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  • FTC seeks comments on possible adjustments to privacy and data security rulemaking authority

    Privacy, Cyber Risk & Data Security

    On August 6, the FTC published a request for comments in the Federal Register—in advance of a series of 15 to 20 public hearings scheduled to start this September—on whether the agency should make adjustments to competition and consumer protection law, enforcement priorities, and policy in light of evolving technologies and market developments. The hearings will cover a range of consumer-related issues, including the agency’s “remedial authority to deter unfair and deceptive conduct in privacy and data security matters” and the “interpretation and harmonization of state and federal statutes and regulations that prohibit [such conduct].” According to testimony presented by FTC Chairman Joseph Simons at a July 18 House Subcommittee on Digital Commerce and Consumer Protection hearing, there exists a need for expanded rulemaking and civil penalty authority. Specifically, Simons discussed Section 5 of the FTC Act, which he stated is too limited to address all of the privacy and security concerns in the marketplace and does not provide for civil penalties. Comments on the hearing topics must be received by August 20.

    Privacy/Cyber Risk & Data Security FTC Federal Register FTC Act

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  • FTC announces charges against auto dealerships for falsifying consumer information on auto financing documents

    Lending

    On August 1, the FTC announced charges against a group of four auto dealers (defendants) with locations in Arizona and New Mexico near the Navajo Nation’s border alleging, among other things, that the defendants advertised misleading discounts and incentives through their vehicle advertisements, and falsely inflated consumers’ income and down payment information on certain financing applications. The charges brought against the defendants allege violations of the FTC Act, the Truth in Lending Act, and the Consumer Leasing Act. According to the complaint, by allegedly falsifying the customers’ income and down payments, the defendants “inaccurately made consumers appear more creditworthy” on the false financing applications. Moreover, the FTC claims the defendants often prevented consumers from reviewing the falsified information provide in the financing applications prior to signing. As a result, credit was extended to consumers—many of whom are members of the Navajo Nation—who then subsequently “defaulted at a higher rate than properly qualified buyers.” Furthermore, the complaint asserts that the defendants’ deceptive advertising practices concealed the true nature and terms of the financing or leasing offers, and were in violation of federal law for failing to disclose the required terms. The complaint seeks, among other remedies, a permanent injunction to prevent future violations, restitution, and disgorgement.

    Lending Consumer Finance FTC Auto Finance FTC Act TILA Consumer Leasing Act

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  • FTC halts fraudulent telemarketing scheme in Arizona

    Consumer Finance

    On July 31, the FTC announced that it had successfully halted a $3 million telemarketing scheme, which falsely promised to obtain grants for consumers in exchange for the upfront payment of fees. The FTC alleges the Arizona-based defendants charged consumers upfront fees ranging from $295 to $4,995 and promised to obtain $10,000 or more in government, corporate, or private grants that could help the consumers pay off personal expenses such as medical bills. However, “most, if not all,” consumers ultimately received nothing in return and the defendants often changed the company name once they received consumer complaints or state attorney general notices, or once they lost merchant accounts.

    On July 16, the FTC filed a now-unsealed complaint with the U.S. District Court for the District of Arizona. The FTC simultaneously sought a temporary restraining order (TRO), which the court granted the following day. Among other things, the TRO prohibits the defendants from: (i) conducting similar business activities; (ii) violating the Telemarketing Sales Rule; and (iii) using or disseminating consumer information obtained through the fraudulent activities. Additionally, the TRO freezes the defendants’ assets and places the companies in receivership until relief is determined.

    Consumer Finance FTC Federal Issues Courts Telemarketing Sales Rule

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  • FTC testifies before House subcommittees about combating consumer fraud

    Federal Issues

    On July 26, the Director of the FTC’s Bureau of Consumer Protection, Andrew Smith, testified before subcommittees of the U.S. House Committee on Oversight and Government Reform regarding the FTC’s program to combat consumer fraud. The prepared testimony discusses the FTC’s anti-fraud program and highlights the agency’s enforcement actions against illicit companies that pose as government agents, such as the IRS, to convince consumers and small businesses to send them money. The FTC touts the steps taken to spur development of technological solutions to unlawful robocalls, including call-blocking and call-filtering products. The testimony also focuses on the FTC’s efforts to curb payment processors from assisting fraudulent actors in violation of the FTC Act. The FTC notes that the Commission has brought 25 actions against payment processors that failed to comply with requirements to ensure their systems were not being used to process fraudulent merchant transactions. The FTC emphasized that while the “overwhelming majority” of payment processors abide by the law, when certain processors do not, they cause “significant economic harm to consumers and legitimate businesses.”

    Federal Issues Payment Processors Consumer Finance Fraud Robocalls FTC FTC Act U.S. House

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  • FTC and New York Attorney General reach deal with debt collection firm

    Courts

    On July 20, the U.S. District Court for the Western District of New York issued a judgment to resolve a suit brought by the FTC and the New York Attorney General against a debt collection firm and an affiliated officer (defendants) accused of allegedly engaging in deceptive and abusive practices, including unlawfully threatening to arrest consumers if debts were not paid. (See previous InfoBytes coverage here.) Under the stipulated final order for permanent injunction and settlement of claims pursuant to the FTC Act and the Fair Debt Collection Practices Act, the defendants—who have not admitted to the allegations—are held jointly and severally liable for paying the more than $22.5 million under a suspended judgment should it ever be determined that the financial disclosures provided to the state and the FTC were not completely truthful, accurate, or complete. The defendants are also banned from the debt collection industry and required to file compliance reports with the FTC. The judgment further authorizes the receiver to liquidate the debt collection firm’s assets.

    Courts FTC State Attorney General Debt Collection FTC Act FDCPA

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  • DOJ announces task force on market integrity and consumer fraud

    Federal Issues

    On July 11, the Deputy Attorney General, Rod Rosenstein, announced the establishment of a new task force on market integrity and consumer fraud pursuant to an Executive Order (EO) issued by President Trump on the same day. The task force, led by Rosenstein, will provide guidance for the investigation and prosecution of cases involving fraud on the government, financial markets, and consumers. The announcement lists a wide range of fraudulent activities, including (i) cyber-fraud; (ii) fraud targeting older Americans and service members; (iii) securities and commodities fraud; and (iv) corporate fraud affecting the general public, such as money laundering and other financial crimes. Rosenstein emphasized that the task force will work to achieve “more effective and efficient outcomes” to identify and stop fraud “on a wider scale than any one agency acting alone.”

    While the EO requests senior officials from numerous federal agencies be invited by the DOJ to participate in the task force, Rosenstein was joined by acting Director of the CFPB, Mick Mulvaney; Chairman of the SEC, Jay Clayton; and Chairman of the FTC, Joe Simons in the announcement. Mulvaney stated, “[t]he Bureau takes its mandate to enforce the law seriously, and the Bureau will continue to apply the law to achieve this end of combatting fraud against Americans…. This task force is an example of the growing cooperation of the Bureau’s work with other federal and state authorities to combat a multitude of bad actors out there today.”

    Federal Issues Fraud Consumer Finance Anti-Money Laundering Financial Crimes DOJ SEC FTC CFPB

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  • FTC, CFPB discuss scope of Fair Credit Reporting Act during Senate Banking Committee hearing

    Federal Issues

    On July 12, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “An Overview of the Credit Bureaus and the Fair Credit Reporting Act” to discuss the scope and enforcement of the Fair Credit Reporting Act (FCRA), the measures undertaken by the CFPB and the FTC to oversee credit bureau data security and accurate credit reporting, and other laws and regulations as they pertain to credit bureaus. Committee Chairman Mike Crapo, R-Idaho, opened the hearing by discussing the need to understand the “current state of data security, data accuracy, data breach policy” given consumers’ increased reliance on technology and recent cybersecurity incidents.

    Associate Director for the Division of Privacy and Identity Protection at the FTC, Maneesha Mithal, discussed in prepared remarks the FTC’s role in implementing, enforcing, and interpreting the FCRA, as we all as the importance of educating consumers and businesses about FCRA requirements. According to Mithal, the FCRA continues to be a “top priority” for the FTC as the consumer reporting system evolves and new technologies emerge. Mithal discussed consumer reporting agency (CRA) FCRA compliance requirements concerning, among other things, dispute resolution processes, furnisher obligations, and credit reporting accuracy. Specifically, Mithal commented on the FTC’s more than 30 FCRA enforcement actions, in addition to the more than 60 law enforcement actions taken against companies for allegedly failing to implement reasonable data security practices. Mithal also touched upon the FTC’s business guidance and consumer education efforts concerning FCRA rights and obligations.

    Assistant Director for Supervision Policy at the Bureau, Peggy Twohig, similarly discussed the Bureau’s authority over CRAs and furnishers with respect to the agency’s supervisory and enforcement authority, and noted, among other things, that while the agency possesses broad authority to promulgate rules as required to enforce the FCRA, it lacks rulemaking authority under certain sections of the FCRA related to red flags and the disposal of records, which fall under the FTC’s purview. Twohig further commented on the Bureau’s efforts to educate consumers on a variety of topics, including data breaches, credit freezes, and credit and identity monitoring.

    Federal Issues FTC CFPB Senate Banking Committee FCRA Consumer Reporting Agency Enforcement Consumer Education

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  • FTC announces settlement with California company over EU-U.S. Privacy Shield false certification claims

    Privacy, Cyber Risk & Data Security

    On July 2, the FTC announced it had reached a settlement with a California-based company over allegations that it falsely claimed participation in the European Union-U.S. Privacy Shield framework, EU-U.S. Privacy Shield. According to the FTC, the company’s false claim that it was in the process of certification is a violation of the FTC Act’s prohibition against deceptive acts or practices. The settlement prohibits the company from misrepresenting its participation in “any privacy or security program sponsored by a government or any self-regulatory or standard-setting organization” and requires the submission of timely compliance notices. This action marks the fourth FTC EU-U.S. Privacy Shield enforcement action following the EU’s finalization and adoption in July 2016 (see previous InfoBytes coverage here) of the EU-U.S. Privacy Shield, which established a mechanism for companies to transfer consumer data between the EU and the U.S. in compliance with specified obligations.

    Privacy/Cyber Risk & Data Security FTC Enforcement Settlement

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  • District Court agrees with FTC, enters $5 million judgment against credit monitoring scheme

    Courts

    On June 26, the U.S. District Court for the Northern District of Illinois granted the FTC’s motion for summary judgment, concluding that no reasonable jury would find that the defendants’ scheme of using false rental property ads to solicit consumer enrollment in credit monitoring services without their knowledge did not involve unfair or deceptive practices. The FTC argued that the defendants’ scheme, which used the promise of a free credit report to enroll the consumers into a monthly credit monitoring program, violated the FTC Act’s ban on deceptive practices. The court agreed, holding that the ad campaign was “rife with material misrepresentations that were likely to deceive a reasonable consumer.” Additionally the court agreed with the FTC that the defendants’ website was materially misrepresentative because it did not give “the net impression that consumers were enrolling in a monthly credit monitoring service” for $29.94 a month, as opposed to defendants’ claim that consumers were obtaining a free credit report.

    The court entered a judgment ordering the defendants to pay over $5 million in equitable monetary relief to the FTC and prohibiting defendants from, among other things, charging consumers for any credit monitoring services and disclosing or using any collected consumer information. The defendants must also submit to compliance reporting and monitoring by the FTC.

    Courts FTC Act Credit Report Credit Monitoring FTC

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  • FTC and New York Attorney General announce action against phantom debt operation

    Consumer Finance

    On June 27, the FTC and the New York Attorney General’s Office announced charges against two New York-based phantom debt operations and their principals. The complaint alleges they ran a deceptive and abusive debt collection scheme involving the marketing and selling of fictitious loan debt portfolios and collecting on debts consumers did not owe. The charges brought against the operations allege violations of the FTC Act, the Fair Debt Collection Practices Act, and New York state law. According to the complaint, the debt broker knowingly purchased fabricated debt from a phantom debt collection operation previously charged by the FTC and the Illinois Attorney General in a separate action for selling fabricated debt. (As previously covered by InfoBytes, the Illinois-based operation was banned from the debt collection business and prohibited from selling debt portfolios.) The debt broker then engaged a debt collection agency and its owner to collect on the fabricated debt using illegal collection tactics, while continuing to purchase debts and place them for collection despite having knowledge that consumers disputed the debts. The complaint seeks, among other things, injunctive relief, restitution, and disgorgement.

    Consumer Finance FTC State Attorney General Debt Collection Debt Buyer FTC Act FDCPA State Issues

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