Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB or Bureau) sued payment processor BrightSpeed Solutions Inc. and its former CEO Kevin Howard for supporting Internet-based tech-support scams. The CFPB alleges the defendants knowingly processed more than $71 million in payments for clients who tricked consumers, often older Americans, into purchasing expensive and unnecessary antivirus software or services.
The CFPB is rescinding a series of policy statements to ensure industry complies with consumer protection laws. The Bureau announced it is rescinding seven policy statements issued last year that provided temporary flexibilities to financial institutions in consumer financial markets including mortgages, credit reporting, credit cards and prepaid cards. The seven rescissions, effective April 1, provide guidance to financial institutions on complying with their legal and regulatory obligations. With the rescissions, the CFPB is providing notice that it intends to exercise the full scope of the supervisory and enforcement authority provided under the Dodd-Frank Act.
The CFPB sued student debt relief company Student Loan Pro and its owners for allegedly charging consumers more than $3.5 million in illegal upfront fees, some as high as $795. The Bureau alleged that defendants violated the Telemarketing Sales Rule’s ban on upfront fees and is seeking injunctive relief, consumer redress and civil penalties.
The CFPB issued its annual complaint report highlighting more than a half-million complaints received in 2020. The 542,000 complaints were a nearly 54% increase over 2019. Credit and consumer reporting complaints accounted for more than 58% of complaints received, followed by debt collection (15%), credit card (7%), checking or savings (6%), and mortgage complaints (5%).
The CFPB, along with four other federal agencies, are gathering insight on financial institutions’ use of artificial intelligence (AI). The agencies seek information from the public on how financial institutions use AI in their activities, including fraud prevention, personalization of customer services, credit underwriting, and other operations.
Federal Communications Commission
The FCC fined a health insurance telemarketer a record $225 million for spoofed robocalls. John C. Spiller and Jakob A. Mears, operating under business names including Rising Eagle and JSquared Telecom, allegedly transmitted approximately 1 billion spoofed robocalls falsely claiming to offer health insurance plans across the country during the first four-and-a-half months of 2019.
The FCC issued cease-and-desist letters to six voice providers that are alleged to have consistently violated FCC guidelines on the use of autodialed and prerecorded voice message calls. The companies are three Canadian companies, – RSCom, Stratics Networks, and Third Rock Telecom, a Florida based prover – Yodel Technologies, a U.K.-based company – Icon Global, and a New Jersey based company – IDT Corporation.
Federal Trade Commission
The Federal Trade Commission (FTC) announced that it is sending nearly $50 million in refunds to University of Phoenix (UOP) students. The refunds stem from a lawsuit the FTC filed against UOP alleging that it used deceptive advertisements that falsely touted its relationships and job opportunities with companies such as AT&T, Yahoo!, Microsoft, Twitter, and the American Red Cross. The FTC also alleged that UOP’s advertising gave the false impression that the online school worked with those companies to create job opportunities for its students and tailor its curriculum for such jobs. In addition to the nearly $50 million in direct payments for some students, the $191 million settlement includes $141 million to cancel unpaid balances owed directly to the school by eligible students.
FTC Acting Chairwoman Slaughter and CFPB Acting Director Uejio issued a joint statement regarding the national moratorium on evictions during the pandemic, which was recently extended by the Centers for Disease Control and Prevention for an additional three months. Further, the FTC provided guidance for consumers and businesses on preventing evictions. Related, the White House released a fact sheet about the Biden-Harris Administration’s multi-agency effort to support renters and landlords.
The FTC is launching a new initiative aimed at partnering with community legal aid organizations to expand its outreach to lower-income communities to encourage them to report fraud and provide them with advice to help recover. The Community Advocate Center initiative will provide a new way for organizations that provide free and low-cost legal services to report fraud and other illegal business practices their clients have experienced directly to the FTC on behalf of their clients.
The FTC settled allegations against mobile banking app Beam Financial Inc. and its founder and CEO, Yinan Du (a/k/a Aaron Du), over allegations that the company falsely promised users they would have “24/7” access to their funds and earn high interest rates on their accounts. Defendants are banned from offering such services and must give full refunds to users as part of the settlement.
The FTC obtained a settlement with the owners of a scam that targeted Latina consumers with promises of wealth and financial security. In a complaint filed as part of the FTC’s Operation Income Illusion sweep, the agency alleged that Moda Latina BZ Inc., Esther Virginia Fernandez Aguirre, and Marco Cesar Zarate Quíroz specifically targeted Latina consumers in Spanish-language ads on TV with false promises of earnings at home.
The FTC announced that it has issued orders to five E-cigarette manufacturers seeking information on 2019 and 2020 sales, advertising, and promotional methods. The FTC sent the orders to JUUL Labs, Inc.; R.J. Reynolds Vapor Company; Fontem US, LLC; Logic Technology Development LLC; and NJOY, LLC.
The FTC obtained a court order banning an alleged work-from-home scammer from selling business opportunities and using robocalls in a settlement with Randon Morris, National Web Design, LLC, B2B Website Design, LLC, Amazon Affiliate Program, LLC, and R&C Consultation, LLC. The settlement includes a $2 million judgment which is partially suspended based on the defendants’ ability to pay.
Defendants in two FTC cases will be permanently banned from the debt collection industry as part of settlements resolving FTC charges they threatened consumers with legal action to collect on debts that did not exist. In complaints filed as part of the Operation Corrupt Collector enforcement sweep, the FTC accused National Landmark Logistics and Absolute Financial Services of using illegal robocalls to leave messages with consumers that threatened outcomes from lawsuits to arrests.
The FTC settled with a company that deceptively advertised its SkyLink TV antennas were an effective way for consumers to stop paying for cable or satellite TV subscriptions and still receive their favorite channels and premium content. The proposed order with Wellco, Inc. imposes a $31.82 million judgment against the defendants. The judgment will be suspended upon the defendants’ payment of $650,000 to the Commission, based on their inability to pay the full judgment.
The FTC is sending payments totaling more than $6.5 million to more than 500,000 consumers who were affected by online retailer Fashion Nova’s violations of the FTC’s Mail, Internet, or Telephone Order Merchandise Rule. According to the FTC, Fashion Nova promised consumers fast shipping of their orders but regularly failed to meet those promises, didn’t properly notify consumers of shipping delays, and didn’t give them the chance to cancel their orders and receive prompt refunds. The company also illegally used gift cards to compensate consumers for unshipped merchandise instead of providing refunds. Gift cards are not considered refunds under the requirements of the Mail Order Rule.
Securities and Exchange Commission
The Securities and Exchange Commission (SEC) filed a civil fraud action against a California man who falsely claimed to possess insider information which he sold on dark web insider trading sites. In reality, James Roland Jones lied about possessing such information, according to the SEC, but sold the information to several users who paid bitcoin for the tips and ultimately traded based on the information Jones provided.
The SEC charged the co-founders of uBiome Inc., a private medical testing company, with defrauding investors out of $60 million by falsely portraying uBiome as a successful start-up with a proven business model and strong prospects for future growth. The San Francisco-based company’s success in generating revenue actually depended upon duping doctors into ordering unnecessary tests and other improper practices. The scheme finally unraveled, and the company filed bankruptcy.
The SEC obtained an emergency asset freeze and charged a California trader with posting false stock tweets about a defunct company, while secretly profiting by selling his own holdings of the company’s stock. Andrew L. Fassari used the Twitter handle @OCMillionaire to tweet false statements about Arcis Resources Corporation (ARCS), a defunct Nevada cannabis company with publicly traded securities, during December 2020. The stock skyrocketed 4,000 per cent and Fassari sold his stock for profits of more than $929,000.
Other Federal News
The U.S. Department of Education announced action to streamline its process for making borrower defense relief determinations. It will be rescinding the formula for calculating partial relief and adopting a streamlined approach for granting full relief under the regulations to borrower defense claims approved to date. The Department anticipates this change will ultimately help approximately 72,000 borrowers receive $1 billion in loan cancellation.
The Federal Bureau of Investigation’s Internet Crime Complaint Center (IC3) released its annual report. The 2020 Internet Crime Report reported 791,790 complaints – an increase of more than 300,000 complaints from 2019 – and reported losses exceeding $4.2 billion, with the most commonly reported crimes being phishing scams, non-payment/non-delivery scams, and extortion. Victims lost the most money to business email compromise scams, romance and confidence schemes, and investment fraud.
The Federal Deposit Insurance Corporation issued the March 2021 edition of the Consumer Compliance Supervisory Highlights. The purpose of this publication is to enhance transparency regarding the FDIC’s consumer compliance supervisory activities and to provide a high-level overview of consumer compliance issues identified in 2020 through the FDIC’s supervision of state non-member banks and thrifts. This edition includes a summary of the FDIC’s supervisory approach in response to COVID-19, supervisory observations related to consumer protection laws, examples of practices that may be useful in mitigating risks, regulatory developments, and consumer compliance resources.
The U.S. Food and Drug Administration has issued warning letters to two companies for selling products labeled as containing cannabidiol (CBD) in ways that violate the Federal Food, Drug, and Cosmetic Act. Specifically, the warning letters address the alleged illegal marketing of unapproved drugs labeled as containing CBD. The FDA has not approved any over-the-counter drugs containing CBD, and, allegedly, none of the products at issue met requirements to be legally marketed without an approved new drug application.
The Internal Revenue Service warned of an IRS-impersonation scam that appears to primarily target educational institutions, including students and staff who have “.edu” email addresses, and asks for information such as Social Security number and Electronic Filing PIN. The suspect emails display the IRS logo and use various subject lines such as “Tax Refund Payment” or “Recalculation of your tax refund payment.” It asks people to click a link and submit a form to claim their refund.
The U.S. Attorney’s Office for the Eastern District of Virginia announced the seizure of seven websites related to the COVID-19 pandemic. According to court records, the U.S. obtained court authorization to seize four domains that purported to be the legitimate websites of Pfizer, Inc. (“Pfizer”)—specifically, “pfizermx.com,” “pfizer-vaccines.com,” “pfizerstockrate.com,” and “pfizerksa.com.” In addition, the government seized three websites claiming to be associated with the United Nations International Children’s Emergency Fund (UNICEF)—specifically, “unicefcovid19relief.com,” “unicefeverychild.com,” and “unicefinternship.com.” Although each of the seized domains purported to be the legitimate websites of either Pfizer or UNICEF, the sites instead appeared to have been designed to obtain the personal information of website visitors for nefarious purposes, such as fraud or phishing attacks.
Other articles in this edition include: