Federal Trade Commission

Online lender LendingClub Corporation agreed to pay $18 million to settle Federal Trade Commission (FTC) charges that the company deceived consumers about hidden fees that it charged and whether their loan applications were approved. In addition, the settlement bars LendingClub from making misrepresentations to loan applicants and requires that the company clearly and conspicuously disclose the amount of any prepaid, up-front, or origination fee and the total amount of funds that borrowers will receive.

The FTC removed Aristotle International Inc. (Aristotle) from the list of FTC-approved children’s privacy self-regulatory programs that police for compliance with the Children’s Online Privacy Protection Act (COPPA). Aristotle was one of seven approved programs and the first to be removed since the rule allowing for self-regulation went into effect two decades ago due to alleged failures in its monitoring of customer websites. Operators that participate in a COPPA safe harbor program will, in most circumstances, be subject to the review and disciplinary procedures provided in the safe harbor’s guidelines in lieu of formal FTC investigation and law enforcement.

The FTC filed an administrative complaint against FleetCor and its CEO for mystery fuel card fees.  FleetCor, marketing under the “Fuelman” brand name and through co-branded cards with businesses around the country, allegedly falsely told its business customers that they would save money, be protected from unauthorized charges, and have no set-up, transaction, or membership fees. In reality, according to FleetCor’s own records, customers generally have not achieved the advertised per-gallon savings by using FleetCor’s cards.

The FTC began sending more than $5.4 million in refunds to 31,144 consumers allegedly defrauded by Online Training Academy (OTA). According to the FTC’s February 2020 complaint, OTA made misleading claims that anyone could use its patented “strategy” to generate substantial income from trading in the financial markets in any market condition. Additionally, the complaint alleged OTA “instructors”— salespeople on commission who marketed OTA’s training and strategy in live events across the country— often falsely held themselves out as successful traders who had amassed substantial wealth using the company’s strategy.

In Other Federal News

U.S. Customs and Border Protections reported that its port of Memphis officers have seized more than 3,000 counterfeit COVID-19 vaccination cards. In describing one intercepted shipment, the agency noted that the cards had blanks for the recipient’s name and birthdate, the vaccine maker, lot number, and date and place the shot was given, as well as the Center for Disease Control logo in the upper right corner. However, there were typos, unfinished words, and some of the Spanish verbiage on the back was misspelled.

The Consumer Financial Protection Bureau settled with a debt collection enterprise that allegedly misrepresented consumers’ debts and failed to conduct reasonable investigations of identity theft allegations raised by consumers regarding disputed debts. The company, Fair Collections & Outsourcing (FCO), its owner Michael Sobota, and related entities, allegedly violated federal law by failing to establish or implement reasonable written policies and procedures regarding the accuracy and integrity of the information it furnished to credit reporting agencies. The settlement, if approved by the court, would require FCO and Sobota to put in place reasonable policies and procedures to prevent future violations and pay an $850,000 civil penalty.

The U.S. Department of Justice (USDOJ) announced an Ohio man pleaded guilty to operating a multimillion dollar bitcoin cryptocurrency money laundering service. Larry Dean Harmon admitted to operating Helix, a bitcoin “mixer” or “tumbler” and to facilitating laundering more than $300 million worth of bitcoin for customers seeking to conceal illegal drug trafficking transactions from law enforcement. Harmon also agreed to the forfeiture of more than 4,400 bitcoin, valued at more than $200 million.

USDOJ announced the arrest of a pharmacist in Chicago on charges related to his alleged sale of COVID-19 vaccination cards online.  According to court documents, in March and April 2021, Tangtang Zhao sold 125 authentic Centers for Disease Control and Prevention vaccination cards to 11 different buyers for approximately $10 per card.

The Federal Communications Commission (FCC) proposed new rules to curb robocallers’ access to phone numbers through updated rules for VOIP providers. The proposal modifies rules that allow VOIP providers direct access to numbers rather than requiring them to obtain numbers through a traditional carrier. The rule will require VOIP providers applying for direct access to certify they will not assist with illegal robocalls or spoofing and that they will take affirmative steps to stop the origination, termination, and transmission of such calls. The rule also requires providers to report foreign ownership interests of 10% or greater and the referral of such applications to executive branch agencies for their views on any national security, law enforcement, foreign policy, or trade policy concerns.

The U.S. Food and Drug Administration (FDA) issued a corporate-wide warning letter to Midwestern Pet Foods Inc. regarding contaminated pet food, resulting in hundreds of pet deaths. The warning letter states FDA inspections at the company’s Oklahoma plant found high levels of aflatoxin, a poisonous substance produced by certain molds that can cause illness and death in pets. Meanwhile, the company initiated a March 2021 voluntary recall of certain lots of 140 pet food products from an Illinois plant due to potential salmonella contamination. The warning letter addresses various contamination concerns regarding all company facilities. Recalled and withdrawn animal and veterinary products are identified on an online FDA database.

The Securities and Exchange Commission (SEC) obtained emergency relief to stop an alleged Florida Ponzi scheme. According to the SEC’s complaint, Coral Springs resident Johanna M. Garcia and two entities she controls raised at least $70 million from more than 2,150 investors in a fraudulent securities offering. Garcia allegedly claimed the money would be used to fund small business loans called “merchant cash advances,” and promised investors annual returns of 120-180%.

Other Items of Interest

Charities

Led by Florida Attorney General Ashley Moody, Michigan Attorney General Dana Nessel, and Nevada Attorney General Aaron Ford, a bipartisan coalition of 38 attorneys general and the FTC began distributing almost $500,000 in charitable contributions stemming from the shutdown of a deceptive telefunding operation. Associated Community Services and related defendants, who allegedly made deceptive fundraising calls, agreed to settle allegations that they duped consumers into donating to charities that failed to provide the services they promised. The defendants paid almost $500,000 to the states to be distributed to court-approved nonprofits for the charitable purposes donors originally intended to support.

Florida Attorney General Ashley Moody announced a settlement with the Florida Coalition Against Domestic Violence (FCADV) and former FCADV CEO Tiffany Carr requiring them to repay the state and domestic violence centers approximately $5 million. The agreement, if approved by the court, resolves multiple pending civil actions alleging defendants misused state grant funds and paid excessive compensation to Carr. Additionally, under the settlement agreement, all parties agree to a judicial dissolution of FCADV.

Virginia Attorney General Mark Herring obtained a settlement with a purported service dog training non-profit organization and its founder for allegedly misleading consumers and selling them dogs that were often poorly-trained puppies with significant behavioral issues and inadequate skills or training.  Charles D. Warren, Jr., the founder of Service Dogs by Warren Retrievers, has agreed to injunctive terms precluding future involvement in soliciting funds or holding fiduciary positions for charities or organizations that provide service animals.  Warren was required to pay $130,000 toward restitution in addition to $90,000 paid as sanctions in a prior enforcement action.

Veterans and Military

South Carolina Attorney General Alan Wilson announced a free clinic for veterans and service members with legal needs.  The clinic is sponsored by the attorney general’s V.A.L.O.R. Program.  V.A.L.O.R. stands for Veteran and Armed Forces Legal Outreach and with the support of local attorneys, will assist in providing legal documents such as basic wills, living wills, and powers of attorney.

Legislation

Illinois Attorney General Kwame Raoul applauded passage of the Illinois Preventing Youth Vaping Act. The law prohibits companies from directing advertisements and marketing materials at people younger than 21 by including cartoons or images from video games, movies, and other media that appeal to youth. The law also prohibits other misleading advertising that promotes using e-cigarettes as smoking cessation products or low-risk alternatives to tobacco without the required FDA approval for those uses. The law gives the Attorney General’s office and law enforcement agencies both criminal and civil enforcement authority. Attorney General Raoul also applauded passage of the Illinois “Know Before You Owe” law. The law is designed to ensure that student loan borrowers have information about their federal aid eligibility before they turn to private loans that offer fewer borrower protections, less flexible repayment options, and generally cost more than federal student loans.

Other articles in this edition include:

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