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  • FTC Announces Civil Penalty Judgment Against Debt Collector Fined $2 Million for FDCPA Violations

    Consumer Finance

    On April 24, the FTC announced a civil penalty judgment against the president of a Texas-based debt collection company, ordering him to pay $2 million for violating the Fair Debt Collection Practices Act by falsely threatening debtors (see previous InfoBytes post). The judgment was filed in the Eastern District of Texas and resolves a case filed on the FTC’s behalf by the Department of Justice in January 2015, alleging that the company’s collectors were impersonating attorneys and judicial employees; falsely threatening litigation, wage garnishments and asset seizures; and misrepresenting the character or legal status of debts under collection. Both the president and the debt collection company have been banned from the debt collection business under a permanent injunction issued in April 2016.

    Consumer Finance FTC Debt Collection

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  • California Company Settles FTC Charges, Agrees to Provide Effective Opt-Out for Consumers

    Privacy, Cyber Risk & Data Security

    On April 21, the FTC announced that it had reached a settlement with a California company, which enables sellers to target digital advertisements to consumers, over allegations in violation of the FTC Act that the company deceived consumers by tracking them online and through their mobile devices even after consumers elected to opt out of such tracking. According to the 2016 complaint, the company’s privacy policy conveyed to consumers that its “opt-out mechanism would be effective in blocking tailored, anonymous ads on websites and apps. However, the opt-out cookie applied only to mobile browsers, and was not effective in blocking tailored, anonymous ads on mobile applications.” Moreover, the complaint also alleged that the company used unique identifiers to track specific consumers, even after they had blocked or deleted cookies.

    Following a 30-day public comment period, the Commission voted 2-0 to approve the final order. The order prohibits the company from misrepresenting “the extent to which [it] collects, uses, discloses, retains, or shares” consumers’ information and the ability of consumers to limit, control, or prevent the ways the company uses their data. Furthermore, the company must direct consumers to a disclosure explaining the types of information the company collects and how it uses it for targeted advertising. Clear, easily-accessible opt-out options for consumers who choose not to have their information used in targeted advertising must also be featured. Notably, the Commission stated in letter-responses to two commenters that while it lacks the authority to obtain civil penalties for initial violations under Section 5 of the FTC Act, the company would risk civil penalties of up to $40,654 per violation per day as a compliance incentive and to deter other companies from engaging in similar conduct.

    Privacy / Cyber Risk & Data Security FTC

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  • California Joins 49 States and the District of Columbia in Settlement with Global Money Services Business

    Consumer Finance

    On April 12, California Attorney General Xavier Becerra announced that California has joined a multistate settlement between state attorneys general from 49 states and the District of Columbia and a global money services business to resolve allegations that scammers used the company’s wire transfer services to defraud consumers (see previous InfoBytes post). Under the terms of the settlement, California consumers who made a wire transfer during the period of January 1, 2004 through January 19, 2017, may be eligible for a share of more than $65 million in refunds. As previously covered in InfoBytes, on January 19 of this year, the global money services business entered into a Deferred Prosecution Agreement with the DOJ and FTC requiring, among other things, the business to pay $586 million in refunds to consumers to settle allegations that the company had failed to maintain an effective anti-money laundering program and aided and abetted wire fraud.

    Consumer Finance State AG Enforcement DOJ FTC

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  • FTC Approves Final Orders to Settle Allegations That Companies Misrepresented Participation in International Privacy Program

    Privacy, Cyber Risk & Data Security

    On April 14, the FTC announced  final orders against three U.S. companies, resolving allegations that the companies had falsely represented their participation in the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules (APEC CBPR) system in their online privacy policies (see previous InfoBytes post). Following a 30-day public comment period, the Commission voted 2-0 to approve the final orders, which prohibit the companies from “misrepresenting their participation, membership or certification in any privacy or security program sponsored by a government or self-regulatory or standard-setting organization.” Furthermore, the Commission issued a response letter to one of the commenters stating that although the Commission is not authorized to seek civil penalties for an initial violation, upon approval of the final order, one of the companies “will be subject to civil penalties of up to $40,654 per violation per day,” as a compliance incentive and to  deter other companies from engaging in similar conduct.

    Privacy / Cyber Risk & Data Security FTC APEC CBPR

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  • PHH Submits Reply Brief in Case Against CFPB; DOJ Allocated 10 Minutes at May 24 Oral Argument

    Courts

    As recently covered by InfoBytes, on March 31 the CFPB and seven amicus curiae respondents each filed briefing in PHH Corp. v CFPB urging the D.C. Circuit to uphold the constitutionality of the Bureau’s single-director, independent-agency structure. On April 10, PHH filed a reply brief responding to the arguments raised by the CFPB and other respondents, and reiterating its position that, among other things, the en banc court should declare that the Dodd-Frank Act’s creation of the CFPB violated constitutional separation of powers requirements and that the only satisfactory remedy is the complete invalidation of the Bureau.

    Citing Myers v. United States, 272 U.S. 52 (1926), PHH contends that, “the Constitution does not permit Congress to assign any portion of the executive power to an ’independent’ officer who is not accountable to, and removable by, the President.” Id. at 113. Moreover, in addressing comparisons between the CFPB and the FTC, the mortgage lender’s reply argues that “[t]he CFPB’s broad executive, legislative, and adjudicative authority further refutes its claim that it is functionally ‘indistinguishable’ from the FTC in 1935” because, among other reasons, “[i]n 1935, the FTC had no substantive rulemaking powers—the FTC disclaimed that authority until 1962.” In support of this claim, PHH highlights the fact that “the CFPB has all the authority—and more—of a cabinet department such as Treasury or Justice” but “unlike most cabinet positions, the Director may unilaterally appoint every subordinate official in the agency, as well as hire and compensate all CFPB employees outside the normal competitive-service requirements” (emphasis added). In addition to addressing the constitutional issue, PHH’s reply brief also notes that the CFPB has offered no support for its effort to enforce a reinterpretation of the Real Estate Settlement Procedures Act against the companies.

    Oral argument is scheduled for May 24. As provided in a Per Curiam Order issued on April 11, the Court has allocated 30 minutes per side for the argument and an additional ten minutes of argument for the United States as amicus curiae. For additional background, please see our recent PHH Corp. v CFPB Case Update.

    Courts PHH v CFPB Consumer Finance CFPB Dodd-Frank FTC

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  • Congress Approves Joint Resolution to Repeal FCC’s Broadband Privacy Rules, Signed into Law by President Trump

    Privacy, Cyber Risk & Data Security

    On April 3, President Trump signed into law a measure (S.J.Res. 34) rescinding the new Federal Communications Commission (FCC) broadband privacy rules related to Internet service providers (ISPs). As previously covered on InfoBytes, the privacy rules—passed last year in a 3-2 party-line vote under former Democratic FCC Chairman Tom Wheeler—require, among other things, that ISPs receive express consent from users concerning the use of their personal data for marketing purposes. FCC Chairman Ajit Pai has taken the position that the new FCC regulations are inconsistent with the Federal Trade Commission’s (FTC) framework. The rules had been partially stayed by the FCC in response to multiple reconsideration petitions. Approved last week in the Senate by a 50-48 margin, and subsequently passed by a 215-205 House vote, S.J.Res. 34 was sent to President Trump on Friday for his signature. The President signed the joint resolution into law on Monday evening, thereby repealing the FCC regulations pursuant to the Congressional Review Act, 5 U.S.C. §§ 801-808. Notably, per the language of the resolution—which was originally introduced by Sen. Jeff Flake (R-AZ) in early March—the FCC is also prohibited from re-issuing new rules without the passage of a new law authorizing them.

    Privacy / Cyber Risk & Data Security FCC FTC Trump

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  • Prepaid Card Company Settles FTC Charges, Agrees to Provide $53 Million in Consumer Relief

    Consumer Finance

    On March 31, the FTC announced that it had reached a $53 million settlement with a prepaid card company over charges that the company deceived consumers about access to funds deposited on its debit cards in violation of the FTC Act. The 2016 complaint alleged that the company participated in deceptive advertising claims by informing consumers that they would be able to immediately access funds stored on reloadable prepaid debit cards. Many consumers claimed, however, that they were unable to access their money for weeks or at all because the company either “denie[d] or delay[ed] activation of the card, or because it block[ed] consumers from using it,” and that as a result, many of them suffered severe financial hardships. Moreover, the complaint also claimed that some consumers who closed accounts and requested refunds had to wait several weeks for their money or were informed their funds were allegedly depleted by “account inactivity fees.”  The settlement requires the company to provide the $53 million settlement amount to consumers in refunds.

    The Commission vote approving the settlement was 2-1. Commissioner Terrell McSweeny issued a statement in support of the settlement, noting that he “believe[s] that the proposed stipulated order provides both injunctive and monetary relief that effectively addresses the challenged conduct. The order prohibits [the company] from misrepresenting to consumers how long it will take, or what conditions are necessary, to activate prepaid cards and have access to funds.” Acting Chairman Maureen Olhausen dissented, explaining, “[f]irst, the majority fails to consider the context of [the company’s] representations in concluding that [the company] made false claims to consumers. Second, the settlement order imposes monetary relief unrelated to [Defendant’s] allegedly deceptive advertising.” Olhausen further explained that, in her view, “[c]ontext often has a significant effect on what reasonable consumers take away from representations in advertising. As FTC law has long recognized, ‘the tendency of advertising to deceive must be judged by viewing it as a whole, without emphasizing isolated words or phrases apart from their context.’”

    Consumer Finance FTC Prepaid Cards

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  • FTC Releases 2016 Annual Highlights

    Privacy, Cyber Risk & Data Security

    On March 28, the FTC released its 2016 Annual Highlights Report, which outlines the agency’s ongoing efforts over the past year to protect consumers and promote competition. Acting Chairman Maureen K. Olhausen stated, “2016 was a historic year for the FTC. We obtained almost $12 billion in redress for consumers, and took action in more than a dozen merger cases to preserve competition.” Key highlights in four sections—enforcement, policy, education, and stats and data—covered multiple sectors such as health care, technology, and other consumer products and services. Regarding enforcement highlights in 2016, the report covered a range of administrative and court actions related to, among other things, privacy and data security issues, particularly in the mobile marketplace, as well as the Commission’s largest false advertising settlement in its history with a global auto manufacturer. The policy section of the report highlights eight amicus briefs filed on topics such as reverse payments and the FDCPA, as well as its efforts to provide guidance and recommendations on topics such as sharing economy platforms, big data, and fraud. The education section covers topics such as consumer guidance on fraud, scams, and deceptive business practices prevention, and notes that it published almost 200 blog posts for consumers. Notably, according to the stats and data section of the report, the FTC received more than three million consumer complaints in 2016, consisting of 858,090 debt collection complaints, 503,967 “other” complaints, and 406,578 imposter scam complaints.

    Privacy/Cyber Risk & Data Security FTC FinTech Enforcement Consumer Complaints

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  • FTC Returning More Than $2.7 Million to Consumers Scammed in Debt Collection Scheme

    Consumer Finance

    On March 30, the FTC announced that it is mailing checks to 5,232 consumers who lost money as part of a debt collection scheme that cheated consumers out of more than $2.7 million. The compensation follows a 2011 complaint filed by the Commission that was settled in 2014, in which the two principal owners (Defendants) of the debt collection company were ordered to surrender more than $3.3 million worth of assets to be paid to the victims. Defendants were also permanently banned from the debt collection business and prohibited from falsely representing any financial products or services. The charges in the complaint allege Defendants (and others) violated the FTC Act and FDCPA by: (i) calling consumers and posing as process servers attempting to “deliver legal papers . . . purportedly related to a lawsuit”; (ii) threatening consumers with arrest if they did not respond to the calls; and (iii) masquerading as attorneys or law office employees demanding consumers pay legal fees where, in many instances, “consumers did not even owe the debt the defendants were trying to collect.” According to the Commission’s March 30 announcement, consumers who lost money will receive the full amount of fraudulent fees Defendants added to their debt.

    Consumer Finance Debt Collection FTC FDCPA

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  • Debt Collection Company President Fined $2 Million for FDCPA Violations

    Courts

    On March 21, a U.S. district judge in the Eastern District of Texas ordered the president of a Texas-based third-party debt collector company (Defendant) to pay a $2 million civil penalty for FDCPA violations by company employees. U.S. v. Commercial Recovery Systems, Inc., No. 4:15-CV-00036, 2017 WL 1065137 (E.D. Tex. Mar. 21, 2017). The complaint, filed in 2015, alleges that Defendant had the authority to direct and control the employees’ actions and had personal knowledge that employees were “impersonating attorneys, attorneys’ staff and judicial employees; falsely threatening litigation; falsely threatening wage garnishments and asset seizures; and misrepresenting the character or legal status of debts under collection.” In his order, the judge notes that Defendant “admitted to hiring abusive collection managers and refused to fire them if they were effective,” acknowledged that the company had no formal FDCPA training program, and testified that the company had been driven into bankruptcy largely by FDCPA suits brought by private litigants. Such conduct, the judge reasoned, evidences a “lack of good faith.” The Court noted that theoretically the Defendant could have faced a civil penalty exceeding $4 billion if the estimated 109,643 violations were penalized at $40,000 each—the maximum penalty amount authorized by the FTC Act for “each instance of conduct that violates the FDCPA with actual or implied knowledge of the FDCPA.” In additional to the penalty, the Defendant must cease all debt collection activity.

    Courts Financial Crimes FDCPA Debt Collection FTC

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