Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) entered into a consent order with Choice Money Transfer doing business as Small World Money Transfer for alleged multiple violations of the Remittance Transfer Rule and the Electronic Fund Transfer Act. The CFPB alleged the company did not accurately disclose prepayment information to remittance senders, such as money transfer fees, current exchange rates, and the date the recipient would receive the funds, and failed to provide refunds required by law. The order requires Choice Money to pay a $950,000 penalty that will be deposited into the CFPB’s victims relief fund.
The CFPB sued payment processor Active Network LLC for allegedly tricking people trying to sign up for fundraising events into enrolling into its annual subscription discount club, Active Advantage. The CFPB’s lawsuit alleges the company automatically and unlawfully enrolled families into its discount club by using “digital duplicity.” The company previously settled with Iowa and Vermont, but allegedly only changed its manner of operation in those two states.
The CFPB issued guidance to consumer reporting companies about their obligation to screen for and eliminate obviously false “junk data” from consumers’ credit reports. The advisory opinion stated that “a consumer reporting agency that does not implement reasonable internal controls to prevent the inclusion of facially false data, including logically inconsistent information, in consumer reports it prepares is not using reasonable procedures to assure maximum possible accuracy under section 607(b) of the Fair Credit Reporting Act.”
The CFPB issued guidance for banks about two “junk fee” practices that the agency deems likely unfair and unlawful under existing law. The Bureau’s Consumer Financial Protection Circular on surprise overdraft fees and the CFPB’s compliance bulletin on surprise depositor fees detail when a financial institution’s back-end penalties likely break the law.
Federal Trade Commission
The FTC finalized a consent order against Opendoor Labs, Inc. an online real estate business accused of deceiving consumers about how much money they could save by selling their home to Opendoor, as opposed selling on the open market. The final order requires Opendoor to pay $62 million, which is expected to be used for consumer redress and injunctive relief prohibiting the deceptive conduct.
The FTC won a court order and permanent injunction barring a company from claiming its paint insulates, after finding the claims about the R-value of the paint were false. The order permanently bans F & G International Group Holdings, LLC, FG International, LLC, and their principal J. Glenn Davis from making deceptive claims and prohibits them from supporting similar deception from other companies.
The FTC obtained a $3.3 million stipulated judgment against auto dealer Passport Automotive Group for allegedly deceiving consumers by tacking hundreds to thousands of dollars in illegal junk fees onto car prices and for discriminating against Black and Latino consumers with higher financing costs and fees. Under the order, Maryland-based Passport, its president, Everett Hellmuth, and its vice president, Jay Klein, will pay more than $3.3 million to settle the FTC’s lawsuit, which will be used to refund consumers harmed by Passport’s conduct.
The FTC announced that it has issued three Advance Notices of Proposed Rulemaking related to 1) junk fees; 2) fake reviews and other deceptive endorsements; and 3) updated rules regarding labeling of home appliances regarding energy use and right to repair.
The FTC approved final orders regarding “right to repair” restrictions against Harley-Davidson Motor Company Group, grill maker Weber-Stephen Products, and the manufacturer of Westinghouse outdoor power equipment. The orders involving Weber-Stephen Products and MWE Investments and Harley-Davidson require the companies to take steps to recognize consumers’ right to repair and prohibits them from voiding warranties if repairs are performed by independent companies.
In Other Federal News
The Federal Communications Commission (FCC) initiated a proceeding to consider ways to bring non-IP phone networks into the caller ID authentication ecosystem. The FCC noted that STIR/SHAKEN caller ID authentication standards are only technologically possible on IP-based phone networks, leaving a relatively small but significant hole in robocall protection. The FCC’s Notice of Inquiry seeks comment on the prevalence of non-IP technology telephone service, its impact on the problem of illegal robocalls, and input on technological or policy solutions.
The FCC announced orders to begin removing seven voice service providers from the agency’s Robocall Mitigation Database. Providers must mitigate robocalls by implementing STIR/SHAKEN throughout their IP networks. If they fail to do so, they be removed from the database and other networks will be prohibited from carrying [or is that too strong?] their traffic. The FCC ordered Akabis, Cloud4, Global UC, Horizon Technology Group, Morse Communications, Sharon Telephone Company, and SW Arkansas Telecommunications and Technology to show cause as to why the FCC should not remove them from the database.
The Securities and Exchange Commission (SEC) announced charges against Kim Kardashian for touting on social media a crypto asset security offered and sold by EthereumMax, allegedly without disclosing the payment she received for the promotion. Kardashian agreed to settle the charges, pay $1.26 million in penalties, disgorgement, and interest, and cooperate with the Commission’s ongoing investigation.
The SEC charged New Jersey-based National Realty Investment Advisors LLC (NRIA) and four of its former executives with running a Ponzi-like scheme that raised approximately $600 million from about 2,000 investors, promising their money would be used to buy and develop real estate properties, which would generate returns of up to 20 percent. In reality, the complaint alleges, investor money was used to pay distributions to other investors, to fund an executive’s family’s personal and luxury purchases, and to pay reputation management firms to thwart investors’ due diligence of the executives.
The U.S. Department of Justice (USDOJ) filed a stipulation and agreement resolving a dispute with Google over the loss of data responsive to a search warrant issued in 2016, which allegedly violated the Stored Communications Act (SCA). Google agreed to reform and upgrade its legal process compliance program to ensure timely and complete responses to legal process, as required by the SCA. Google also agreed to an independent compliance monitor.
USDOJ, on behalf of the U.S. Food and Drug Administration, filed complaints for permanent injunctions against six e-cigarette manufacturers. These are the first cases in which FDA has initiated injunction proceedings to enforce the Federal Food, Drug, and Cosmetic (FD&C) Act’s premarket review requirements for new tobacco products. The complaints allege that each defendant failed to submit premarket applications for their e-cigarettes and has continued to illegally manufacture, sell, and distribute their products, despite previous warning from the FDA that they were in violation of the law. The defendants are Morin Enterprises Inc. doing business as E-Cig Crib, Soul Vapor LLC, Super Vape’z LLC, Vapor Craft LLC, Lucky’s Convenience & Tobacco LLC doing business as Lucky’s Vape & Smoke Shop, and Seditious Vapours LLC doing business as Butt Out.
District of Columbia Attorney General Karl A. Racine announced victories in actions to stop misuse of nonprofit funds, including the resolution of lawsuits against Public Media Lab (PML) and Pavilion USA 2020, Inc., which will return over $400,000 in misused funds to District nonprofits. The District alleged that over a 12-year period, PML a District nonprofit corporation, funneled nearly all its funds to a for-profit film production company, Manifold Productions Inc. The nonprofit enabled Michael Pack, the owner of Manifold and chief executive officer for PML, to receive a stream of tax-exempt dollars without a competitive bidding process, public scrutiny, or accounting requirements regarding its spending.
Attorneys general from across the country expressed their concern for victims of Hurricane Ian and cautioned donors to be alert to avoid charity scams. Among the attorneys general warning donors were Florida Attorney General Ashley Moody, Illinois Attorney General Kwame Raoul, and West Virginia Attorney General Patrick Morrisey.
Veterans and Military News
USDOJ announced that GM Financial agreed to pay over $3.5 million to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by illegally repossessing 71 servicemembers’ vehicles and by improperly denying or mishandling over 1,000 vehicle lease termination requests. The SCRA prevents an auto finance or leasing company from repossessing a servicemember’s vehicle without first obtaining a court order, as long as the servicemember made at least one payment on the vehicle before entering military service. The SCRA also allows servicemembers to terminate a vehicle lease early after entering military service or receiving certain qualifying military orders without incurring any early termination charges and those servicemembers are entitled to a refund of any rent or lease amounts paid in advance.
The U.S. Department of Education announced final rules related to the “90-10 Rule” which requires for-profit colleges to obtain 10 percent of their revenue from non-federal sources. Provisions in the American Rescue Plan closed a loophole which had allowed these colleges to count federal dollars outside of the student aid system—such as G.I. Bill benefits—in the 10 percent revenue bucket. Veterans’ education advocates and some attorneys general argued that the loophole incentivized recruitment of veterans and servicemembers into these institutions.
Other articles in this edition include: