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Court grants summary judgment in favor of FTC and Florida State Attorney General in debt relief scam case
On December 10, the U.S. District Court for the Middle District of Florida granted the FTC and the Florida Attorney General’s motion for summary judgment against an individual accused of participating in a scheme that allegedly targeted financially distressed consumers through illegal robocalls selling bogus credit card debt relief services and interest rate reductions. According to a 2016 complaint, several interrelated companies and the founder of such companies (defendants), among other things, allegedly violated the FTC Act, the Telemarketing Sales Rule, and the Florida Deceptive and Unfair Trade Practices Act by (i) claiming to be “licensed enrollment center[s]” for major credit card networks with the ability to work with a consumer’s credit card company or bank to substantially and permanently lower credit card interest rates; (ii) charging up-front payments for debt relief and rate-reduction services; and (iii) pitching credit card debt-elimination services, claiming the defendants could access money from a government fund to pay off consumers’ credit card debt in 18 months, when in actuality, no such government fund existed. In some cases, the defendants instructed consumers to stop paying their credit-card bills, resulting in “significant harm in the form of reduced creditworthiness, higher interest rates on their existing credit-card debt, and higher overall credit-card debt due to the accrual of late fees and interest charges.”
The court entered a permanent injunction ordering the defendant founder of the companies involved to pay over $23 million in equitable monetary relief. The order also permanently restrains and enjoins such defendant from, among other things, participating—whether directly or indirectly—in (i) telemarketing; (ii) advertising, marketing, selling, or promoting any debt relief products or services; or (iii) misrepresenting material facts.
On December 4, the Illinois Attorney General announced a $17.25 million settlement with a national bank resolving allegations of misconduct in the marketing and sale of residential mortgage backed securities (RMBS) dating back to before the 2008 mortgage crisis. According to the announcement, the bank’s $17.25 million settlement will be distributed to the Teachers Retirement System of the State of Illinois, the State Universities Retirement System of Illinois, and the Illinois State Board of Investment. Additional details on the settlement have not been made available by the state.
On December 6, the Virginia Attorney General Mark Herring announced he is joining a bipartisan group of 40 state Attorneys General to stop or reduce “annoying and dangerous” robocalls. The multistate group is reviewing, through meetings with several major telecom companies, the technology the companies are pursuing to combat robocalls. According to the announcement, the working group’s goals are to (i) develop an understanding of the technology that is feasible to combat unwanted robocalls; (ii) encourage the major telecom companies to expedite a technological solution for consumers; and (iii) determine if the states should make further recommendations to the FCC. As previously covered by InfoBytes, in October, a group of 35 Attorneys General, including Herring, submitted reply comments to the FCC in response to a public notice seeking ways the FCC could create rules that would enable telephone service providers to block more illegal robocalls. In their comments to the FCC, the coalition encouraged the FCC to implement rules and additional reforms that go beyond the agency’s 2017 call-blocking order, which allows phone companies to proactively block illegal robocalls originating from certain types of phone numbers.
Coalition of state Attorneys General announce settlement to resolve allegations concerning debt buyers’ collection and litigation practices
On December 4, the North Carolina Attorney General, along with 41 other state Attorneys General and the District of Columbia, announced a $6 million settlement with a national group of debt buyers to resolve allegations concerning the debt buyers’ collection and litigation practices. According to the press release, the debt buyers allegedly engaged in robo-signing practices by signing and filing large quantities of affidavits in state courts without first verifying the provided information. Under the terms of the settlement, the debt buyers have agreed to (i) completely eliminate or reduce the judgment balances for affected consumers in the participating states; (ii) reform their business practices by carefully verifying the information in affidavits for the courts and present accurate documents in court proceedings; (iii) review original account documents and provide substantiating documentation to consumers free of charge when a consumer disputes a debt; (iv) “maintain proper oversight and training over its employees and the law firms that it uses”; and (v) refrain from reselling debt for two years.
New York Attorney General reaches largest ever COPPA settlement to resolve violations of children’s privacy
On December 4, the New York Attorney General announced the largest Children’s Online Privacy Protection Act (COPPA) settlement in U.S. history—totaling approximately $6 million —to resolve allegations with a subsidiary of a telecommunications company that allegedly conducted billions of auctions for ad space on hundreds of websites it knew were directed to children under the age of 13. According to the Attorney General’s office, the subsidiary collected and disclosed personal data on children through auctions for ad space, allowing advertisers to track and serve targeted ads to children without parental consent. Under COPPA, operators of websites and other online services are prohibited from collecting or sharing the information of children under the age of 13 unless they give notice and have express parental consent. Among other things, the subsidiary also allegedly placed ads on other exchanges that possessed the capability to auction ad space on child-directed websites, but that when it won ad space on COPPA-covered websites, the subsidiary treated the space as it would any other and collected user information to serve targeted ads.
Under the terms of the settlement, the subsidiary must (i) create a comprehensive COPPA compliance program, which requires annual COPPA training for staff, regular compliance monitoring, and the retention of service providers that can comply with COPPA, as well as a third party who will assess the privacy controls; (ii) enable website operators that sell ad inventory to indicate what portion of a website is subject to COPPA; and (iii) destroy the personal data it collected on children.
Pension advance company settles with Virginia Attorney General over high-interest loans targeting veterans and retirees
On November 15, the Virginia Attorney General announced a $51.7 million settlement with a pension advance company, its owner, and related entities (defendants) to resolve allegations concerning allegedly illegal, high-interest loans made to more than 1,000 Virginia veterans and retirees in violation of the Virginia Consumer Protection Act (VCPA). According to the Attorney General’s complaint, the defendants allegedly “disguised [the] illegal, high interest loans as ‘pension sales’ that could provide Virginia pension holders with a quick lump sum of cash,” and seemingly concentrated the sales in two Virginia areas where a large number of retired veterans and civil servants reside. Following the lawsuit, the defendants shut down lending operations in Virginia and around the country. Under a permanent injunction and final judgment, the court—which declared the defendants’ agreements to be “usurious and illegal”—ordered the defendants to: (i) provide over $20 million in borrower debt forgiveness; (ii) pay a $31.7 million civil money penalty; (iii) pay $414,473 in restitution; (iv) pay $198,000 for costs and attorneys’ fees; and (v) agree to injunctive relief to prevent further violations of the VCPA.
On November 1, the Arizona Attorney General announced the approval of two more participants in the state’s fintech sandbox program. The first company, which is based in New York, will test a savings and credit product, enabling Arizona consumers to obtain a small line of credit aimed at providing overdraft protection. If a consumer agrees to a repayment plan recommended by the company’s proprietary technology, the APR may be as low at 12 percent; if a consumer adopts a different repayment plan, the line of credit will have a standard APR of 15.99 percent. The company intends to report transactions under the payment plan to national credit bureaus to enable the building of credit histories. The second company, an Arizona-based non-profit, will test a lending product using proprietary blockchain technology, which has an APR cap of 20 percent.
As previously covered by InfoBytes, the Arizona governor signed legislation in March creating the first state sandbox program for companies to test innovative financial products or services without certain regulatory requirements. In October, the Attorney General announced the first sandbox participant, a mobile platform company (InfoBytes coverage available here).
On November 1, the FTC announced a joint action with the New York Attorney General against a New York-based debt collection company for allegedly violating the FTC Act, the FDCPA, and New York state law by using false or deceptive tactics to collect money from consumers, sometimes resulting in the consumer paying more than what they allegedly owed. According to the complaint, the company’s employees threatened consumers with arrest or lawsuits while falsely posing as law enforcement officials or attorneys. Additionally, the employees allegedly added “more pressure” to consumers by telling them they owed more than the company’s records indicated they did, using forms to show a higher balance than the actual client balance—a practice known as “overbiffing.” On October 25, the U.S. District Court for the Western District of New York granted a temporary restraining order, halting the company’s allegedly illegal activity and freezing the company’s assets. The complaint seeks a (i) permanent injunction; (ii) consumer redress; and (iii) civil money penalties under New York law.
Interestingly, as covered by InfoBytes here, FTC Commissioner Rohit Chopra issued a concurring statement in another recent FTC action, suggesting the FTC should seek to partner with other enforcement agencies that have the authority to obtain monetary settlements from FTC targets. In this complaint, the New York Attorney General is seeking civil money penalties against the debt collectors under New York General Business Law § 350-d.
FTC to hold public hearings on consumer privacy and data security; focus will address data security enforcement program
On October 26, the FTC announced it will hold four days of public hearings in December 2018 and February 2019 to examine the Commission’s authority to deter unfair and deceptive conduct in data security and privacy matters as part of its broader series of hearings on “Competition and Consumer Protection in the 21st Century.” According to the FTC, these hearings (i) “will provide the first comprehensive re-examination of the FTC’s approach to consumer privacy since 2012,” and (ii) “will provide an opportunity to reexamine the Commission’s work in light of changing technologies, legal regimes, and business models.”
The FTC will continue to accept public comments through March 13, 2019, regarding items to be discussed at the February 2019 hearing. As previously covered by InfoBytes, a coalition of bipartisan state Attorneys General submitted a comment letter to the FTC last August requesting that they be included in the discussions regarding consumer protection during the Commission’s hearing process. Specifically, the letter emphasized the states’ “long history of protecting consumers from unfair and deceptive practices” under each state’s consumer protection authority, and noted consumers’ concerns over personal information and data security.
On October 29, the New York Attorney General announced the filing of a complaint against a national jewelry store, headquartered in New York, for allegedly engaging in fraudulent and deceptive conduct, deceptive credit repair services, and illegal lending in the financing of jewelry sales to active duty servicemembers. Specifically, the complaint alleges the company targets active duty servicemembers through a purported charitable program in which military-themed teddy bears are sold with a promise of a charitable donation by the company. The company also sells patriotic and military-themed jewelry and offers financing through a program exclusively available to servicemembers. The financing program is marketed as a credit repair or credit-establishing opportunity through a different entity, but according to the complaint, the separate entity is merely an “alter-ego” of the jewelry company, a relationship which is not disclosed to servicemembers. The company markets the financing program to active duty servicemembers as a way to build credit scores to purchase other consumer goods, such as a motor vehicle; however, once a servicemember agrees to the program, the Attorney General alleges the company’s employees are instructed to “’sell’ enough product to maximize the amount of credit [the company] is willing to advance.” The amount of credit is allegedly based on the amount of time the servicemember has left in active service, not on traditional underwriting standards such as credit history. Additionally, the complaint alleges the company marks up poor-quality jewelry between 600 and 1,000 percent over the wholesale price and advertises a “per payday” price on the merchandise, which bears “little resemblance to the total amount paid by a consumer at the end of the financing contract.” Of special interest to all creditors doing business in New York, the complaint appears to include in its civil and criminal usury claims the concept that the effective interest rate was higher because the good being purchased had “inflated retail prices.” The complaint seeks civil money penalties, restitution, and injunctive relief.
- Jonice Gray Tucker to discuss "Trends in regulatory enforcement" at the American Bar Association Banking Law Committee Meeting
- Jessica L. Pollet to discuss "Your career is impacting your life..." at the Ark Group Women Legal Conference
- Jon David D. Langlois to discuss "Successors in interest updates" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo