Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB or Bureau) is ordering Wells Fargo Bank to pay more than $3.7 billion to resolve claims of widespread mismanagement of auto loans, mortgages, and deposit accounts. The consent order requires payment of $2 billion in redress for almost 16 million consumer accounts and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s alleged illegal conduct included unlawful repossessions, improperly denied mortgage modifications leading to some consumers losing their homes to wrongful foreclosures, illegally charged surprise overdraft fees, and unlawfully frozen accounts.
The CFPB entered into a $19 million settlement with My Loan Doctor, LLC and its founder, Edgar Radjabli to resolve claims they deceived consumers into thinking they were depositing funds into a guaranteed return savings product within a commercial bank. The Loan Doctor and Radjabli allegedly falsely represented that deposited funds would be used to originate loans for healthcare professionals, held in insured accounts or backed by cash alternatives, and would yield interest rates between 5% and 6.25%. The proposed settlement would require the defendants to refund all the deposits made, including all interest due to consumers and pay a $391,530 civil penalty.
The CFPB issued a proposed rule requiring certain nonbank financial firms who are subject to an enforcement agency order to register with the CFPB. The CFPB has further proposed to publish the orders and company information via an online registry. Larger companies subject to the CFPB’s supervisory authority would also be required to designate an individual to attest whether the firm is adhering to registered law enforcement orders. The proposed rule is open for public comment for 60 days after publication in the Federal Register.
Federal Trade Commission
The Federal Trade Commission (FTC) announced an agreement with Epic Games to pay $520 million over allegations of privacy violations and unwanted charges. Epic Games, Inc., creator of the popular video game Fortnite, allegedly violated the Children’s Online Privacy Protection Act (COPPA) and deployed design tricks, known as dark patterns, to dupe millions of players into making unintentional purchases. The FTC’s action against Epic involves two separate record-breaking settlements. A proposed federal court order filed by the Department of Justice on behalf of the FTC, under which Epic will pay a $275 million monetary penalty for allegedly violating the COPPA Rule; and a separate proposed administrative order, requiring Epic to pay $245 million to refund consumers for alleged dark patterns and billing practices. This is the FTC’s largest administrative order in history.
The FTC settled a lawsuit with the operators of “The Credit Game,” a credit repair scheme that allegedly cost consumers millions of dollars. Michael and Valerie Rando and their companies are subject to total monetary judgments in the amount of $18,875,613, a portion of which will be suspended due to the defendants’ inability to pay. They are also required to turn over a wide array of property, including luxury automobiles, that will be liquidated and used to provide refunds to consumers harmed by the scam.
The FTC announced the issuance of new business guidance for marketers and sellers of health products. The Health Products Compliance Guidance is the agency’s first revision of its business guidance in this area in nearly 25 years and represents a substantial update to the staff’s 1998 guide, Dietary Supplements: An Advertising Guide For Industry. Since that guide was issued, the FTC has brought more than 200 cases challenging false or misleading advertising claims for dietary supplements, foods, over-the-counter drugs, and other health-related products. The revised guide draws on those cases with 23 new examples.
The FTC announced that it is seeking public comment on potential updates and changes to the Green Guides for the Use of Environmental Claims. The Commission’s Green Guides help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act. The Commission is requesting public comment on the continuing need for the Guides, their economic impact, and their effect on the accuracy of various environmental claims. A list of recent cases brought relating to topics covered by the guides can be found on the FTC’s website.
In Other Federal News
The Federal Communications Commission (FCC) announced that for the first time, a provider of voice services was cut off from other networks for allegedly failing to meet robocall mitigation requirements. Global UC was ordered removed from the Robocall Mitigation Database which, according to the agency’s order “requires all intermediate providers and terminating voice service providers to cease accepting the Company’s traffic.”
The FCC clarified that “ringless voicemails” are subject to robocalling rules. Callers must obtain a consumer’s consent before delivering a message to a consumer’s mailbox without ringing their cell phone. The unanimous decision by the full Commission finds that ringless voicemails are, in fact, “calls” that require consumers’ prior express consent. The declaratory ruling and order denies a petition filed by All About the Message, LLC, which asked the Commission to find that delivery of a message directly to a consumer’s cell phone voicemail is not a call protected by the TCPA.
The U.S. Food and Drug Administration (FDA) issued warning letters to five firms for selling E-cigarettes that look like toys, food, and cartoon characters. The FDA alleged that the products were likely to promote use by youth and that none of the manufacturers submitted a premarket application for any of the unauthorized products, some of which were designed to imitate foods like popsicles, look like toys such as glow sticks, Nintendo Game Boys, and walkie-talkies, and youth-appealing characters from TV shows, movies, and video game characters, including “The Simpsons,” “Family Guy,” and “Squid Game.”
The Securities and Exchange Commission (SEC) announced charges against the creator of an alleged global cryptocurrency Ponzi scheme and three promotors in connection with a $295 million fraud. Douver Torres Braga, Joff Paradise, Keleionalani Akana Taylor, and Jonathan Tetreault were charged for their roles in Trade Coin Club, an alleged fraud that victimized more than 100,000 investors worldwide.
The SEC charged Goldman Sachs Asset Management, L.P. (GSAM) for failing to follow its policies and procedures involving ESG investments. Under the SEC’s order, GSAM agreed to pay a $4 million penalty related to its alleged failure to develop standards for Environmental, Social, and Governance (ESG) investments for one product and its failure to follow policies and procedures once they were established.
The U.S. Department of Justice announced the arrest of two Estonian citizens in Tallinn, Estonia, for their alleged involvement in a $575 million cryptocurrency fraud and money laundering conspiracy. According to court documents, Sergei Potapenko and Ivan Turõgin, both 37, allegedly defrauded hundreds of thousands of victims through a multi-faceted scheme involving the defendants’ cryptocurrency mining service called HashFlare and a cryptocurrency bank called Polybius Bank. In reality, Polybius was never actually a bank, and never paid out promised dividends and the revenue generated by HashFlare was allegedly grossly overstated.
Charities News
New York Attorney General Letitia James released her annual “Pennies for Charity: Fundraising by Professional Fundraisers” report, which analyzes data submitted to the Office of the Attorney General’s Charities Bureau by professional fundraisers on their 2021 charitable fundraising campaigns in New York. The report looks at trends in the sector, provides guidance and tips for donors, and gives charities information on fundraisers’ performance. This year’s report found that professional fundraisers received over a quarter of every dollar donated to charities that employed them in 2021 in fees and expenses — a total of more than $460 million. Analyzing 658 campaigns conducted by professional fundraisers in 2021, the report finds that charities received 73 percent of donations, in line with the year prior and a small increase from 2019.
Veteran and Military Consumer Protection News
The CFPB released research revealing that reserve and national guard members called to active duty are paying an extra $9 million in interest every year because they are not always receiving the benefit of their right to rate reductions under the Servicemembers Civil Relief Act. The report has recommendations for increasing application of interest rate reductions, including automatically applying reductions rather than requiring servicemembers to proactively apply for rate reductions.
Other articles in this edition include:
- Attorney General Consumer Protection News: December 2022
- Consumer Chief of the Month
- Center for Consumer Protection 2022 Year in Review
