The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly April 2019
Consumer Chief of the Month: Meghan Stoppel, Nebraska
Two years. It hardly seems possible that almost two years have passed since I became the Consumer Protection Division Chief in Nebraska. I previously worked as an assistant attorney general in Kansas for almost eight years, and people often ask me whether Nebraska is a lot like my home state.
After two years, I can tell you there is plenty that sets Nebraska apart. From its one-of-a-kind unicameral legislature to the annual College World Series, there is plenty for Nebraska to claim as its own. But I have been most impressed, so far, by the Nebraskans I have met to date. In fact, I have spent much of the last two years learning just why so many people are so proud to call Nebraska “home.”
Article of the Month:
New Technology, But Just the Same Old Traditional Fraud
Richard V. Rodriguez, Assistant Attorney General, Office of Consumer Protection, Office of the Attorney General of the District of Columbia
Joshua Morris, Assistant Attorney General, Office of the Attorney General of the District of Columbia
Crowdfunding has fast entered many people’s lexicons in the past ten years. It has grown from a $2.7 billion market in 2012 to a $34.4 billion market in 2015 and is predicted to have a $300 billion potential by 2025. Crowdfunding is the practice of funding a project or business idea by raising small amounts of money from a large number of people, typically via the Internet. Crowdfunding has been used to fund a wide variety of activities, from new business ideas—be it goods or services—to disaster relief or political campaigns. A crowdfunding campaign typically involves a platform, creator(s), and backers. The “platform” is the website or organization that hosts or facilitates the crowdfunding campaigns. The “creator” is the person or business that creates the campaign. The “backers” are the people who pay or donate the small amounts of money to fund a campaign.
Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The CFPB released its annual report to Congress on the administration of the Fair Debt Collection Practices Act.
- The CFPB issued a suspicious activity report on elderly financial exploitation.
- The CFPB released its 18th edition of Supervisory Highlights. The report covers Bureau supervision activities generally completed between June 2018 and November 2018, and includes examination findings in the areas of automobile loan servicing, deposits, mortgage servicing, and remittances.
Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The CFPB announced changes to policies regarding Civil Investigative Demands (CIDs) to ensure they provide more information about the potentially wrongful conduct under investigation.
- CFPB Director Kathleen L. Kraninger announced a symposia series exploring consumer protections in today’s dynamic financial services marketplace. The series is aimed at stimulating a proactive and transparent dialogue to assist the CFPB in its policy development process, including possible future rulemakings. During each symposium, the CFPB will host a discussion panel of experts with a variety of viewpoints on the topic.
Federal Trade Commission:
- The FTC has rescheduled a roundtable with the state attorneys general, which originally had been planned for March 25 as part of the agency’s Hearings Initiative, for June 12 at Creighton University in Omaha, Nebraska.
- The operators of an online rewards website and a dress-up games website have separately agreed to settle FTC allegations that they failed to take reasonable steps to secure consumers’ data, which allowed hackers to breach both websites.
- The FTC has released the agenda for its May 8 event, Strictly Business: An FTC Forum on Small Business Financing. The forum will explore trends and consumer protection issues in the small business financing marketplace, including the recent proliferation of online loans and alternative financing products.
- Avant, LLC, an online lending company, has agreed to settle the FTC’s charges that it engaged in deceptive and unfair loan servicing practices, such as imposing unauthorized charges on consumers’ accounts and unlawfully requiring consumers to consent to automatic payments from their bank accounts.
- The FTC Data Spotlight shows a steep rise in complaints about Social Security scams which have overtaken IRS complaints.
- The FTC has charged a telemarketing operation and its owners with making millions of illegal, unsolicited calls about educational programs to consumers who submitted their contact information to websites promising help with job searches, public benefits, and other unrelated programs.
- Twelve corporate and four individual defendants have settled FTC charges that they deceptively marketed “cognitive improvement” supplements using sham news websites containing false and unsubstantiated efficacy claims, references to non-existent clinical studies, and fraudulent consumer and celebrity endorsements.
- The FTC will hold a public workshop on August 7, 2019 to examine consumer protection issues related to video game “loot boxes”—in-game rewards players can buy while playing a video game.
- A federal judge has ordered journal publisher and conference organizer Srinubabu Gedela and his companies to pay more than $50.1 million to resolve FTC charges that they made deceptive claims to academics and researchers about the nature of their conferences and publications, and hid steep publication fees.
- As part of its ongoing efforts to ensure that dietary supplements and other health-related products are advertised truthfully, and that efficacy claims made for such products are supported by competent and reliable scientific evidence, the FTC joined the U.S. Food and Drug Administration in sending warning letters to three companies marketing products containing cannabidiol to treat and cure a variety of serious diseases and conditions.
Securities and Exchange Commission:
- The SEC charged a New York City man with continuing a previously charged scheme, stealing millions of dollars from investors who were allegedly falsely promised their funds would be used for the purchase and resale of tickets to Broadway shows and a sporting event.
- The SEC charged a former senior lawyer at SeaWorld Entertainment Inc. with insider trading based on nonpublic information that the company’s revenue would be better than anticipated for the second quarter of 2018.
- The SEC unveiled a public service campaign to empower Main Street investors to take control of their financial future. The public service announcement encourages investors to use the free tools and unbiased information available on the SEC’s online resource for investor education−Investor.gov−to get answers to their questions about investing.
- The SEC's Office of Investor Education and Advocacy created an investor checklist to help investors get started with creating their own saving and investing plan.
- The SEC charged the former CFO and two former employees of a publicly traded transportation company with fraud for manipulating the company’s financial results in order to meet earnings targets and projections.
In other federal news:
- A federal court struck down the exemption in the Telephone Consumer Protection Act for government-backed debt calls on first amendment grounds.
- The FBI Internet Crime Complaint Center released its 2018 annual report.
- The Department of Justice announced that General Electric (GE) will pay a civil penalty of $1.5 billion under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to resolve claims involving subprime residential mortgage loans originated by WMC Mortgage (WMC), a GE subsidiary. WMC, GE, and their affiliates allegedly misrepresented the quality of WMC’s loans and the extent of WMC’s internal quality and fraud controls in connection with the marketing and sale of residential mortgage-backed securities (RMBS). FIRREA authorizes the federal government to seek civil penalties for violations of various predicate criminal offenses, including wire and mail fraud where the violation affects a federally insured financial institution.
- The Commodity Futures Trading Commission announced that on March 18, 2019, District Judge James Lawrence King of the U.S. District Court for the Southern District of Florida entered an order finding Coral Gables, Florida resident Robert Escobio in contempt for failing to pay more than $1.5 million in previously-ordered restitution to defrauded customers of Mr. Escobio’s now-defunct precious metals firm, Southern Trust Metals, Inc.
- The Department of Justice announced that a U.S. citizen who resided in Costa Rica pleaded guilty for his role in a “sweepstakes fraud” scheme that defrauded hundreds of U.S. residents, many of them elderly.
- The Department of Justice announced that two owners of an Arizona business were charged in an indictment unsealed for overseeing a scheme to forge hundreds of thousands of counterfeit documents containing improperly obtained personal information, primarily relating to senior citizens, which they allegedly sold to their clients, who then allegedly provided this information to telemarketers.
Attorney General Consumer Protection News and Other Items of Interest
Arkansas Attorney General Leslie Rutledge filed a consumer protection lawsuit against Little Rock-based Bourbon & Boots Acquisition Company LLC, and its owner, Rodney Ford, for allegedly failing to deliver items ordered by consumers, failing to fulfill orders of advertised products, and failing to refund moneys for unfulfilled orders or substandard products. In other Arkansas news, General Rutledge warned consumers of scammers posing as employees of legitimate and trusted businesses such as pest control, lawn care, or alarm companies in an attempt to steal personal information from Arkansans.
California Attorney General Xavier Becerra, with Alameda County District Attorney Nancy E. O’Malley and San Mateo County District Attorney Stephen M. Wagstaffe, announced a $4.6 million settlement involving Advantage Rent A Car and its affiliate E-Z Rent-A-Car (Advantage) following a multi-year joint investigation into violations of California’s consumer protection laws. The settlement – incorporated into a stipulated judgment which also includes comprehensive injunctive terms to prevent future misconduct – resolves allegations that Advantage frequently charged its customers artificially inflated prices for rental vehicle repair.
Delaware Attorney General Kathleen Jennings announced an auto finance company operating in Delaware, Exeter Finance LLC, has agreed to provide significant consumer relief for its role in financing subprime auto loans to hundreds of Delaware car buyers.
Florida Attorney General Ashley Moody took action against a custom trailer company, its owner and two managers for deceiving customers. A complaint filed in Polk County against Husky Cargo, LLC, and two managers, Dwayne Pass and Tammy Pass, alleges that the business collected down payments for custom trailers that were not delivered or built as promised according to customer requirements. In other Florida news, General Moody issued a Consumer Alert about an increasingly common vacation rental scam that involves the use of fake online ads posted to deceive consumers.
Idaho Attorney General Lawrence Wasden announced the conclusion of a consumer protection lawsuit against manufactured home retailer Hathaway Homes Group, LLC, and its former owner, Paul J. Hathaway for allegedly accepting down payments for new, unbuilt manufactured, and modular homes that were never ordered from manufacturers. Consumers also alleged Hathaway misrepresented the conditions of his used homes and failed to perform the warranty work on his installed homes. In other Idaho news, General Wasden has announced a settlement resolving the state’s consumer protection lawsuit against Boise-based Renaissance Consign, LLC, and owner Dale Corson. The settlement requires Corson to pay refunds to consumers and permanently prohibits him from operating a consignment business in Idaho.
Illinois Attorney General Kwame Raoul filed a lawsuit against Purdue Pharma L.P. and Purdue Pharma Inc. over its alleged deceptive marketing practices designed to significantly increase prescriptions issued for opioids.
Indiana Attorney General Curtis Hill warned Hoosiers to beware of scammers who descend on storm-affected communities in order to take advantage of homeowners needing repairs. In other Indiana news, General Hill is pursuing legal action against a promotions company over allegations of deceptive advertising. The issue involves mailings that allegedly lead Hoosiers to falsely believe they have won valuable prizes.
Iowa Attorney General Tom Miller warned Iowans in the 56 counties declared disaster areas to look out for price gouging and other scams.
Maryland Attorney General Brian E. Frosh announced that his Consumer Protection Division has filed charges against Cash-N-Go, Inc., Brent M. Jackson, and related businesses owned and operated by Jackson under the “Cash-N-Go” name for allegedly making unlicensed and usurious consumer loans, referred to as “title loans” or “title pawns,” which put vulnerable Maryland consumers at risk of losing their motor vehicles.
Massachusetts Attorney General Maura Healey announced that a finance company operating in Massachusetts, Exeter Finance LLC, will pay more than $5.5 million for its role in allegedly financing unfair, subprime auto loans for Massachusetts car buyers. In other Massachusetts news, General Healey announced that a national mortgage servicing company will pay $2 million and undertake affordable loan modifications for affected Massachusetts homeowners. The settlement resolves allegations that Caliber Homes Loans Inc. (Caliber) failed to help borrowers avoid foreclosure and instead gave homeowners unaffordable loan modifications with ballooning monthly payments they could not afford.
Michigan Attorney General Dana Nessel filed a class-action lawsuit on behalf of Michigan consumers against Go Workout Frandor and its owner, Steven Millenbach. The lawsuit comes after the company failed to provide satisfactory assurances in response to a Notice of Intended Action issued by the attorney general in early February.
Mississippi Attorney General Jim Hood reminded Mississippians who suffered property damage as a result of recent storms to be on alert for tree cutters and home repair contractors who may be scammers.
Missouri Attorney General Eric Schmitt announced a guilty plea and the sentencing of a St Louis County contractor for home repair fraud.
Montana Attorney General Tim Fox warned Montanans of confusing vehicle service websites charging consumers for services offered free of charge through the state’s Motor Vehicle Division official online presence.
New Hampshire Attorney General Gordon J. MacDonald announced that an enforcement action under the Consumer Protection Act has been brought against Tyler Thomson, the owner of Amherst Roofing, of Amherst, New Hampshire for unfair and deceptive trade practices related to his roofing business.
New Jersey Attorney General Gurbir S. Grewal and the Bureau of Securities within the Division of Consumer Affairs proposed a new rule to strengthen investor protections in New Jersey by requiring all investment professionals registered with the Bureau to place their customers’ interests above their own when recommending securities or providing investment advice.
New York Attorney General Letitia James announced an investigation into Facebook’s unauthorized collection of 1.5 million Facebook users’ email contact databases. In other New York news, General James announced a lawsuit filed against Park Avenue Stem Cell, a New York City for-profit stem cell clinic, and its managing doctor, Dr. Joel B. Singer, M.D., for allegedly engaging in fraudulent and illegal advertising regarding its stem cell procedures.
The New York Department of Financial Services announced the creation of the Consumer Protection and Financial Enforcement Division. The new division is responsible for protecting and educating consumers and fighting consumer fraud, as well as ensuring that regulated entities comply with New York and federal law in relation to their activities serving the public.
North Carolina Attorney General Josh Stein was granted a temporary restraining order against a real estate business involved in a lawsuit he filed alleging unfair and deceptive trade practices. The lawsuit alleges that the defendants buy properties from distressed homeowners with promises to deliver cash in hand or pay all closing costs, among other false advertising.
North Dakota Attorney General Wayne Stenehjem announced that a Fargo contractor and business owner, Timothy Rosene, is barred from doing business in North Dakota for at least the next five years. In October 2017, the Attorney General’s Consumer Protection division initiated an investigation of Rosene, doing business as Studs to Rugs, Inc., after receiving multiple complaints from homeowners that his business took numerous large deposits before abruptly closing without warning and without providing any refunds.
Ohio Attorney General Dave Yost filed a consumer protection lawsuit against a used car dealership and its owner who allegedly failed to deliver vehicle titles to central Ohio customers. In other Ohio news, General Yost announced two different consumer protection lawsuits against home improvement contractors accused of performing shoddy work and failing to deliver promised services. Additionally, General Yost and the FTC announced that a dozen Ohioans who fell victim to a widespread tech support scam will soon receive refunds totaling more than $5,000.
Pennsylvania Attorney General Josh Shapiro announced a settlement agreement with Continental Real Estate Management, a State College based property manager, following a review of the property manager’s security deposit practices by the Office of Attorney General’s Bureau of Consumer Protection. In other Pennsylvania news, General Shapiro announced that his office filed a lawsuit against Crown Food Carts, Inc. and Robert W. Scifo, individually. The lawsuit alleges that the defendants entered into contracts with small businesses to sell mobile food vending trucks, carts, and trailers, as well as related equipment and supplies through the internet, but failed to deliver the products and/or delivered incorrect products after substantial delays.
Virginia Attorney General Mark R. Herring has obtained a permanent injunction and final judgment against Ricky Harmon Pettit for violating the Virginia Consumer Protection Act by providing unlicensed contractor work in consumers’ homes in Central and Northern Virginia. Pettit worked under various names including Pettit’s Home Improvement, Ricky H. Pettit Home Improvement, and R. H. Pettit Builders.
Washington Attorney General Bob Ferguson’s announced that Johnson & Johnson will pay $9.9 million to avoid going to trial for misrepresentations and failure to include serious risks in the instructions and marketing materials for surgical mesh devices.
West Virginia Attorney General Patrick Morrisey announced that he won restitution, a civil penalty and obtained a court order to permanently block a Putnam County flooring contractor from any future work in the area of home improvement sales and installation.
Wisconsin Attorney General Josh Kaul announced that hundreds of Wisconsin consumers were provided restitution for companies alleged to have violated consumer protection laws.
Facebook believes it may be fined close to $5 billion related to the FTC’s investigation of its data practices.
Microsoft reports hacking of email accounts.
Robocalls hit an all-time high in March when Americans endured 5.23 billion robocoalls.
Yahoo offers $117.5 to settle data breach cases.
Verizon is set to release robocall blocking technology.
Arizona Attorney General Mark Brnovich warned Arizonans to protect themselves from charity scams after the fire at the Notre Dame Cathedral in Paris.
Johnny Bobbitt, a homeless man accused of helping fabricate a "good Samaritan" story to receive $400,000 in donations, was sentenced to five years' probation. Bobbitt, Katelyn McClure and Mark D'Amico are accused of making up the story and then seeking donations via the crowdfunding site GoFundMe, and Bobbitt's subsequent lawsuit against McClure and D'Amico prompted an investigation.
The Department of Justice announced that a federal court in Miami, Florida, permanently barred Michael L. Meyer from organizing, selling, and making statements about the tax benefits of an allegedly abusive charitable giving tax scheme. The court’s injunction specifically prohibited Meyer from selling the Ultimate Tax Plan, sometimes referred to as a Charitable LLC or Charitable Limited Partnership. In addition, the court barred Meyer from preparing federal tax returns, performing appraisals for federal tax purposes, representing anyone other than himself before the IRS, furnishing tax advice about charitable contributions, and making statements about transactions having a significant purpose of tax avoidance.
Twenty state attorneys general submitted a statement for consideration during a joint field hearing of the U.S. House Education and Labor and Veterans Affairs Committees in El Cajon, California.
Nebraska Attorney General Doug Peterson testified before the Senate Subcommittee on Communications, Technology, Innovation, and the Internet in regards to illegal robocalls.
U.S. Senators introduced a bill to ban online social media companies from tricking consumers into giving up their personal data.
A bill requested by Washington Attorney General Ferguson that strengthens Washington’s data breach notification laws passed the Washington legislature. The new law requires consumer notification if a hacker obtains private data such as passport numbers, usernames and passwords.
Veterans and Military News
Montana Attorney General Tim Fox’s Office of Consumer Protection and the Montana National Guard alerted consumers about the accessibility of military records free of charge for servicemembers and their families.
A new report says some colleges receiving the most GI benefits spend the least on education veterans.
The CFPB Office of Servicemember Affairs released a detailed research brief on the financial well-being of veterans. According to this national survey, which measured the financial well-being of Americans across the country, veterans, as a group, experience somewhat higher levels of financial well-being than the average American.
The Department of Justice announced that a settlement has been reached with the City of Glendale, Arizona, resolving a lawsuit filed by the Department of Justice under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) on behalf of Arizona Air National Guard Member Rebecca Cruz.
The Department of Justice announced that it filed a complaint in federal court against the Warren County, North Carolina, Board of Education (Warren County), to protect rights guaranteed to an Army Reservist, Command Sergeant Major Dwayne Coffer (CSM Coffer), by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).
United States Attorney Sherri A. Lydon announced that a federal grand jury in Greenville, South Carolina, returned an Indictment alleging a conspiracy to engage in mail and wire fraud. Scott A. Kohn, age 64, of Newport, California, and Future Income Payments, LLC (FIP), an entity organized under the laws of Nevada, are charged in the indictment. According to the indictment, FIP operated a Ponzi scheme in which it actively recruited pension holders who were desperate for money, including many veterans of the United States Armed Forces. The pensioners made monthly payments to FIP in exchange for a lump sum payment or loan. The adjusted annual percentage rate on these transactions often exceeded 100%.
Consumer Protection Trivia
- What type of scam involves a seller posting online a normally high dollar good such as a luxury clothing item for a fraction of the normal price but when a consumer buys the good, they never receive it?
A. Prize and sweepstakes scam
B. Fake merchandise scam
C. Imposter scam
D. Tech support scam
- In what year did the National Conference of Commissioners on Uniform State Laws draft the model Uniform Deceptive Trade Practices Act?
*Trivia answers can be found below.
- B. Fake merchandise scam
- C. 1964
Blake Bee, Program Counsel for the Center for Consumer Protection, is the editor of Center for Consumer Protection Monthly, a compendium of information that may be of interest to the attorney general community and others interested in consumer protection. Neither the National Association of Attorneys General (NAAG) nor the National Attorneys General Training & Research Institute expresses a view as to the accuracy of the matters, nor as to the position expounded by the authors of the hyperlinked materials. Any use and/or copies of this newsletter in whole or part must include the customary bibliographic citation. NAAG retains copyright and all other intellectual property rights in the material presented in this publication. For content submissions or to contact the editor directly, please email firstname.lastname@example.org or call (202) 326-6263.