need of money to help her daughter stay in her home, V.W. began searching onlinefor loans. She was soon contactedby an agent for FIP who said they could give her the money she needed. FIP then advanced V.W. $2,100 in exchange for 36 months of payments of $300, costing the consumer $10,800 over the term of the transaction. Expressed as an APR, this transaction costs the consumer approximately 170%. At one point, the consumer tried to payoff the loan early, but FIP told her it would not matter and she would still owe the remainder of the pension payments. Her experiences dealing with FIP have caused her stress and the loan has cut into the money she needs to buy medicine. 62. L.M. was recovering from breast cancer and was looking for money to help pay medical bills. She was contacted by an agent for FIP who asked her ifshe had ever taken out a loan against her pension. FIP then advanced L.M. $2,100 in exchange for 48 monthly payments of $350 out of her Chicago Transit Authority Pension, costing the consumer $16,000 over the term ofthe transaction. Expressed as an APR, this 11 of 19

12 transaction costs the consumer approximately 200%. Having paid off her debt and thinking this a loan, L.M. contacted FIP to payoffthe balance of the loan, but FIP told her it would not matter and she would still owe the remainder of the pension payments. L.M. was forced to close down her bank account in order to stop FIP from making repeated debits from it. FIP contacted L.M. and demanded she put money on a prepaid debit card in order to make continued monthly payments. VIOLATIONS APPLICABLE STATUTES CONSUMER FRAUD ACT 63. Section 2 of the Consumer Fraud Act, 815 ILCS 505/2, provides: Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in section 2 of the "Uniform Deceptive Trade Practices Act", approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. CONSUMER INSTALLMENT LOAN ACT 64. The Consumer Installment Loan Act provides in pertinent part: No person, partnership, association, limited liability company, or corporation shall engage in the business of making loans of money in a principal amount not exceeding $40,000, and charge, contract for, or receive on any such loan a greater rate of interest, discount, or consideration therefor than the lender would be permitted by law to charge if he were not a licensee hereunder, except as authorized by this Act after first obtaining a license from the Director of Financial Institutions...2oS ILCS 670/1 65. Every licensee may lend a principal amount not exceeding 12 of 19

13 $40,000 and, except as to small consumerloans as defined in this Section, may charge, contract for and receive thereon interest at an annual percentage rate of no more than 36%, subject to the provisions ofthis Act ILCS 670/15(a) 66. With respect to a small consumer loan: A licensee may charge, contract for and receive interest at an annual percentage rate of no more than 99% calculated in accordance with the federal Truth in Lending Act. 670/17 2(a)(2) 67. Advertising for loans transacted under this Act may not be false, misleading or deceptive ILCS 670/18 COUNT I - CONSUMER FRAUD ACT 68. Future Income Payments has engaged in a course of trade or commerce which constitute unfair and deceptive acts or practices declared unlawful under Section 2 ofthe Consumer Fraud Act, 815 ILCS 505/2, in connection with marketing and performing pension financing transactions by: a. Representing expressly or by implication that FIP's financial transactions are legal when, in fact, FIP failed to obtain the required license under the Consumer Installment Loan Act as required by law. b. Representing expressly or by implication that FIP's transactions are sales, when in fact, FIPs transactions are loans that are regulated by the Consumer Installment Loan Act; c. Representing expressly or by implication that FIP is permitted to retain a finance charge consisting of the difference between what FIP advances consumers and the amount it receives in pension payments when, in fact, the amount FIP collects as a finance charge is regularly in excess of the permissible charge under the Consumer Installment Loan 13 of 19

14 Act; d. Representing expressly or by implication that consumers can sell a stream of their pension payments to FIP when, in fact, the sale or transfer of those pension payments is prohibited by law; e. Representing expressly or by implication that FIP has the right to assign a stream of a consumer's pension payments to a subsequent purchaser when, in fact, the sale or transfer of those pension payments was prohibited by law; f. Representing expressly or by implication that the amount of money advanced to borrowers constitutes income from a sale, when in fact, the amount received from FIP was not income but the proceeds of a loan; g. Representing expressly or by implication that a borrower's pension plan approved the transaction with the consumer, when in fact the pension representatives from the plan had stated the transaction was impermissible; h. Representing expressly or by implication that FIP can recover a borrower's pension payments in a legal action when, in fact, those pensions are exemptfrom recovery in post-judgement court processes; 1. Representing expressly or by implication that a borrower must execute an authorization for electronic debit when, in fact, Illinois law prohibits conditioning an offer of credit upon the execution of electronic fund transfer; J. Representing expressly or by implication that a consumer has the ability to payoffthe loan early when, in fact, FIP does not permit 14 of 19

15 consumers to payoffthe loan early; k. Unfairly and deceptively attempting to force a consumer to go through with a transaction with FIP by debiting the consumer's bank account when the consumer informed FIP they no longer wished to go through with the transaction with FIP; 1. Failing to disclose to consumers a material term of the transaction, specifically the Annual Percentage Rate FIP charges consumers on its loans. COUNT I - REMEDIES 69. Section 7 of the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/7, provides: (a) Whenever the Attorney General has reason to believe that any person is using, has used, or is about to use any method, act or practice declared by the Act to be unlawful, and that proceedings would be in the public interest, he may bring an action in the name of the State against such person to restrain by preliminary or permanent injunction the use of such method, act or practice. The Court, in its discretion, may exercise all powers necessary, including but not limited to: injunction, revocation, forfeiture or suspension of any license, charter, franchise, certificate or other evidence of authority of any person to do business in this State; appointment of a receiver; dissolution of domestic corporations or association suspension or termination of the right of foreign corporations or associations to do business in this State; and restitution. (b) In addition to the remedies provided herein, the Attorney General may request and this Court may impose a civil penalty in a sum not to exceed $50,000 against any person found by the Court to have engaged in any method, act or practice declared unlawful under this Act. In the event the court finds the method, act or practice to have been entered into with intent to defraud, the court has the authority to impose a civil penalty in a sum not to exceed $50,000 per violation. 15 of 19

16 (c) In addition to any other civil penalty provided in this Section,ifa person is found by the court to have engaged in any method, act, or practice declared unlawful under this Act, and the violation was committed against a person 65 years of age or older, the court may impose an additional civil penalty not to exceed $10,000 for each violation. 70. Section 10 of the Consumer Fraud Act, 815 ILCS 505/10, provides that "in any action brought under the provisions of this Act, the Attorney General is entitled to recover costs for the use of this State." COUNT I -PRAYER FOR RELIEF WHEREFORE, the plaintiff prays that this honorable Court enter an Order: A. Finding that the defendant has violated Section 2 of the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2, by engaging in the unlawful acts and practices alleged herein; B. Preliminarily and permanently enjoining the defendant from engaging in the deceptive and unfair practices alleged herein, or enjoining the defendant from operating in the State of Illinois; C. Declaring that all contracts entered into between the defendant and Illinois consumers by the use of methods and practices declared unlawful are void or rescinded and requiring that full restitution be made to said consumers; D. Ordering the defendant to pay up to $50,000 per deceptive act or unfair practice and an additional amount of $50,000 for each act or practice found to have been committed with intent to defraud, as provided in Section 7 of the Consumer Fraud Act, 815 ILCS 505/7; 16 of 19

17 E. Requiring the defendant to pay all costs for the prosecution and investigation of this action, as provided by Section 10 of the Consumer Fraud Act, 815 ILCS 505/10; and require. F. Providing such other and further equitable relief as justice and equity may COUNT II - CONSUMER INSTALLMENT LOAN ACT 71. Plaintiffs re-allege and incorporate the allegations in Paragraphs 1 to Defendant has violated the Consumer Installment Loan Act by offering loans to Illinois consumers without licensure by the Illinois Department of Financial and Professional Regulation. COUNT II - REMEDIES 73. If it appears to the Director that a person or any entity has committed or is about to commit a violation of this Act, a rule promulgated under this Act, or an order of the Director, the Director may apply to the circuit courtfor an orderenjoining the person or entity from violating or continuing to violate this Act, the rule, or order and for injunctive or other relief that the nature of the case may require and may, in addition, request the court to assess a civil penalty up to $1,000 along with costs and attorney's fees. (205 ILCS 670/24.5) 74. Notwithstanding any other provision of this Section, if any person who does not have a license issued under this Act makes a loan pursuant to this Act to an Illinois consumer, then the loan shall be null and void and the person who made the loan shall have no right to collect, receive, or retain any principal, interest, or charges related to the loan. 205 ILCS 670/20(d) COUNT II - PRAYER FOR RELIEF WHEREFORE, the Plaintiff prays that this Honorable Court enter an Order: 17of 19

18 A. Finding that Defendant is engaged in lending under the Consumer Installment Loan Act, 205 ILCS 670/1 et seq., without first having obtained a license required by the Consumer Installment Loan Act; B. Permanently enjoining Defendant, acting alone or in concert with others, from making or offering loans to Illinois consumers unless Defendant becomes licensed by the Department of Financial and Professional Regulation. C. Declaring that all contracts entered between the Defendant and Illinois consumers are null and void pursuant to Section 20(d) of the Consumer Installment Loan Act; and requiring that full restitution be made to said consumers; and require, D. Providing such other and further equitable relief as justice and equity may Respectfully submitted, THE PEOPLE OF THE STATE OF ILLINOIS, by LISA MADIGAN, ATTORNEY GENERAL OF ILLINOIS DEBORAH HAGAN Consumer Protection Division, Chief ELIZABETH BLACKSTON Consumer Fraud Bureau, Chief BY:~~ PAUL A. ISAAC - Attorney No Consumer Fraud Bureau, Deputy Bureau Chief 500 S. Second Street Springfield, Illinois pisaac@atg.state.il.us PHILIP HEIMLICH Consumer Fraud Bureau, Supervising Attorney 500 S. Second Street 18 of 19

19 Springfield. Illinois GRANT SWINGER Military & Veterans Rights, Bureau Chief 100 W. Randolph Street, izth Floor Chicago Illinois of 19

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