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Center for Consumer Protection Monthly February 2018

Consumer Chief of the Month

I consider it a tremendous honor to serve as February's Consumer Chief of the Month. I first joined the Mississippi Attorney General's Office in September 1996, after working in private practice for three years with a Jackson law firm that focused primarily on plaintiff's work. I was hired by former Attorney General Mike Moore and twenty-one years later, it is my pleasure to serve under the leadership of Attorney General Jim Hood.

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Article of the Month

When I was a young man, my father told me "don't get mad- get even." With the enactment of the Consumer Review Fairness Act, Congress provided consumers with a powerful tool to redress the harm caused them by unfair and deceptive practices in the business marketplace. According to the FTC, the Consumer Review Fairness Act ("CRFA") "protects consumers' ability to share their honest opinions about a business's products, services, or conduct, in any forum, including social media."

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Scam Alert:

IRS Impersonation: It's tax season! How to know if it's really the IRS calling or knocking on your door?

Federal Consumer Protection News

Consumer Financial Protection Bureau:

  • The CFPB released its five-year Strategic Plan that establishes its mission, strategic goals, and strategic objectives.
  • The CFPB issued a request for information about the CFPB's enforcement processes. The CFPB is seeking information to help assess the overall efficiency and effectiveness of its processes related to the enforcement of federal consumer financial law.
  • The CFPB has information for borrowers with severe disabilities and student debt.

Commodity Futures Trading Commission:

  • The CFTC has created educational brochures on virtual currencies and on the basics of bitcoins.
  • The CFTC has issued a customer advisory that warns individuals to beware of virtual currency pump and dump schemes.
  • The CFTC orders AMP Global Clearing LLC to pay $100,000 for supervision failures related to cybersecurity of its customers' records and information.

Federal Communications Commission:

  • The FCC is seeking applicants to participate in its Intergovermental Advisory Committee. Applications are due by March 12. More information can be found here.

Federal Trade Commission:

  • A unanimous en banc decision of the United States Court of Appeals for the Ninth Circuit ruled in the FTC's favor on a key issue involving the agency's jurisdiction as it relates to common carriers.
  • The FTC is warning consumers about online dating scams.
  • The FTC has charged a student loan debt relief operation with bilking more than $28 million from thousands of consumers throughout the country by falsely promising that consumers' monthly payments would go towards paying off their student loans.
  • The FTC has reached a settlement with PayPal, Inc. over allegations that the company told users of its Venmo peer-to-peer payment service that money credited to their Venmo balances could be transferred to external bank accounts without adequately disclosing that the transactions were still subject to review and that funds could be frozen or removed.

In Securities and Exchange Commission news:

  • The SEC's Office of Compliance Inspections and Examinations (OCIE) announced its 2018 examination priorities. OCIE publishes its exam priorities annually to improve compliance, prevent fraud, monitor risk, and inform policy. Of particular interest this year will be matters involving critical market infrastructure, duties to retail investors, and developments in cryptocurrency, initial coin offerings, and secondary market trading.
  • The SEC announced that the Miami-based businessman behind an alleged scheme involving investments in a Vermont-based ski resort has agreed to pay back more than $81 million of investor money that he used illegally.

In other federal news:

  • The Justice Department announced the largest coordinated sweep of elder fraud cases in history.
  • Two individuals have been found guilty for their roles in a $10 million telemarketing scheme that defrauded primarily elderly victims in the United States from call centers in Costa Rica.
  • Michaels Stores Inc. and Michaels Stores Procurement Co. Inc. (Michaels) agreed to enter into a consent decree and pay $1.5 million, the Justice Department announced. The decree resolves allegations that Michaels failed timely to report to the Consumer Product Safety Commission information regarding a large glass vase that injured consumers between 2007 and 2009.
  • Two Russian nationals were sentenced to federal prison for data breach conspiracy.
  • An Arkansas man was sentenced to 33 months in prison for aiding and abetting computer intrusions by selling malicious software, or "malware," to individuals who used the malware to steal sensitive information, surreptitiously activate webcams, and conduct other illegal intrusions.

Attorney General Consumer Protection News and Other Items of Interest

Alabama Attorney General Steve Marshall announced that the State of Alabama has filed suit against Purdue Pharma, L.P., Purdue Frederick Company Inc., and Rhodes Pharmaceuticals, L.P. (collectively Purdue), the manufacturers and sellers of prescription opioid pain medications, including the brand name drugs OxyContin, MS Contin, Dilaudid/Dilaudid HP, Butrans, Hysingla ER, and Targiniq ER, as well as generic opioids. Alabama's complaint asserts that Purdue violated Alabama's Deceptive Trade Practices Act in the marketing and sale of opioid drugs and, in so doing, jeopardized the public health, welfare, and safety of Alabama residents.

Arizona Attorney General Mark Brnovich announced a $1.85 million verdict in a consumer fraud lawsuit filed against Dennis N. Saban and his companies, Phoenix Car Rental and Saban's Rent-A-Car. After a 5-week trial, a judge found Saban and his car rental companies must pay $1.85 million for violating the Arizona Consumer Fraud Act by charging unlawful fees during car rental transactions from 2009 to 2016.

The Better Business Bureau has issued a report on online romance scams.

Florida Attorney General Pam Bondi announced that more than 300 Floridians affected by a tech support scam will receive refund checks.

Idaho Attorney General Lawrence Wasden announced a settlement with TK Holdings, Inc., the U.S. subsidiary of Japanese airbag maker Takata, over allegations the company concealed safety issues related to its airbag systems. The settlement was reached between the company and attorneys general of 44 states and the District of Columbia. It concludes a multistate investigation into TK Holdings' failure to disclose known safety defects associated with certain airbag inflators.

In related news, TK Holdings Inc. (Takata) is one of the world's largest manufacturers of automotive safety systems including air bags. Reports of driver and passenger injuries from defective deployment of Takata's airbags prompted federal regulators to investigate and ultimately initiate vehicle recalls. Hawaii, New Mexico, and the United States Virgin Islands filed actions against Takata alleging the company engaged in unfair or deceptive acts by making false or misleading statements about the safety of Takata's airbags. After Takata filed for bankruptcy, the court was asked to determine whether each state's claims for restitution for its citizens and for penalties were dischargeable. While normally all claims against a reorganizing corporation are discharged (i.e., payable only under the terms of its plan), a 2005 amendment to the Bankruptcy Code excepted debts owed to a governmental unit arising from fraudulent conduct. The court agreed with the states that, under state law, the claims were owed to the government even if they were suing for restitution for their citizens. It also found, however, that the fraud was not directed at the government itself so it could not have relied on any fraudulent statements that were made or suffered any damages itself thereby. In essence, the court held that, although the government could sue for its citizens, it could only recover for damages it suffered itself. Accordingly, it found that the debts were dischargeable. The states are appealing the decision.

Illinois Attorney General Lisa Madigan alerted Illinois residents to a scam using her office and name and the prospect of free money in an attempt to solicit personal information from people.

Kansas Attorney General Derek Schmidt announced that 3 Kansas auto dealerships have been fined for violating the Kansas Consumer Protection Act by using prize-notification mailings that did not comply with Kansas law.

Maine Attorney General Janet T. Mills announced that the Federal Trade Commission and the Maine Attorney General's Office have agreed to settle their case against Minnesota-based Marketing Architects, Inc., for its role in promoting weight loss supplements "AF Plus" and "Final Trim."

Massachusetts Attorney General Maura Healey launched a new Data Breach Reporting Online Portal, which businesses and organizations can use to provide notice to the attorney general's office as required by the Massachusetts Data Breach Notification Law.

Michigan Attorney General Bill Schuette told an Oakland County snow-plowing operation, Five Star Landscaping and Snow Removal, to immediately cease violating Michigan's Consumer Protection Act. Five Star Landscaping is allegedly failing to provide services for which it has collected payment, and is refusing refunds to consumers who experience poor or non-existent service.

Missouri Attorney General Hawley and the FTC seek to shut down an international direct mail operation that allegedly falsely represented consumers had won, or were likely to win, a substantial cash prize in exchange for paying a series of fees.

New York Attorney General Eric T. Schneiderman announced that his office has filed a lawsuit against Insys Therapeutics, Inc. (Insys), a company that sells a fentanyl drug called Subsys. Although Subsys was approved by the Food and Drug Administration to treat cancer-related breakthrough pain, the complaint alleges that Insys recklessly marketed the drug for much wider use, covering a much broader set of patients.

Ohio Attorney General Mike DeWine warned consumers to beware of online romance scams, which have been reported by several Ohioans in recent weeks.

South Dakota Attorney General Marty Jackley is warning consumers of sweepstakes and wire transfer scams.

Virginia Attorney General Mark R. Herring announced that more than $2.7 million in relief will be provided to Virginia consumers who took out loans with Internet lender MoneyLion of Virginia LLC-an affiliate of New York based Internet lender MoneyLion, Inc. General Herring's settlement with MoneyLion will provide refunds and debt forgiveness to 3,800 consumers as a result of the company's alleged violations of the Virginia Consumer Protection Act.

Washington Attorney General Bob Ferguson announced that two Massachusetts-based ticket-buying companies will pay Washington state $60,000 for using "ticket bot" software, a violation of Washington's Ticket Sellers Act.


Alabama Attorney General Steve Marshall supports the introduction of the Alabama Data Breach Notification Act in the Alabama Legislature this session.

Oregon Attorney General Ellen Rosenblum urges the Oregon legislature to support better data privacy protections by passing a bill that would strengthen Oregon's data breach laws.

Legislation affecting servicemembers supported by Washington Attorney General Bob Ferguson passed the legislature and will now head to Governor Inslee for his signature. The legislation allows Washington servicemembers called to active duty to cancel or suspend service contracts for gym memberships, internet services, subscription television services, telecommunications services and satellite radio services, without fear of penalty or fee. The legislation also allows the reinstatement of the contract under previous or generally favorable terms.

Veterans and Military News

The American Bar Association has provided an update on its Veterans Legal Services Initiative.

The FTC's Bureau of Consumer Protection issued a paper that examines financial issues that can affect military consumers.

Iowa Attorney General Tom Miller Monday filed a consumer fraud lawsuit against a Chickasaw County business and its owner, alleging they deceptively claimed authority to provide paid veterans' benefits assistance.

The Justice Department announced that BMW Financial Services, N.A. has agreed to pay over $2 million to resolve allegations that it violated the Servicemembers Civil Relief Act by failing to refund a type of up-front lease payment to 492 servicemembers who lawfully terminated their motor vehicle leases early.

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 or call (202) 326-6263.

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