The US Supreme Court ruled against the FTC in AMG Capital Management LLC v. FTC, holding that Section 13(b) of the FTC Act does not permit the FTC to seek and does not allow courts to award “equitable monetary relief such as restitution or disgorgement.” FTC Acting Chairwoman Rebecca Kelly Slaughter issued a statement criticizing the decision and vowing to seek immediate Congressional action to provide the FTC authority to recover restitution in direct judicial proceedings. Several congressional leaders have vowed to expedite legislation to restore the FTC’s authority to obtain restitution through direct court actions. See, e.g., opening remarks of House Committee on Energy and Commerce Frank Pallone, Jr. during April 27, 2021 hearing.
The US Supreme Court ruled in favor of Facebook holding that unsolicited text messages sent to a cellphone number did not violate the Telephone Consumer Protection Act of 1991 (TCPA) prohibition on robocalls. In a unanimous ruling, the Court held that to qualify as an “automatic telephone dialing system” under the TCPA, a device “must have the capacity either to store, or to produce, a telephone number using a random or sequential number generator” – a type of equipment that is no longer widely used. Congressional and consumer advocacy leaders have vowed to seek legislation to address the opinion and extend coverage to protect consumers from robocalls using current technology. See e.g., press release from Senator Ed Markey: Senator Markey and Rep. Eshoo Blast Supreme Court Decision on Robocalls as “Disastrous;” press release from National Consumer Law Center: Supreme Court Deals Blow to Protections Against Robocalls; Advocates Urge Congress to Act to Prevent a Tsunami of Unwanted Calls and Texts to Cellphones.
Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB or Bureau) issued an interim final rule in support of the Centers for Disease Control and Prevention’s eviction moratorium. The CFPB’s rule requires debt collectors to provide written notice to tenants of their rights under the eviction moratorium and prohibits debt collectors from misrepresenting tenants’ eligibility for protection from eviction under the moratorium.
The CFPB formally delayed the mandatory compliance date of the General Qualified Mortgage final rule from July 1, 2021 to October 1, 2022. The CFPB is taking this action to help ensure access to responsible, affordable mortgage credit, and preserve flexibility for consumers affected by the COVID-19 pandemic and its economic effects.
The CFPB took action against SettleIt, Inc. for steering consumers into high-cost loans. The Bureau alleged that SettleIt, Inc. presented itself as an independent debt-settlement company that helps consumers negotiate with creditors like CashCall and LoanMe. But SettleIt is affiliated with CashCall and LoanMe and allegedly steered consumers into expensive loans with the companies rather than obtaining terms that benefited consumers. The CFPB filed a stipulated agreed judgment that would require SettleIt, Inc. to pay at least $646,000 to consumers and $750,000 in civil penalties.
The CFPB took action against reverse mortgage lender Nationwide Equities Corporation for sending allegedly deceptive advertising to hundreds of thousands of borrowers. According to the Bureau, the advertisements included hidden costs and risks, false pre-approvals, and false statements about existing relationships with borrowers. In addition to requiring a compliance plan to prevent future deception, the company agreed to pay a $140,000 civil penalty.
The CFPB proposed extending the effective date of two recent debt collection rules to give affected parties more time to comply due to the ongoing COVID-19 pandemic. The rules relate to certain mandatory disclosures concerning time-barred debt and clarify prohibitions on other unlawful acts.
The CFPB proposed a set of rule changes intended to help prevent avoidable foreclosures as emergency federal foreclosure protections expire. Nationwide, nearly 3 million homeowners are behind on their mortgages. The CFPB’s proposal seeks to ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge of borrowers exiting forbearance in the fall will put borrowers and mortgage servicers under strain.
Federal Communications Commission
The Federal Communications Commission (FCC) fined Tele Circuit Network Corporation $4,145,000 for switching consumers from their preferred carrier to Tele Circuit without permission and adding unauthorized charges to consumers’ bills. These actions specifically harmed elderly and infirm consumers who, in some cases, were left without telephone service for extended periods of time while the company refused to reinstate service until the unauthorized charges were paid in full.
The FCC called on carriers to ensure free consumer tools are available to block robocalls and issued two new robocall cease-and-desist letters. The FCC also launched a new website to detail the FCC’s work to protect consumers from illegal robocalls using the tools Congress provided in the TRACED Act.
The FCC is encouraging the public to download the FCC’s Speed Test app, which is currently used to collect speed test data as part of the FCC’s Measuring Broadband America program. In addition to showing network performance test results to the user, the app provides the test results to the FCC to assist it in gathering data regarding broadband availability across the United States.
Federal Trade Commission
Smart home monitoring company Vivint will pay $20 million to settle Federal Trade Commission (FTC) charges that it misused consumer credit reports to help unqualified customers obtain financing for the company’s products and services. Under the settlement, Vivint will pay a $15 million civil penalty and an additional $5 million to compensate injured consumers.
The FTC announced that Yellowstone Capital, a provider of merchant cash advances, will pay more than $9.8 million to settle charges that it took money from businesses’ bank accounts without permission and deceived them about the amount of financing business owners would receive and other features of its financing products.
The FTC charged St. Louis-based chiropractor Eric Anthony Nepute and his company Quickwork LLC with violating the COVID-19 Consumer Protection Act and the FTC Act, by deceptively marketing products containing vitamin D and zinc as scientifically proven to treat or prevent COVID-19. This is the first case the FTC has brought under the new law.
The FTC settled with two companies, BASF SE and DIEM Labs, that allegedly deceptively marketed two dietary fish oil supplements. The FTC alleged the companies claimed the products were clinically proven to reduce liver fat in adults and children with non-alcoholic fatty liver disease. They will pay a total of more than $416,000 for refunds to all consumers who bought either supplement.
The FTC provided guidance for consumers and businesses on preventing evictions. A recent CFPB report showed that more than 8.8 million Americans are behind on rent payments. The tenants at risk of homelessness are disproportionately people of color, primarily Black and Hispanic families. The guidance highlights CDC information on the eligibility requirements for consumers seeking relief under the eviction moratorium, including a link to the written declaration for consumers to provide to their landlords.
In Other Federal News
The Commodities Futures Trading Commission announced a consent order requiring payment of $10.3 million by an admitted Ponzi scheme operator. Douglas Lien of Santa Fe, New Mexico admitted to receiving more than $14.2 million from defrauded clients intended for commodity futures trading and misappropriating the funds for personal use. The settlement requires payment of restitution of $5,195,679, a civil penalty of $5,195,679, and imposes permanent trading and registration bans.
The Consumer Product Safety Commission (CPSC) issued a public warning regarding Peloton’s Tread+ treadmill. According to the CPSC, one death and dozens of incidents of children and pets becoming injured by being sucked beneath the treadmill have been reported. The agency urged consumers with children or pets at home to stop using the product immediately.
The Securities and Exchange Commission (SEC) charged a fund manager and former race car team owner with operating a multimillion-dollar fraud scheme. Andrew T. Franzone, former owner of a race car team, and investment adviser FF Fund Management, LLC allegedly misrepresented the fund’s investments and strategy, as well as other unlawful actions. Franzone allegedly raised more than $38 million for the fund from approximately 90 investors.
The SEC obtained emergency relief and charged a Florida company and its CEO with misappropriating investor money and operating a Ponzi scheme. According to the SEC, Melbourne, Florida resident Jonathan P. Maroney, through several entities he controls, raised at least $17.1 million from more than 100 investors in a series of fraudulent securities offerings.
The US Department of Justice (USDOJ) announced the arrest of Roman Sterlingov, the operator of a cryptocurrency “mixer,” Bitcoin Fog, for alleged dark web money laundering activities. Cryptocurrency mixers are software or services that let users mix their coins with other users in order to de-link personal information. The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has provided guidance that mixers must register with FinCEN and maintain an anti-money laundering compliance program. According to USDOJ, Bitcoin Fog gained notoriety as a go-to money laundering service, moving over 1.2 million bitcoin – valued at approximately $335 million at the time of the transactions. The bulk of this cryptocurrency came from darknet marketplaces and was tied to illegal narcotics, computer fraud and abuse activities, and identity theft.
The US Food and Drug Administration (FDA) released an action plan for reducing exposure to toxic elements from foods for babies and young children. The FDA stated that although its testing “shows that children are not at an immediate health risk from exposure to toxic elements at the levels found in foods, we are starting the plan’s work immediately … for achieving continued improvements in reducing levels of toxic elements in these foods over time.”
Veterans and Military
The US Department of Veterans Affairs (VA) announced that VA.gov is now the central login for accessing benefits. All benefits-related features previously located in the eBenefits web portal will be available on VA.gov. Veterans are encouraged to start logging into the site using their current Digital Service (DS) Logon or creating a new account using ID.me. Users will be able to access information about VA benefits and services through a single site rather than through multiple locations.
USDOJ announced that Tamara Brown, the owner of a driving school, admitted to committing wire fraud in filing false graduate employment information to its accreditor and unlawfully receiving veterans assistance and federal education funds. Under the terms of the plea agreement, Brown must pay restitution of $1.1 million.
Other articles in this edition include:
- Consumer Chief of the Month
- Restitution: The Superior Remedy
- Attorney General Consumer Protection News