Consumer Protection News January 2017
The following is a compendium of information that may be of interest to our AG offices who are dealing with consumer protection issues. Neither the National Association of Attorneys General nor the National Attorneys General Training & Research Institute expresses a view as to the accuracy of the matters, nor as to the position expounded by the authors of the hyperlinked materials.
Supreme Court of the United States
The United States Supreme Court has granted certiorari in the matter of Henson v. Santander Consumer USA, Inc., 16-349. The Court will resolve “[w]hether a company that regularly attempts to collect debts it purchased after the debts had fallen into default is a ‘debt collector’ subject to the Fair Debt Collection Practices Act.” The Fourth Circuit ruled it is not, holding it is a “creditor” that collects debt on its own account, as distinguished from a “debt collector” that collects debts owed to others.
Consumer Financial Protection Bureau (CFPB)
Four Attorneys General File Memo to Support Modified Settlement Terms of CFPB Enforcement Action
The attorneys general of Connecticut, Vermont, Indiana, and Kansas have filed a memorandum for a motion to intervene in a settlement between the Consumer Financial Protection Bureau and Sprint Corporation in the U.S. District Court for the Southern District of New York. The motion seeks to modify the terms of the stipulated Final Judgment and Order to have the CFPB direct the remaining redress funds in the case to the National Association of Attorneys General to continue and complete the development of the National Attorneys General Training and Research Institute Center for Consumer Protection. Neither the CFPB nor Sprint opposes the intervention or modification.
Takata Corporation Agrees to Plead Guilty and Pay $1 Billion in Criminal Penalties for Airbag Scheme
Three Takata Executives Charged with Wire Fraud and Conspiracy
Tokyo-based Takata Corporation agreed to plead guilty to wire fraud and pay a total of $1 billion in criminal penalties stemming from the company’s fraudulent conduct in relation to sales of defective airbag inflators. An indictment was also unsealed charging three Takata executives with wire fraud and conspiracy in relation to the same conduct.
Takata has agreed to plead guilty to a one-count criminal information filed today in the Eastern District of Michigan charging the company with wire fraud. Under the terms of the agreement, Takata will pay a total criminal penalty of $1 billion, including $975 million in restitution and a $25 million fine. Two restitution funds will be established: a $125 million fund for individuals who have been physically injured by Takata’s airbags and who have not already reached a settlement with the company and an $850 million fund for airbag recall and replacement costs incurred by auto manufacturers who were victims of Takata’s fraud scheme. A court-appointed special master will oversee administration of the restitution funds. Takata has also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years, and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.
Order Issued Against Moneytree, Inc. for Allegedly Deceptive Online Advertisements
The Consumer Financial Protection Bureau issued an order against Moneytree, Inc. for allegedly violating the Dodd-Frank Wall Street Reform and Consumer Protection Act by misleading consumers with deceptive advertisements and collection letters. Under the terms of the order, Moneytree must pay $255,000 in refunds to consumers and a civil penalty of $250,000.
According to the CFPB, Moneytree allegedly advertised that consumers could cash their tax refund checks for “1.99” (without specifying that the fee was 1.99% of the cashed check and not $1.99), sent collection letters that misled consumers to believe their vehicles could be repossessed if they failed to make past-due payments on installment loans, and failed to obtain preauthorization prior to withdrawing funds from consumers’ bank accounts.
Consumer Experiences With Debt Collection
The CFPB has released a report, Consumer Experiences With Debt Collection: Findings From the CFPB’s Survey on Consumer Views on Debt. This report presents the results of the Survey of Consumer Views on Debt, which was conducted by the CFPB between December 2014 and March 2015 to better understand consumers’ experiences and preferences related to debt collection.
Snapshot of Older Consumers and Student Loan Debt
The CFPB has also released its snapshot of older consumers and student loan debt. The number of consumers age 60 and older with student loan debt has quadrupled over the last decade in the United States, and the average amount they owe has also dramatically increased. This Snapshot describes the increasing burden of student loan debt on older consumers, as well as the impact that the increased debt burden is having on older borrowers’ financial security.
CFPB Monthly Complaint Report, Vol. 18 (December 2016) Available
Federal Communications Commission
Consumer Advisory Committee Meeting
The first meeting of the Consumer Advisory Committee under its renewed charter will take place on Friday, January 27, 2017, from 9:00 A.M. to 4:00 P.M. at the Commission’s headquarters building, Commission Meeting Room TW-C305, 445 12th Street, SW, Washington, DC 20554.
At its January 27, 2017, meeting, the Committee will consider administrative and procedural matters relating to its functions. The Committee may receive briefings from Commission staff on issues of interest to the Committee. A limited amount of time will be available on the agenda for comments from the public. If time permits, the public may ask questions of presenters via the email address firstname.lastname@example.org or via Twitter using the hashtag #fcclive. Alternatively, members of the public may send written comments.
The meeting is open to the public and the site is fully accessible to people using wheelchairs or other mobility aids. Sign language interpreters, open captioning, assistive listening devices, and Braille copies of the agenda and committee roster will be provided on site. Meetings of the Committee are also broadcast live with open captioning over the Internet from the FCC Live web page at www.fcc.gov/live/.
Federal Trade Commission
FTC Chairwoman Edith Ramirez resigns
Federal Trade Commission Chairwoman Edith Ramirez announced her resignation from the Commission, effective February 10, 2017. Ramirez became Chairwoman on March 4, 2013, and has served as an FTC Commissioner since April 5, 2010, following her appointment by President Barack Obama.
Crackdown on Robocalling
The Federal Trade Commission announced January 13, 2017 a crackdown on two massive robocall telemarketing operations, both of which have been blasting robocalls to consumers on the National Do Not Call (DNC) Registry since at least 2012.
Many of the defendants in the two cases, FTC v. Justin Ramsey, et al. and FTC v. Aaron Michael Jones, et al., have agreed to court orders that permanently ban them from making robocalls, making any calls to numbers listed on the Do Not Call Registry, violating the Telemarketing Sales Rules, and/or assisting others in doing so. The settling defendants also will pay the Commission a total of more than $500,000.
The two ringleaders of the operations—Justin Ramsey and Aaron Michael (“Mike”) Jones—have previously been sued by state attorneys general for telemarketing violations and the FTC’s litigation against them continues.
In just the first three months of 2014, the FTC alleges that the defendants made more than 329 million robocalls to consumers in all 50 states, including 32 million to numbers on the Do Not Call Registry. In the first quarter of 2015, the FTC alleges that the defendants blasted out 222 million calls, including 40 million to numbers on the Do Not Call Registry.
FinTech Forum Announced
The Federal Trade Commission will host its third FinTech Forum on March 9, 2017, focusing on the consumer implications of two rapidly developing technologies: artificial intelligence and blockchain.
The half-day event is designed to bring together industry participants, consumer groups, researchers, and government representatives, to examine the ways in which these technologies are being used to offer consumers services and the potential benefits and consumer protection implications as these technologies continue to develop.
In advance of the forum, the FTC will be developing panels of experts, academics, and others for the event. If you wish to participate as a panelist, please email any relevant information to email@example.com(link sends e-mail) by January 27, 2017.
Tax Identity Theft Awareness Week
The Federal Trade Commission would like to bring your attention to this year’s Tax Identity Theft Awareness Week, which will be January 30 – February 3, 2017. Designating a week to raise awareness about Tax ID Theft gives an opportunity to help people protect themselves. The FTC encourages attorneys general offices to help promote tips and information about tax identity theft. Sample tweets, daily tips, articles, calendar of events, and other useful resources can be found on their website. Offices can also join their twitter chats and webinars, share the information through their own communication channels, or host their own events with the free resources available online
District of Columbia Attorney General Karl A. Racine announced on January 11, 2017, that lender CashCall Inc. will return payments of more than $1.8 million made by District consumers and will forgive more than $1 million in remaining debts to settle a lawsuit the Office of the Attorney General (OAG) filed last year. The lawsuit had alleged that CashCall violated DC’s Consumer Protection Procedures Act and Debt Collection Law by charging consumers illegal interest rates that ranged from 80% to 169%. On January 12, Florida Attorney General Pam Bondi and Office of Financial Regulation Commissioner Drew Breakspear announced coordinated settlements with the operators of an online lending scheme. The operators of the alleged scheme are Western Sky Financial, LLC, CashCall, Inc., WS Funding, LLC, Delbert Services Corporation and John Paul Reddam, who is President, CEO, owner and director of CashCall. The matter involved allegations that the companies offered loans to Florida borrowers with illegal interest rates of more than 18%. The settlement involves payments of a total of $1.25 million to the state of Florida with around $11 million for borrowers.
American Career Institute
Massachusetts Attorney General Maura Healey has announced that nearly 4,500 students victimized by the now-defunct American Career Institute (ACI) in Massachusetts will have their federal student loans forgiven by the U. S. Department of Education. The loans will be discharged based on deceptive and illegal practices uncovered by the attorney general’s investigation into the former for-profit school. The combined borrower loan discharges will total roughly $30 million.
14 Attorneys General and FTC Settle with Online Dating Service for Alleged Security Misrepresentations
The attorneys general of Alaska, Arkansas, Hawaii, Louisiana, Maryland, Mississippi, Nebraska, New York, North Dakota, Oregon, Rhode Island, Tennessee, Vermont, and the District of Columbia, and the Federal Trade Commission reached a settlement with the owners and operators of the Ashley Madison website, ruby Corp., ruby Life, Inc., and ADL Media, Inc. (collectively, Ashley Madison) to resolve allegations that the company violated the Federal Trade Commission Act and state consumer protection laws by misrepresenting data security on their website.
According to the AGs and the FTC, Ashley Madison allegedly misrepresented the strength of its security, created thousands of fake user profiles, and sold a “Full Delete” option which, even if a consumer opted to purchase, was not always carried out. This led to the leak of former members’ personal information when the website was breached by hackers.
The AGs’ consent judgments and the FTC’s stipulated order impose a combined $17.5 million judgment against Ashley Madison, which will be partially suspended upon payment of $828,500 to the states and $828,500 to the Commission.
Mark Neil is the Editor of Consumer Protection News and may be reached at 202-326-6019. Consumer Protection News is a publication of the National Association of Attorneys General (NAAG). Any use and/or copies of this newsletter in whole or in part must include the customary bibliographic citation. NAAG retains copyright and all other intellectual property rights in the material presented in this publication. For content submissions or to contact the editor directly, please e-mail firstname.lastname@example.org.