The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly December 2019
Consumer Chief of the Month: Benjamin Long
Greetings and happy holidays from the Bluegrass State. I'm honored to be December's Chief of the Month.
I was born in Henderson, Kentucky, a small town in western Kentucky located on the Ohio River just south of Evansville, Indiana. Despite my southern accent, Henderson has more of a midwestern feel. My parents were both educators, and I knew from a pretty young age that I wanted to go into public service.
Extraterritorial Application of Consumer Protection Laws
Tom Melton, Division Director, White Collar and Commercial Division, Utah Attorney General's Office
Robert Wing, Section Director, Civil and Administrative Section, Utah Attorney General's Office
Each state has its own consumer protection laws, which govern transactions occurring in their state. Often, however, conduct spans two or more states. A sale made in one state may be fulfilled from another state, for example. But the legal requirements between the two states may differ. May the state in which the seller is headquartered regulate the conduct? The answer depends on whether a state's statute demonstrates legislative intent to have extraterritorial effect and whether the conduct occurs wholly in another state.
Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The CFPB's Ombudsman's Office released its FY 2019 Annual Report.
- The CFPB issued a Notice of Proposed Rulemaking relating to the Remittance Rule (Rule). The Rule generally requires companies that provide remittance transfers in the normal course of business to disclose to consumers certain fees and the exchange rates that apply to transfers. The Rule also includes an exception that allows some banks and credit unions to estimate fee and exchange rate information instead of disclosing exact amounts in certain circumstances, but this exception expires by statute in July 2020.
Federal Trade Commission:
- The FTC has granted final approval to a settlement with the former CEO of Cambridge Analytica, LLC and an app developer who worked with the company to resolve allegations they used deceptive tactics to collect personal information from tens of millions of Facebook users for voter profiling and targeting.
- The FTC issued an Opinion finding that the data analytics and consulting company Cambridge Analytica, LLC engaged in deceptive practices to harvest personal information from tens of millions of Facebook users for voter profiling and targeting. The Opinion also found that Cambridge Analytica engaged in deceptive practices relating to its participation in the EU-U.S. Privacy Shield framework.
- The University of Phoenix and its parent company, Apollo Education Group, will settle for a record $191 million to resolve FTC charges that they used deceptive advertisements that falsely touted their relationships and job opportunities with companies such as AT&T, Yahoo!, Microsoft, Twitter, and the American Red Cross.
- The FTC and the state of Maine are seeking a civil contempt order against two companies that market dietary supplements, alleging they have continued to promote their products using unproven claims that they can treat and cure diseases, in violation of a 2018 FTC settlement order.
- The FTC released reports on cigarette and smokeless tobacco sales and marketing expenditures for 2018.
- The FTC has issued its biennial report to Congress focusing on the use of the National Do Not Call Registry by both consumers and businesses and other organizations over the past two years.
- The operators of a work-from-home scheme, Effen Ads, LLC and its owners and the CEO of their main affiliate marketing network, W4 LLC, will pay nearly $1.5 million to settle FTC allegations that they used misleading spam emails to lure consumers into buying work-from-home services.
- The U.S. District Court for the District of Nevada has ruled in favor of the FTC in a case against the operators of a scheme that deceived financially distressed homeowners by falsely promising to make their mortgages more affordable. The defendants also charged consumers illegal advance fees and unlawfully told consumers not to pay their mortgages to or communicate with their lenders.
- The FTC filed suit against FleetCor, a company that sells fuel card services to businesses, alleging that it has charged customers at least hundreds of millions of dollars in hidden fees after making false promises about helping customers save on fuel costs.
- Global Asset Financial Services Group, LLC, the operators of a scheme that conned consumers into paying non-existent debts, will be permanently banned from the debt collection business and from misleading consumers about debt in a settlement with the FTC.
- A Utah-based company and its owner, Elite IT Partners, Inc., and its President and CEO, James Martinosare, are permanently banned from offering tech support products and services to consumers as part of a settlement with the FTC resolving allegations that their scheme tricked consumers into believing their computers were infected with viruses in order to sell them costly computer repair services.
- The FTC announced that Thomas Henry Fred, Jr., and three companies that he owns targeted new businesses across the country with bogus threats of government fines will pay $1.2 million and be banned from sending unsolicited direct mail under a settlement with the FTC and the state of Florida.
- The FTC warned of fake letters from scammers pretending to be from the FTC.
- The marketers of a dietary supplement called Synovia agreed to settle FTC charges by halting the deceptive tactics they allegedly used to mislead consumers into thinking Synovia could treat arthritis and alleviate joint pain.
- At the request of the FTC and the state of Ohio, a federal court has halted the operations of Voice over Internet Protocol service provider Globex Telecom Inc., which allegedly played a key role in robocalling consumers to promote a credit card interest reduction scheme that bilked consumers out of millions of dollars.
Securities and Exchange Commission:
- The SEC announced charges against Edward Espinal, of Wayne, New Jersey, and his company, Cash Flow Partners LLC, in connection with an alleged $5 million Ponzi scheme that defrauded at least 90 investors, many of whom were members of the Hispanic community.
- The SEC announced that a Colorado stock promoter and two of his companies agreed to pay $4.2 million to settle the U.S. Securities and Exchange Commission's charges for fraudulently promoting and trading a cannabis stock.
- The SEC announced that it has obtained a temporary restraining order and asset freeze against a California solar panel company and three executives who allegedly defrauded more than 100 investors.
In other federal news:
- The FBI Internet Crime Compliant Center released a public service announcement on money mules.
- The U.S. Department of Justice announced that a federal court ordered a New York company to stop distributing adulterated and misbranded dietary supplements.
Attorney General Consumer Protection News and Other Items of Interest
Twenty-five attorneys general urged the FTC to strengthen its rules prohibiting websites, mobile applications, and other digital marketing companies from collecting and using the personal information of children under the age of 13.
Seventeen attorneys general urged the FTC to adopt expanded regulations that would require businesses to provide adequate notification before enrolling consumers in their subscription services following a free trial period and regarding how consumers can cancel these subscriptions before actually being billed.
Arizona Attorney General Mark Brnovich announced that his office obtained a $600,000 consent judgement against a Sun City vacuum sales business and its owners. Last year, Attorney General Brnovich filed a lawsuit alleging that Sun City-based Island Don, Inc., which does business as Bright & Shiny Kirby Company, Bright & Shiny Cleaning Services, or Sun West Kirby, made thousands of calls in violation of the National "Do Not Call" Registry from September 2017 to July 2018 and deceived Arizonans over the phone.
Colorado Attorney General Phil Weiser announced that CenturyLink will pay $8,476,000 for unfairly and deceptively charging hidden fees, falsely advertising guaranteed locked prices, and failing to provide discounts and refunds it promised to consumers who signed up for internet, television, and telephone services in Colorado.
Florida Attorney General Ashley Moody issued a Consumer Alert to warn shoppers about common gift card scams that increase after the holidays.
Kansas Attorney General Derek Schmidt warned consumers of scammers posing as Apple support.
Illinois Attorney General Kwame Raoul announced a lawsuit the Attorney General's office filed against JUUL Labs, Inc. (JUUL), the nation's largest manufacturer of e-cigarettes. Attorney General Raoul filed the lawsuit in Cook County Circuit Court against California-based JUUL, alleging the company intentionally has marketed its harmful nicotine products to minors, misrepresented the potency of nicotine in its products and misrepresented JUUL's products as smoking cessation devices.
Indiana Attorney General Curtis Hill filed a complaint alleging that a DeKalb County man and his company violated Indiana law by creating and operating a pyramid scheme.
Maine Attorney General Aaron M. Frey announced that he has filed a civil action against Castle Builders, Inc., its owner Malcolm I. Stewart, and his wife Elizabeth J. Stewart for alleged violations of the Maine Unfair Trade Practices Act. The lawsuit seeks a permanent injunction against the Defendants that will prohibit them from soliciting or contracting with consumers for home construction services in the state of Maine, restitution for consumers who suffered financial loss caused by their unlawful practices, civil penalties, and attorney's fees.
Maryland Attorney General Brian E. Frosh announced that his Consumer Protection Division issued a Final Order against Greg Blosser and his company The Surrogacy Group, LLC, an Annapolis-based company, for violating the Consumer Protection Act when it sold surrogacy services to consumers for tens of thousands of dollars, but did not provide the promised services.
Massachusetts Attorney General Maura Healey has sued a Melrose couple for running a tech support scheme that allegedly charged unsuspecting consumers for repairs to fix nonexistent problems with their computers. In other Massachusetts news, Attorney General Healey sued eight online e-cigarette retailers for illegally selling and delivering flavored tobacco products to consumers in Massachusetts, in violation of a new state law.
Michigan Attorney General Dana Nessel announced her office is investigating two related Grand Rapids businesses: Blvck Pods, LLC and BlvckedPods, LLC, which sell wireless earphones (earbuds) online. These two Michigan companies have been the subject of numerous complaints from consumers around the world who believed they were buying "100% Custom and Unique" products produced and shipped from Grand Rapids. In reality, the companies' operators are running a drop-shipping business by taking orders and relying on a Chinese company to fulfill the orders, which allegedly never arrived or arrived in a non-working condition. The businesses also allegedly failed to promptly refund their customers. In other Michigan news, Attorney General Nessel announced that Michigan became the first state in the country to sue major opioid distributors as drug dealers when it filed a lawsuit against Cardinal Health Inc., McKesson Corporation, AmerisourceBergen Drug Corporation, and Walgreens in Wayne County Circuit Court.
Minnesota Attorney General Keith Ellison announced that the state of Minnesota is suing e-cigarette manufacturer JUUL Labs, Inc. The lawsuit alleges among other counts that JUUL has violated multiple state consumer protection laws, breached its duty of reasonable care, and created a public nuisance.
Missouri Attorney General Eric Schmitt announced that his office successfully secured a refund for an elderly Missouri citizen scammed by a chairlift company.
Montana Attorney General Tim Fox warned Montanans about a scam where call centers are posing as local tow truck companies.
New York Attorney General Letitia James announced that a New York State Supreme Court has awarded more than $16 million to New York state in restitution and penalties, as well as permanently enjoined a ring of New York and Oregon companies and one individual in a magazine and newspaper subscription scam.
Ohio Attorney General Dave Yost sued a home improvement contractor in northeast Ohio who has done business under more than 10 different names and allegedly bilked homeowners out of over $150,000.
Oregon Attorney General Ellen Rosenblum filed a lawsuit against Johnson & Johnson and its subsidiary Ethicon, Inc. for allegedly deceptively marketing transvaginal surgical mesh devices to women in Oregon by failing to disclose the dangerous complications sometimes arising from the devices.
Pennsylvania Attorney General Josh Shapiro announced a settlement with Temple University regarding false reporting by its Fox Business School to rankings publications, including U.S. News, to garner a No. 1 ranking for its online MBA program. The agreement includes $250,000 in new scholarships for students. In other Pennsylvania news, Attorney General Shapiro announced his office has reached a settlement with travel websites Orbitz and Expedia following an investigation into a 2018 data breach.
Washington Attorney General Bob Ferguson filed a lawsuit against Johnson & Johnson, one of the largest suppliers of the raw materials used to produce opioid pain medications, accusing the multinational company of playing a key role in driving the entire pharmaceutical industry to vastly expand the use of prescription opioids. Attorney General Ferguson also asserts that Johnson & Johnson, along with several of its subsidiaries, fueled the opioid epidemic in Washington state by embarking on a massive deceptive marketing campaign and convincing doctors and the public that their drugs are effective for treating chronic pain and have a low risk of addiction, contrary to overwhelming evidence.
West Virginia Attorney General Patrick Morrisey warned consumers to avoid falling prey to a scam where the caller attempts to steal personal information while claiming to represent an attorney general's office.
Wyoming Attorney General Bridget Hill announced a consumer protection settlement with a Cheyenne home renovation company, Grandpa's Shop, LLC, and its owner Luke Christensen. After a comprehensive investigation, the Attorney General filed a complaint against Grandpa's Shop, which also did business as GS Construction and GS Paints, asserting violations of the Wyoming Consumer Protection Act. The Complaint alleged that the contractor completed work without requisite licensing, misrepresented warranty terms, and failed to complete projects in a substantial workmanlike manner. Grandpa's Shop was dissolved on November 9, 2018, leaving unsatisfied consumers without relief.
The president has signed into law the TRACED Act, giving the FCC and the FTC more tools to go after individuals and companies who break the law by making illegal robocalls. Fifty-four attorneys general wrote a letter in March of 2019 urging congress to pass the TRACED Act.
A bipartisan group of U.S. House of Representatives members introduced a bill that would tax e-cigarette companies and use the funds to pay for teacher training and educational materials that would inform students of the health risks of vaping.
Veterans and Military News
Twenty-four attorneys general won a ruling that protects National Guard soldiers from losing their jobs, pay, and benefits after serving their communities on state active duty.
The U.S. Department of Justice announced that a California man plead guilty to his role in an identity theft and fraud scheme that victimized thousands of U.S. servicemembers and veterans.
NAGTRI Consumer Protection Partners Webinar Series: Collaboration Between Attorneys General and the Transnational Alliance to Combat Illicit Trade (TRACIT)
Wednesday, January 15, 2:00 pm - 3:00 pm ET
Over the last decade, two powerful trends have combined to present alarming new risks to consumers:
- Retail eCommerce is showing a 265% growth rate, from $1.3 trillion in 2014 to $4.9 trillion in 2021. Reports show a future of steady upward growth with no signs of decline.
- Trade in fake products has grown by 154% from $200 billion in 2005 to over $500 billion in 2016, accounting for 3.3% of global trade. Similar information collected by US Customs shows that seizures of counterfeits and other illicit products at US borders has increased ten-fold.
Consequently, eCommerce platforms have become vulnerable to misuse and consumers exposed to the infiltration of illicit, illegal, fake, and potentially unsafe products. Moreover, it is the poorest, most disadvantaged consumers who are most vulnerable to illicit products, but it is also these consumers who tend to be the most vulnerable to fraud and other forms of illegal activities online.
There is an urgent need to address the prevalence of illicit products (including counterfeits) available to online consumers and to put in place protections to safeguard them from fraud, exploitation, and a variety of new online risks.
Presentation highlights: Forms of illicit trade available online; consumer risks and harms; avenues for addressing the problem; and recommendations.
Click here to register.
2020 NAGTRI Consumer Protection 101 Training
February 11-13, 2020, Miami, Florida
This training will provide basic information about consumer protection cases. Participants will learn about federal and state consumer protection laws and important case law, the beginnings of a consumer protection case, pre-litigation discovery, enforcement actions, multistate investigations and working groups, the anatomy of a consumer settlement, and ethics in regard to undercover investigations.
This course is open to assistant attorneys general with fewer than 3 years of experience working on consumer protection cases. The deadline to submit a nomination has passed, but attorney general offices may pay to register additional staff.
Click here for more information.
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.