Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) settled with student lender Better Future Forward, Inc., an income share agreement (ISA) provider for mispresenting its product and failing to comply with federal consumer financial law that governs private student loans. Under ISAs, students agree to pay a percentage of their income for a set period of time or until they reach a payment cap. Better Future Forward allegedly falsely represented that the ISAs are not loans, failed to provide disclosures required by federal law, and violated a prepayment penalty prohibition for private education loans. Under the CFPB’s order, Better Future Forward is required to provide disclosures that comply with federal consumer financial law and to eliminate the prepayment penalties.

The  CFPB charged a California-based software company and its owner with providing assistance to illegal credit-repair businesses. Credit Repair Cloud and CEO Daniel Rosen allegedly violated the Telemarketing Sales Rule and the Consumer Financial Protection Act of 2010 by providing substantial assistance or support to credit-repair businesses that use telemarketing and charge unlawful advance fees to consumers.

Federal Trade Commission

The Federal Trade Commission (FTC) obtained a settlement banning alleged “stalkerware app” SpyFone and its CEO from the surveillance business and requiring the deletion of all allegedly secretly stolen data. The complaint against Support King, LLC, d/b/a  SpyFone.com and its owner Scott Zuckerman, alleged that defendants sold stalkerware apps that allowed purchasers to surreptitiously monitor photos, text messages, web histories, GPS locations, and other personal information of the phone on which the app was installed without the device owner’s knowledge.  The decision of the Commission to accept the consent order was published in the Federal Register on September 8, 2021 and public comment is due on or before October 8, 2021.

The FTC sent cease and desist demands to 10 companies suspected of making diabetes treatment claims without the required scientific evidence. The U.S. Food and Drug Administration (FDA) joined the letters, notifying the companies that their products were considered “drugs” under the Federal Food, Drug, and Cosmetic Act that require FDA approval before they can be marketed. Both agencies directed the companies to respond to the letters and address the allegations within fifteen (15) working days.

The FTC testified before the Senate Special Committee on Aging about the agency’s work to halt practices that prey on older Americans. During 2020, older consumers filed 334,411 fraud reports in the Consumer Sentinel database, with reported losses of more than $600 million. Romance scams; prize, sweepstakes, and lottery scams; and business impersonator scams caused the highest aggregate reported losses to older adults, according to the testimony. Older adults submitted more than 26,518 fraud reports related to COVID-19 in 2020 with $104 million in reported losses.

An Atlanta-based debt collection company and its owners will be permanently banned from the debt collection industry under the terms of a settlement with the FTC. Critical Resolution Mediation, LLC, along with Brian Charles McKenzie, Tracy Dottrice Warren, and their agents allegedly threatened consumers with arrest and imprisonment and tried to collect debts that consumers did not actually owe. The defendants are required to pay more than $266,000 and destroy all consumer information they have.

Securities and Exchange Commission

The Securities and Exchange Commission (SEC) charged the Kraft Heinz Company (Kraft) and two former executives for engaging in a years-long accounting scheme. After the SEC investigation commenced, Kraft restated its financials, correcting a total of $208 million in improperly recognized cost savings arising out of nearly 300 transactions. Kraft consented to pay$62 million in civil penalties and the executives, former Chief Operating Officer Eduardo Pelleissone and former Chief Procurement Officer Klaus Hofmann agreed to pay civil penalties of $300,000 and $100,000, respectively.

The SEC announced an action against BitConnect, an online crypto lending platform, its founder Satish Kumbhani, and its top U.S. promoter and his affiliated company, alleging that they defrauded retail investors out of $2 billion through a fraudulent and unregistered global offering of investments in a program involving digital assets. The SEC’s complaint charges the defendants with violating the antifraud and registration provisions of the federal securities laws and seeks injunctive relief, disgorgement plus interest, and civil penalties.

The SEC obtained $539 million in a settlement with three media companies charged with selling nearly $500 million in illegal stock and digital assets. New York City-based GTV Media Group Inc. and Saraca Media Group Inc., and Phoenix, Arizona-based Voice of Guo Media Inc., allegedly raised approximately $487 million from more than 5,000 investors.

U.S. Department of Justice

The United States Department of Justice (USDOJ) announced the arrest of a homeopathic doctor for selling fake COVID-19 immunizations and falsifying vaccination cards. Juli A. Mazi of Napa, California allegedly sold homeoprophylaxis immunization pellets which Mazi told patients contained the COVID-19 virus and would create an antibody response in their immune system.  Mazi also allegedly provided Moderna vaccination cards with instructions for her patients to mark the cards to state that they had received the vaccine on the date they ingested the pellets.

USDOJ announced that a Florida man pleaded guilty to conspiring to defraud the U.S. Food and Drug Administration (FDA) by concealing information about illegal products labeled as dietary supplements. David Winsauer worked from 2014 to 2018 for Blackstone Labs, LLC, that sold products labeled as dietary supplements. According to court filings, Winsauer admitted that he and other co-conspirators worked to portray the company to consumers as complying with applicable federal laws, when in fact, the company arranged to manufacture products that were illegal under federal law.

A Ghanaian national was sentenced to 40 months in prison for defrauding victims in a romance scam, U.S. DOJ announced. According to court documents, Richard Yaw Dorpe, 38, posed as a single, 57-year-old man from Virginia Beach on “OurTime,” an online dating website for people over 50 years old.  Through his romantic manipulations, Dorpe convinced a 69-year-old recent widow to send him clothes, jewelry, a computer, a watch, and over $300,000.

In Other Federal News

The FBI issued a warning regarding a rising trend in romance cams leading to millions in consumer losses. According to the FBI, scammers are increasingly persuading romance scam victims to send money to allegedly invest in or trade cryptocurrency. From January 1, 2021 — July 31, 2021, the FBI Internet Crime Complaint Center received over 1,800 complaints, related to online romance scams, resulting in losses of approximately $133 million.

The Office of the Comptroller of the Currency (OCC) assessed a $250 million civil money penalty against Wells Fargo Bank, N.A., based on the bank’s allegedly unsafe or unsound practices related to deficiencies in its home lending loss mitigation program and violations of a 2018 Compliance Consent Order. The OCC also issued a cease and desist order that requires the bank to improve the execution, risk management, and oversight of the bank’s loss mitigation program. The order restricts the bank, while the order is effective, from acquiring certain third-party residential mortgage servicing and includes other relief to protect borrowers until remediation is provided.

Other Items of Interest

Charities

Minnesota Attorney General Keith Ellison announced an agreement requiring the replacement of the leadership and overhaul of the governance of a Minnesota nonprofit, BFW Institute of Education & Research (“BFW”), also known as Pain Free Patriots. BFW and its leadership allegedly directed that its charitable grantees seek pain relief only at insider-owned businesses, made grants of more than $2 million to those insider-owned entities over a period of four years, and turned a blind eye to hundreds of thousands of dollars in debt that BFW’s founder, Douglas V. Huseby, directed BFW to take from and make payable to him and his affiliated entities. Attorney General Ellison also obtained a default judgment of $954,966 against PNW C2C Marketing, LLC ,operating as “Contributing 2 Combatants” and “Coast 2 Coast Marketing,” and its owner, Jacob Choinski, for defrauding Minnesota donors. The company allegedly went door to door in Minnesota neighborhoods and misrepresented that C2C was a nonprofit soliciting donations to send care packages to servicemembers overseas, however the funds were allegedly diverted for Choinski’s personal use.

Massachusetts Attorney General Maura Healey announced an action against a non-profit homeless shelter’s former executive director. Manuel Duran, who allegedly abused his position with Casa Nueva Vida, improperly funneling more than $2 million in state money to himself, all while falsely certifying compliance with state regulations designed to detect such improper self-dealing.

Hawaii Attorney General Clare Connors announced a victory at the Hawaii Supreme Court, which affirmed the attorney general’s investigatory authority to investigate tax-exempt compliance of non-profit organizations. The court’s opinion held the attorney general was fully authorized to issue a subpoena to obtain the bank records of the non-profit organization KAHEA: The Hawaiian-Environmental Alliance, to determine whether KAHEA’s solicitation and use of funds to support direct actions to prevent construction on Mauna Kea violated laws and regulations governing nonprofit organization.

Veterans and Military

USDOJ announced a settlement with the New Jersey Higher Education Student Assistance Authority (HESAA) to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by obtaining unlawful court judgments against two military servicemembers who co-signed student loans. Under the proposed consent decree, will pay $15,000 each to two servicemembers who had default judgments entered against them, and will pay a civil penalty of $20,000 to the United States. The consent decree also requires HESAA to provide SCRA training to its employees and outside counsel and develop new policies and procedures consistent with the SCRA.

Other articles in this edition include:

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