The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly December 2018
Consumer Chief of the Month: Jane Azia, New York
I started in the New York Attorney General’s Office in 1982 under Attorney General Bob Abrams. Bob Abrams set a high bar for what attorneys general could do to protect the public. He truly cared about the people of the state and exemplified government at its best. I have served under six attorneys general since then, all of whom have brought their unique stamp to the office. Prior to coming to the attorney general’s office, I was a legal services attorney in Poughkeepsie, New York and then in Bedford-Stuyvesant. Having sued the government on behalf of my clients on a number of occasions, I was somewhat apprehensive about going to the “other” side. Any reservations I had quickly evaporated, and I soon discovered that I had found the perfect job and place to be a lawyer.
Article of the Month:
Never-Ending Game of Whack-A-Mole: Dissolving Sham Entities
Mark Boehmer, Assistant Attorney General
Office of the Colorado Attorney General
Colorado has faced a growing problem over the last few years of thousands of sham entities being created by fraudulent filings with the Colorado Secretary of State. This culminated in the Colorado Attorney General filing four cases in April 2018, successfully dissolving 217 such entities.
In these four cases, Chinese nationals filed fraudulent articles of organization or incorporation with the secretary of state using Colorado residents’ home addresses as the address for the bogus businesses.
Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The CFPB announced final policy guidance describing the Home Mortgage Disclosure Act data the CFPB intends to make available to the public beginning in 2019, including modifications to protect consumers’ privacy.
- The CFPB issued its 2017 Fair Lending Report.
- The CFPB has filed a complaint in federal court in the District of Nevada alleging a claim of deception against Village Capital & Investment LLC, a non-bank mortgage company headquartered in Henderson, Nevada. The CFPB and Village Capital also filed a proposed stipulated final judgment and order to resolve the claim. As described in the complaint and proposed order, the CFPB alleges that Village Capital violated the Consumer Financial Protection Act of 2010 by misleading veterans regarding its Interest Rate Reduction Refinancing Loans—loans that allow veterans to refinance their mortgages at lower interest rates with a loan guaranteed by the Department of Veterans Affairs. Specifically, the CFPB alleges that Village Capital misled veterans by overstating the benefits of refinancing.
- The CFPB announced a settlement with State Farm Bank, FSB, a federal savings association headquartered in Bloomington, Ill. As described in the consent order, the CFPB found that State Farm Bank violated the Fair Credit Reporting Act, Regulation V, and the Consumer Financial Protection Act of 2010 by obtaining consumer reports without a permissible purpose; furnishing to credit-reporting agencies (CRAs) information about consumers’ credit that the bank knew or had reasonable cause to believe was inaccurate; failing to promptly update or correct information furnished to CRAs; furnishing information to CRAs without providing notice that the information was disputed by the consumer; and failing to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information provided to CRAs.
Commodity Futures Trading Commission:
- The CFTC and the Utah Department of Commerce, Division of Securities, through its Attorney General (State of Utah) filed an amended complaint alleging that Denise Gunderson Rust and Joshua Daniel Rust actively participated and aided and abetted, in a precious metals Ponzi scheme with defendants Gaylen Dean Rust (Gaylen Rust) and Rust Rare Coin, Inc. (RRC). Through this scheme, Gaylen Rust and RRC fraudulently solicited at least $200 million from investors since May 2013 for the purported purpose of pooling their money to purchase silver, a commodity in interstate commerce.
- The CFTC announced an Order of default judgment and permanent injunction has been issued against defendants Scott Allensworth (d/b/a Capital Growth Group Associates and Cobra Development Group LLP), of Newhall, California, and his California company E-Slate, Inc. (d/b/a Cobra Development Group LLP), Robert J. Fusco, of Henderson, Nevada, and David Weddle of Prospect, Kentucky, in connection with two separate fraudulent commodity pool trading schemes.
- The CFTC announced that Defendant Mark R. Slobodnik of Libertyville, Illinois, has been ordered to pay approximately $370,000 in fines in connection with a $1.76 million commodity pool fraud operated under the name Blue Guru, LLC.
Federal Trade Commission:
- At the FTC’s request, a U.S. district court in Illinois has issued a final judgment and order requiring nine related Canadian and U.S. defendants to pay more than $4.6 million for tricking small businesses into paying for Internet directory listings, search engine optimization services, or website design and hosting services they never ordered.
- A federal judge in Florida has permanently banned Kevin W. Guice from the telemarketing and debt-relief industries, agreeing with the FTC and the State of Florida that he founded and operated a massive debt-relief scam that took in over $23 million from more than 10,000 consumers, until halted by a June 2016 temporary restraining order.
- The FTC offered tips to consumers about buying internet connected toys.
- Two defendants charged with laundering millions of dollars in credit card charges through fraudulent merchant accounts have settled with the FTC.
- The operators of two Florida-based student loan debt relief schemes are banned from the debt relief business as part of agreements settling FTC allegations that they collected illegal upfront fees and falsely promised to help some consumers enroll in government programs that would reduce or forgive their student loan debt.
- One of the defendants involved in MOBE, a massive internet marketing and business coaching scheme alleged to have bilked hundreds of millions of dollars from consumers worldwide, has agreed to settle with the FTC. Under the settlement, she will turn over to the FTC control of funds held by MOBE corporate entities.
- The FTC issued the National Do Not Call Registry Data Book for Fiscal Year 2018. The FTC’s National Do Not Call (DNC) Registry lets consumers choose not to receive most legal telemarketing calls.
- The FTC is mailing 43,456 checks totaling more than $3.5 million to consumers subjected to deceptive and unfair sales and financing tactics by the Sage Auto Group and its owners between 2014 and 2016. Affected consumers will receive an average refund amount of $81.76.
- The officers of a company that marketed and sold Nobetes, a pill they claimed treats diabetes, have settled a FTC complaint alleging that the advertising claims for the product are false or unsubstantiated.
- The FTC is seeking comment on whether the agency should make changes to rules requiring that financial institutions and creditors take certain steps to detect signs of identity theft affecting their customers.
- The defendants in a Minnesota-based business opportunity scheme known as Sellers Playbook have settled with the FTC and the State of Minnesota. The FTC and the Minnesota Attorney General’s Office alleged that defendants lured consumers into believing that they would likely earn thousands of dollars a month selling products on Amazon.
- The FTC’s latest Consumer Protection Data Spotlight finds seniors sending thousands in cash to scammers claiming to be their grandchildren. Seniors lost far more money through these scams than other age groups.
Securities and Exchange Commission:
- The SEC instituted settlement proceedings against two robo-advisers for making false statements about investment products and publishing misleading advertising. The proceedings are the SEC’s first enforcement actions against robo-advisers, which provide automated, software-based portfolio management services.
- The SEC announced settled charges against a natural and organic food company stemming from weaknesses in the company's internal controls related to end-of-quarter sales practices that were designed to help the company meet its internal sales targets. Based upon its extensive cooperation with the SEC's investigation, which included self-reporting and remediation efforts, the SEC did not impose a monetary penalty on the company.
- The SEC announced that three broker-dealers have agreed to pay more than $6 million to settle charges that they provided the SEC with incomplete and inaccurate securities trading information in required SEC productions known as “blue sheet data.” The SEC uses this data to carry out its enforcement and regulatory obligations, including the investigation of insider trading and other fraudulent activity.
In other federal news:
- The United States Department of Justice announced the sentencing of a Chinese citizen for a scheme to sell mislabeled dietary supplements.
- The Federal Communications Commission issued a ruling rejecting requests to make it harder for text messaging providers to protect consumers from spam and scam robotexts.
- The United States Surgeon General released an advisory on “E-cigarette Use Among Youth.”
- The United States Department of Justice announced that a federal court permanently enjoined a Michigan company and its owners from preparing, processing, and distributing adulterated ready-to-eat food.
- The United States Department of Justice announced that a federal court in Florida sentenced Eugene Marotta to 46 months in prison for his role in a mail fraud scheme that deceived thousands of victims (many of whom are elderly) into sending money to claim a falsely promised $350,000 prize.
Attorney General Consumer Protection News and Other Items of Interest
Fifty states and the District of Columbia have reached a settlement with Wells Fargo that will resolve allegations that Wells Fargo opened millions of unauthorized accounts and enrolled customers into online banking services without their knowledge or consent, improperly referred customers for enrollment in third-party rental and life insurance policies, improperly charged auto loan customers for force-placed and unnecessary collateral protection insurance, failed to ensure that customers received refunds of unearned premiums on certain optional auto finance products, and incorrectly charged customers for mortgage rate lock extension fees.
Forty two states and the District of Columbia have settled with Encore Capital Group, Inc. and its subsidiaries, Midland Credit Management, Inc. and Midland Funding, LLC (Midland) for using illegal tactics to collect unverified debts. The settlement resolves a multistate investigation into the debt-buying company’s collection and litigation practices, including claims that Midland “robo-signed” and filed affidavits containing unverified and potentially inaccurate information to support debt-collection lawsuits against consumers.
Forty three attorneys general wrote a letter to the Commissioner of the Social Security Administration (SSA) urging the SSA to develop, pursuant to a newly passed federal law, a database to facilitate the verification of a consumer’s information when requested by a certified financial institution, with the consumer’s consent. The federal law is aimed at addressing “synthetic identity theft,” in which identity thieves use real Social Security numbers along with fictitious names and birthdates to manufacture new identities.
Forty state attorneys general reached a $68 million settlement with UBS to resolve allegations of fraudulent conduct involving the manipulation of LIBOR, a benchmark interest rate that affects financial instruments worth trillions of dollars and has a far-reaching impact on global markets and consumers.
A group of 40 state attorneys general are working to stop or reduce annoying and harmful robocalls. The coalition is reviewing the technology major telecom companies are pursuing to combat illegal robocalls.
Attorneys general from 12 states and commonwealths have filed a complaint in the U.S. District Court for the Northern District of Indiana against Medical Informatics Engineering, Inc. and NoMoreClipboard, LLC, a web-based electronic health record company headquartered in Fort Wayne, Indiana. The complaint alleges the company violated provisions of the Health Insurance Portability and Accountability Act as well as state claims including Unfair and Deceptive Practice Law, Notice of Data Breach statutes, and Personal Information Protection Acts.
Best Buy, the AARP, and NAAG launched a campaigned aimed at raising awareness around gift card fraud.
The Alaska Department of Law’s Consumer Protection Unit is warning the public about marketing of a variety of industrial hemp-derived products that are currently not authorized for sale in Alaska.
Arkansas Attorney General Leslie Rutledge and NorthStar Alarm Services LLC have reached a settlement to resolve allegations that NorthStar violated the Arkansas Deceptive Trade Practices Act and the Home Solicitation Sales Act. The company’s representatives engaged in unlawful and high pressure door-to-door sales tactics, which included misrepresenting its affiliation with other alarm companies and failing to disclose the length and cost of service contracts. In other Arkansas news, General Rutledge obtained a judgment against NuCold Refrigeration Inc. and the owner, Jerry Collins of Plumerville, based on allegations that NuCold failed to provide goods or services after consumers had already paid, provided defective goods, and failed to deliver goods or services by the promised date.
District of Columbia Attorney General Karl A. Racine sued Facebook, Inc. for allegedly failing to protect its users’ data, enabling abuses like one that exposed nearly half of all District residents’ data to manipulation for political purposes during the 2016 election. In its lawsuit, the Office of the Attorney General alleges Facebook’s lax oversight and misleading privacy settings allowed, among other things, a third-party application to use the platform to harvest the personal information of millions of users without their permission and then sell it to a political consulting firm.
Florida Attorney General Pam Bondi’s Office obtained a temporary injunction in connection with a complaint against Marlin Financial, Inc. to prohibit Marlin from offering alleged unlawful loans to Floridians.
Georgia Attorney General Chris Carr urged consumers to be on guard this holiday season and not to fall prey to telemarketing and imposter phone scams.
Idaho Attorney General Lawrence Wasden is asking Idahoans to be aware of a new tax scam targeting state residents.
Illinois Attorney General Lisa Madigan filed a lawsuit against a California woman who has used dozens of aliases and assumed business names to create and sell tickets for fake events in Illinois and throughout the country that never occurred. In other Illinois news, General Madigan filed a lawsuit against a Chicago diabetic supplies reseller and its owner who advertised online that his company would purchase unused diabetic testing supplies from consumers in Illinois and throughout the country but failed to pay people for their supplies.
Indiana Attorney General Curtis Hill advised Hoosiers to beware of fraudulent emails that appear, at first glance, to come from Apple representatives.
Iowa Attorney General Tom Miller’s Office has sued a Davenport resident, alleging that his businesses promised to create and distribute promotional items, including posters promoting high school sports teams, but instead defrauded small businesses across the country.
Kentucky Attorney General Andy Beshear issued a scam alert after his office and the Better Business Bureau said an online company claiming to be located in Lexington and selling bourbon barrels is scamming customers.
Maryland Attorney General Brian E. Frosh announced that his Consumer Protection Division has settled charges against Maryland Speed LLC (Maryland Speed), an online retailer specializing in the sale of auto parts, and its owner, Branden Farthing. Charges against Maryland Speed and Farthing were initially brought in September 2018, and alleged that the retailer, based in Hollywood, Maryland, violated the Consumer Protection Act when it accepted payments for parts that it failed to provide to customers and refused to issue refunds.
Massachusetts Attorney General Maura Healey announced that a Connecticut automobile lender will provide $733,925 in debt relief and refunds to resolve allegations that it facilitated the sale of defective vehicles by certain Massachusetts used car dealerships.
Minnesota Attorney General Lori Swanson filed a lawsuit against an unlicensed Virginia company that offers to help people settle their tax debt. The lawsuit alleges that the company, Wall and Associates, Inc., failed to register in Minnesota and collected large advance payments from customers of up to $15,000 prior to the full delivery of services, in violation of Minnesota law. In other Minnesota news, General Swanson filed a lawsuit against Comcast Corporation/Xfinity for charging customers more than it promised for cable television packages, charging for unordered equipment and services, and not delivering prepaid Visa cards promised in its promotions.
Mississippi Attorney General Jim Hood filed a lawsuit against opioid distributors Cardinal Health, Inc., McKesson Corporation, and AmerisourceBergen Corporation for failing to prevent the diversion of opioids in Mississippi. The lawsuit alleges that these three companies, who distribute the majority of opioids, have failed to prevent the diversion of those drugs by breaching their legal duties to monitor, detect, investigate, refuse, and report suspicious orders of opioids, which the Complaint states is a violation of the Mississippi Consumer Protection Act. In other Mississippi news, General Hood issued a warning to businesses across the state about an international email scam that threatens to bomb a business if money is not transferred to the sender.
Nebraska Attorney General Doug Peterson announced that his office has reached a settlement with Tickets in Time, LLC, Secure Ticket Purchase, LLC, and their owner, John Uhrich (collectively Box Office Ticket Sales), resolving a consumer protection case that was filed in the Lancaster County District Court in 2016. Box Office Ticket Sales is a secondary market ticket seller that resells tickets to sporting events, concerts, and other events. The state alleged that certain marketing and sales practices on Box Office Ticket Sales’ website and over the phone misled consumers into believing that they were buying tickets directly from the event venue rather than from a ticket reseller.
New Jersey Attorney General Gurbir S. Grewal and the Division of Consumer Affairs announced that health insurance provider EmblemHealth, Inc. has agreed to pay the State a $100,000 civil penalty to resolve allegations it improperly disclosed the highly confidential personal information of more than 6,000 New Jersey customers.
New York Attorney General Barbara D. Underwood announced a record $174.2 million consumer fraud settlement with Charter Communications, Inc. and Spectrum Management Holding Company for defrauding internet subscribers.
Pennsylvania Attorney General Josh Shapiro announced that the Attorney General’s Bureau of Consumer Protection has filed a lawsuit against Element Kitchen & Bath Design, LLC and Michael J. Sheehan, for allegedly entering into contracts with consumers to perform home improvement services, including designing, installing, and supplying materials for renovations to consumers’ homes but failing to perform the work or performing the work in a substandard manner. In other Pennsylvania news, General Shapiro announced that the Attorney General’s Bureau of Consumer Protection has filed a lawsuit and is seeking a preliminary injunction against Howard Stahl of Pearl Plumbing, Inc. f/d/b/a Roto-Rooter, and his son, Nolan Stahl, and his current business: Stahl Brothers Plumbing, Inc. d/b/a Rooter Man for allegedly defrauding Pennsylvania consumers in the course of recommending the unnecessary replacement of sewer pipes.
South Dakota Attorney General Marty Jackley’s Consumer Protection Division confirmed that the grandparents scam is targeting seniors this holiday season. In other South Dakota news, General Jackley warned consumers to be aware of a fictitious shipping company by the name Sioux Falls Vehicle Carriers that claims to be physically located in Sioux Falls, South Dakota.
Texas Attorney General Ken Paxton announced that his Consumer Protection Division finalized a settlement with the owner of several Dallas-Fort Worth area gas stations accused of price gouging last year during the state of disaster declared for Hurricane Harvey.
West Virginia Attorney General Patrick Morrisey encouraged consumers to know a store’s return policy before buying gifts. In other West Virginia news, General Morrisey urged consumers to exercise caution when receiving unsolicited pay-for-prayer calls.
The Better Business Bureau released a report on subscription traps and deceptive free trial scams.
California imposed new regulations on internet of things devices.
H.R. 3359 was signed into law, which establishes the Cybersecurity and Infrastructure Security Agency under DHS to develop cybersecurity and critical infrastructure security programs.
The 2018 majority staff of the U.S. House Energy and Commerce Subcommittee on Oversight and Investigations released a cybersecurity strategy report which suggests that companies need to revamp how they find and fix vulnerabilities in their Internet-connected devices. The report also highlights the priorities for the subcommittee in the upcoming year.
Veterans and Military News
The Consumer Financial Protection Bureau warned servicemembers of unnecessary add-on products when buying a car.
The FTC and the Department of Veterans Affairs signed an updated Memorandum of Agreement to continue ongoing efforts to stop fraudulent and deceptive practices targeted at U.S. servicemembers, veterans, and dependents who use military education benefits.
Consumer Protection Trivia
- In what year did congress give the FTC the authority to protect consumers from "unfair and deceptive trave practices?"
- Which president signed the Controlling the Assault on Non-Solicited Pornography and Marketing Act otherwise known as "CAN-SPAM?"
A. George W. Bush
B. Bill Clinton
C. Barack Obama
D. Donald Trump
*Trivia answers can be found below.
- B. 1938
- A. George W. Bush
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.