Consumer Financial Protection Bureau
The CFPB issued rules designed to prevent avoidable foreclosures as homeowners exit COVID-19 hardship forbearances. The federal eviction moratorium ends June 30, 2021. The new rules go into effect August 31, 2021 and require servicers to meet temporary procedural safeguards before referring 120-day delinquent accounts for foreclosure. According to the Bureau, more than 3% of all borrowers are now four months or more behind on their mortgages, which is the point when a foreclosure may be initiated.
The CFPB issued a report highlighting legal violations identified by the Bureau’s examinations in 2020. The report also highlights prior CFPB supervisory findings that led to public enforcement actions in 2020 resulting in more than $124 million in consumer remediation and civil money penalties. The findings included in this report cover examinations in the areas of auto servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination, mortgage servicing, private education loan origination, payday lending, and student loan servicing that were completed from January 1, 2020, to December 31, 2020.
Federal Communications Commission
The Federal Communications Commission (FCC) reaffirmed a $2.8 million fine of drone device marketer Hobby King, denying a Petition for Reconsideration of a June 2020 forfeiture order. The order followed an FCC investigation that found that dozens of devices marketed by the company transmitted in unauthorized radio frequency bands and, in some cases, operated at excessive power levels.
The FCC adopted rules to create a portal for hospitals or other institutions to alert the agency about robocall and spoofing campaigns. The portal will allow information about suspected robocall or spoofing campaigns to flow directly to the FCC’s Enforcement Bureau to alert agency investigators of concerning incidents, including floods of robocalls like those that have been known to clog up hospital phone lines.
The FCC announced that its Emergency Broadband Benefit Program (EBB) has enrolled over 2.3 million households into the subsidy program initiated by Congress. Since mid-May, households in all 50 states, Washington, D.C., Puerto Rico, U.S. Virgin Islands and American Samoa have been approved to receive a discount on their monthly internet bills and have selected a participating EBB provider to receive internet service at home.
Federal Trade Commission
Lina Khan was sworn in as Chair of the FTC. President Biden named Khan to a term on the Commission that expires September 25, 2024 and designated her as Chair. Prior to becoming Chair of the FTC, Khan was an Associate Professor of Law at Columbia Law School. She also previously served as counsel to the U.S. House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law, legal adviser to FTC Commissioner Rohit Chopra, and legal director at the Open Markets Institute.
The FTC is returning more than $172 million to rent-to-own customers who were told their payment plans were “same as cash” or “no interest.” Defendant Prog Leasing, LLC, d/b/a Progressive Leasing, allegedly misled consumers regarding the amounts charged for items such as furniture, jewelry, or cell phones. More than two million consumers will receive refunds averaging $85 each.
The FTC opened the claims process to return $125 million to consumers who sent money to scammers using MoneyGram between January 1, 2013, and December 31, 2017. The claims process is the result of FTC and U.S. Department of Justice settlements charging that MoneyGram violated previous agreements with the government to crack down on fraudulent money transfers.
The FTC sent nearly $30 million in refunds to more than 8,000 people who were tricked into enrolling in schools run by Career Education Corporation (CEC). CEC’s lead generators allegedly tricked consumers into providing their information and enrolling at CEC schools, including American InterContinental University and Colorado Technical University, using a variety of deceptive methods, such as pretending to be affiliated with the military and falsely promising to help with job placement and various public benefits.
The FTC approved consent orders against three companies selling fish oil supplements, resolving allegations that they deceptively marketed two supplements as clinically proven to reduce liver fat in adults and children with non-alcoholic fatty liver disease. The final orders with BASF SE, its subsidiary BASF Corp., and DIEM Labs, require payment of more than $416,000 relate to the companies’ marketing of Hepaxa and Hepaxa PD.
The FTC finalized a settlement that will require fertility-tracking app company Flo Health Inc. to obtain the affirmative consent of app users before sharing their personal health information with others and to obtain an independent review of their privacy practices. As part of the settlement, Flo Health must notify affected users about the disclosure of their health information and instruct any third party that received users’ health information to destroy that data. Flo also is prohibited from misrepresenting its data collection practices.
In Other Federal News
Center for Disease Control and Prevention (CDC) Director, Dr. Rochelle Walensky, signed an extension to the CDC’s nationwide eviction moratorium, further preventing the eviction of tenants who are unable to make rental payments. The CDC moratorium that was scheduled to expire on June 30, 2021, is now extended through July 31, 2021. According to the CDC, this is intended to be the final extension. Days after the CDC announced the extension,the U.S. Supreme Court, by a 5-4 vote, denied an application by Alabama real estate agents for an emergency order to vacate the stay of a U.S. District Court judgment vacating the moratorium. Although the district court held that the moratorium violated the Administrative Procedures Act, it issued a stay of its judgment pending the government’s appeal.
The U.S Department of Education announced more than $500 million in debt relief for more than 18,000 former ITT Tech students under the federal borrower defense loan discharge program. The “borrower defense” regulation authorizes the department to forgive loans where a school misleads students or engages in other conduct in violation of certain state laws. ITT Tech allegedly provided prospective students misleading information about future earnings and transferability of credits. The department credited the Iowa Office of the Attorney General, among others, for providing evidence necessary to support the students’ applications.
The U.S. Department of Justice (USDOJ) seized 63.7 bitcoins currently valued at approximately $2.3 million allegedly paid by Colonial pipeline to DarkSide, the criminals whose ransomware attack resulted in the shutdown of the pipeline that supplies 50% of the gasoline sold on the East coast. Subsequently, the Senate Committee on Homeland Security & Governmental Affairs held a hearing on June 8 titled: “Threats to Critical Infrastructure: Examining the Colonial Pipeline Cyber Attack” during which Joseph A. Blount, Jr., President and CEO of Colonial Pipeline, testified.
USDOJ, on behalf of the U.S. Food and Drug Administration (FDA) sued two Nevada bottled water companies and their owners and obtained an injunction halting the distribution of adulterated and misbranded water products. AffinityLifestyles.com Inc. and Real Water Inc., along with company officers Brent A. Jones and his son, Blain K. Jones, allegedly marketed their products as a healthy alternative to tap water. However, the government alleged that the products in fact consisted of municipal tap water processed with various chemicals in violation of current good manufacturing practices, relevant food safety standards, and hazard prevention measures.
The USDOJ announced the sentencing of a motor vehicle dealer who pleaded guilty to odometer tampering and related charges. Shmuel Gali was sentenced to 60 months’ imprisonment for his role in a long-running odometer tampering and money laundering scheme and ordered to pay $3,936,000 in restitution. Gali and other co-defendants rolled back the odometers an average of 70,000 miles on nearly 700 vehicles at their Queens, New York dealership and charged inflated prices based on the misrepresented mileage.
The Securities and Exchange Commission announced that New Jersey Attorney General Gurbir S. Grewal has been appointed Director of the Division of Enforcement, effective July 26, 2021. Grewal has served as New Jersey’s Attorney General since January 2018, when he was confirmed by the New Jersey State Senate after being nominated by Governor Phil Murphy.
Other Items of Interest
District of Columbia Attorney General Karl Racine announced a lawsuit against a failed nonprofit that was founded to raise funds for the U.S. pavilion at the 2020 World’s Fair Exposition in Dubai and two of its founders, alleging that the founders improperly paid themselves more than $360,000, advancing their private financial interests at the expense of the organization’s goals. According to the complaint, the founders’ alleged mismanagement and abandonment of their fiduciary duties contributed to the organization’s failure to fulfill its mission and ultimate dissolution.
Michigan Attorney General Dana Nessel announced the amendment of a trust to provide $1.2 million to the Community Foundation for Southeast Michigan for distribution to local charities.
Minnesota Attorney General Keith Ellison sued a fundraiser for not properly spending money raised in Philando Castile’s name. The action against Pamela Fergus, a/k/a “Philando Feeds the Children,” alleges that Fergus raised approximately $200,000 in the name of Philando Castile to relieve student lunch debt for Saint Paul Public School students but only about $80,000 was used for that purpose, leaving approximately $120,000 unaccounted for. Philando Castile was a Saint Paul Public Schools food-service worker who was killed by a St. Anthony, Minnesota police officer on July 6, 2016.
Ohio Attorney General Dave Yost reached a settlement with the operators of the nonprofit Dogs 4 Warriors after an investigation into allegations of abuse of funds and deceptive fundraising practices. As part of the agreement, the charity’s operators, Sheila Slezak and Andrew Slezak, must pay $50,000 in damages and penalties and also permanently shutter the charity and remove its website and social media presence.
Veterans and Military
The Consumer Financial Protection Bureau (CFPB) issued an interpretive rule regarding its authority to resume examinations regarding the Military Lending Act (MLA). In 2018, the CFPB’s leadership discontinued MLA-related examination activities, based on its stated belief that Congress did not specifically confer examination authority on the CFPB with respect to the MLA. The CFPB stated its current leadership “does not find those prior beliefs persuasive and the CFPB will now resume MLA-related examination activities.”
Other articles in this edition include:
- Consumer Chief of the Month
- Supporting Charities in the Time of COVID-19
- Attorney General Consumer Protection News