The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly February 2019
Consumer Chief of the Month: Rebecca Eggleston, Arizona
As a fairly new consumer protection chief, I'm honored to be in the company of so many other chiefs across the country who have been serving in that capacity for many years. At the first NAAG Consumer Protection Conference I attended, I was struck by the number of participants who had been workin in their state attorney general's office, and specifically in consumer protection, for 15, 20, even 25-plus years. It speaks to both the importance and the personal fulfillment of the work we do.
Article of the Month:
Security Freezes and Federal Preemption - Preventing Identity Theft Post-Equifax Breach
Dan Birdsall, Assistant Attorney General
Office of the Nebraska Attorney General
Identity theft is a complex problem that does not have a single, silver-bullet solution. Many state regulators have implemented data security laws that require entities that collect personal information to maintain reasonable security measures designed to protect that information. Equally important is providing consumers the education and tools to protect themselves from identity theft.
Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The CFPB released its semi-annual report to Congress.
- The CFPB is proposing to rescind certain provisions of its 2017 final rule governing “Payday, Vehicle Title, and Certain High-Cost Installment Loans.” Specifically, the CFPB is proposing to rescind the rule’s requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. The CFPB is preliminarily finding that rescinding this requirement would increase consumer access to credit.
- The CFPB announced a settlement with Cash Tyme, a payday retail lender with outlets in Alabama, Florida, Indiana, Kentucky, Louisiana, Mississippi, and Tennessee.
- The CFPB filed a proposed settlement with NDG Financial Corp., E-Care Contact Centers, Ltd., Blizzard Interactive Corp., New World Consolidated Lending Corp., New World Lenders Corp., Payroll Loans First Lenders Corp., New World RRSP Lenders Corp., Northway Financial Corp., Ltd., and Northway Broker, Ltd. And several corporate officials. The entities and individuals are payday lenders and corporate officials based in Canada and Malta. In its amended complaint, the CFPB alleges that the defendants violated the Consumer Financial Protection Act of 2010 by misrepresenting to consumers in states where loans offered by the defendants violated state licensing or usury laws that they were obligated to repay loan amounts when such an obligation did not exist because state law voided the loan.
Commodity Futures Trading Commission:
- The CFTC announced that the U.S. District Court for the Western District of North Carolina entered a Supplemental Consent Order against Defendants Hannes Tulving, Jr. of Newport Beach, California, and his company The Tulving Company, Inc., finding that they fraudulently solicited customers in connection with precious metals transactions, misappropriated customer funds, and concealed their fraud with false statements that the customer accounts were profitable.
- The CFTC announced that a federal court in a CFTC enforcement action entered a preliminary injunction prohibiting defendant Kelvin O. Ramirez (Ramirez), of Houston, Texas from engaging in fraud, misappropriation of customer funds, and regulatory violations in connection with an off-exchange foreign currency (forex) scheme. The CFTC’s complaint charges that Ramirez defrauded more than 140 clients by falsely claiming he had millions of dollars in assets under management when he did not and there is no evidence of him trading. Instead, as alleged, he absconded with his clients’ money.
- The CFTC announced that on December 27, 2018, a federal court in Washington ordered Bellevue, Washington residents Sung Hong a/k/a Lawrence Hong or Laurence Hong, his wife, Hyun Joo Hong a/k/a/ Grace Hong, and their company Pishon Holding LLC to pay more than $1.25 million in restitution in connection with an enforcement action brought by the CFTC charging the defendants with fraudulent solicitation and misappropriation involving futures contracts. In addition to the restitution, the Court Order also imposes a permanent trading and registration ban on the Hongs and Pishon and prohibits them from violating provisions of the Commodity Exchange Act as charged.
- The CFTC announced that the U.S. District Court for the District of Connecticut issued a Final Judgment and Consent Order on February 5, 2019, against Andre Flotron, a former precious metals trader for UBS AG, requiring him to pay a $100,000 civil monetary penalty for spoofing and engaging in a deceptive or manipulative scheme through his spoofing in violation of the Commodity Exchange Act (CEA) and CFTC Regulations. The Order also imposes a one-year trading and registration ban.
Federal Trade Commission:
- The FTC Hearings schedule set new dates for the two previously scheduled sessions – broadband and consumer privacy – canceled due to the recent lapse in government funding. The Hearings will also include sessions on international issues in competition, consumer protection and privacy, and the analysis of merger retrospectives, as well as a state attorneys general roundtable.
- The operators of the video social networking app Musical.ly, now known as TikTok, have agreed to pay $5.7 million to settle FTC allegations that the company illegally collected personal information from children. This is the largest civil penalty ever obtained by the Commission in a children’s privacy case.
- Following a public comment period, the FTC has approved a final consent order with SoFi, resolving allegations that it misrepresented how much money student loan borrowers have saved or will save from refinancing their loans with the company.
- The FTC voted not to make changes to the CAN-SPAM Rule after it solicited public comments as to whether changes were needed. The agency received 92 comments on CAN-SPAM, saying that the majority of the submissions favored keeping the rule with no alterations.
- Following a public comment period, the FTC has approved a final order settling charges against a Texas-based marketer and seller of intravenously injected therapy products (iV Cocktails) who allegedly made a range of deceptive and unsupported health claims about their ability to treat serious diseases such as cancer, multiple sclerosis, and congestive heart failure.
- The FTC created videos on common consumer education topics.
- The defendants in an alleged work-from-home business opportunity scam are banned from selling any business coaching service or business opportunity under a settlement with the FTC.
- According to a report issued by the FTC, between July 1, 2017 and June 30, 2018, the agency’s law enforcement actions yielded more than $2.3 billion in refunds to defrauded consumers, including $122 million mailed directly by the FTC to 1.28 million people.
- New complaint data released by the FTC shows romance scams generated more reported losses than any other consumer fraud type reported to the agency in 2018.
- The FTC is sending refund checks to people deceived by the operators of an alleged tech support scheme. The refunds stem from a settlement the FTC and the State of Alabama reached last year with Troth Solutions over allegations that the defendants tricked people into believing their computers were infected with viruses and malware, and then charged them hundreds of dollars for unnecessary repairs.
- The FTC is mailing 104,612 checks totaling nearly $3.5 million to people who bought weight-loss supplements marketed by Maine-based sellers Direct Alternatives and Original Organics, LLC. Affected consumers will receive their refund checks, which average $33.12, within the next week. The FTC and the Maine Attorney General’s Office obtained the money in the settlement of two related cases against these sellers and a marketing company that created and disseminated advertisements for Direct Alternative’s weight-loss products.
- 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 has joined the FDA in sending three warning letters to companies based in Florida, South Carolina, and New Mexico. As detailed in the letters sent to Gold Crown Natural Products, TEK Naturals, and Pure Nootropics, LLC, the FTC has reviewed the companies’ advertisements and believes they may violate the FTC Act by making false or unsubstantiated health claims. Specifically, the FTC is warning about advertisements claiming to treat Alzheimer’s and remediate or cure other serious illnesses including Parkinson’s, heart disease, and cancer.
- Following a public comment period, the FTC has approved two final orders settling allegations that Creaxion Corporation, Inside Publications, LLC, and their respective principals misrepresented that paid endorsements were independent consumer opinions and that commercial advertising was independent journalistic content.
- At the FTC’s request, a federal court has temporarily halted and frozen the assets of a debt collection scheme that allegedly bilked consumers out of millions of dollars, using deceptive and threatening tactics to collect phantom debts that they did not owe.
- The FTC moved to add two new defendants to an ongoing case against a California-based student debt relief operation shuttered pursuant to a court order obtained by the FTC in November 2018. The scheme allegedly bilked consumers out of millions of dollars using false promises that they could reduce their monthly payments, or eliminate or reduce their student loan debt.
- The FTC is seeking public comments on whether it should repeal, amend, or retain the Guides for Select Leather and Imitation Leather Products (Leather Guides) as part of its systematic review of all current FTC rules and guides. The notice seeks comment on the continuing need for the Leather Guides, including whether deceptive or unfair advertising and marketing practices are still used to sell leather and imitation leather products, and whether the Leather Guides should cover products that are not currently included—such as automotive and furniture upholstery products.
In other federal news:
- Federal regulators are expected to fine Equifax for data breach.
- The Food and Drug Administration warned consumers of false promises about so-called Alzheimer’s cures.
- The Securities and Exchange Commission announced fraud charges and an asset freeze against the operators of a South Florida-based investment fund scheme, one of whom has a prior felony conviction and is on parole after nearly 20 years in prison.
Attorney General Consumer Protection News and Other Items of Interest
A coalition of 31 state attorneys general led by Oregon Attorney General Rosenblum sent a letter to the FTC urging the federal agency to not only maintain its “Identity Theft Rules,” also called “Red Flag Rules,” but, in light of technological advances and savvy identity thieves, to update the rules to further protect consumer information. The letter cites the proliferation of identity theft and the growth in technology since the rules were adopted in 2007. The letter points out that with all the consumer data they have been able to accumulate due to the number of data breaches, “...identity thieves are able to amalgamate consumer data with exact accuracy to cause financial harm.”
Alaska Attorney General Kevin G. Clarkson filed a lawsuit against opioid manufacturer Mallinckrodt PLC, Mallinckrodt LLC and SpecGX LLC, a Mallinckrodt subsidiary.
Arizona Attorney General Mark Brnovich announced that Charles Richard Montoya Mayville of Alternative Online Design LLC will pay up to $265,000 to consumers who purchased work from home opportunities and advertising services from Alternative Design Online LLC. In a consent judgment reached with the Arizona Attorney General’s Office, Mr. Mayville is also banned from selling any business opportunity in Arizona for 20 years.
Arkansas Attorney General Leslie Rutledge filed suit against Allen K. Jeffrey, owner of J Boys Blacktop, for violations of the Arkansas Deceptive Trade Practices Act and Home Solicitation Sales Act for alleged home repair fraud.
Connecticut Attorney General William Tong and Department of Consumer Protection Commissioner Michelle H. Seagull advised Connecticut consumers who may have unused gift cards to Payless ShoeSource to use those credits before the discount shoe chain is slated to close its U.S. stores.
Florida Attorney General Ashley Moody warned consumers about an evolved form of phishing attack. Conversation hijacking attacks involve scammers accessing an ongoing email conversation and sending a new message containing a malicious link or attachment—giving the appearance that the message is from a trusted source. Victims clicking on the link or opening the attachment are then prompted to provide personal information that could be used to submit fraudulent tax returns.
Indiana Attorney General Curtis Hill warned Hoosiers to be skeptical of advertising mailers claiming they have won prizes, especially when “winners” must pick up prizes at car dealerships or other sales-oriented venues.
Iowa Attorney General Tom Miller warned older Iowans about offers of “free government benefits.”
Kansas Attorney General Derek Schmidt announced that a Topeka man pleaded guilty last week to one felony count of violating a consumer protection order. This is the first conviction in a case brought by the Kansas Attorney General under a new law passed by the Kansas Legislature in 2016, creating the crime of violation of a consumer protection order. In other Kansas news, General Schmidt announced that a California company has been ordered to pay $10,000 in penalties and fees for violating the Kansas No-Call Act.
Louisiana Attorney General Jeff Landry cautioned Louisiana parents and guardians about several child products that have been recently recalled.
Maine Attorney General Aaron Frey warned consumers about recent reports of calls from individuals claiming to represent Medicare.
Mississippi Attorney General Jim Hood warned employees of the State of Mississippi that scammers are targeting them in attempt to reroute direct deposits of employees’ pay to another bank account. In other Mississippi news, General Hood warned Mississippians of a rise in scam calls that try to get consumers to believe their social security number has been suspended.
New York Attorney General Letitia James announced a settlement with STAR Exemption Advisor, YCA Corp., and its business owner Arie Gal for allegedly scamming thousands of new homeowners by charging them excessive fees to enroll in the Basic STAR Exemption Program, which is otherwise free.
Pennsylvania Attorney General Josh Shapiro announced a lawsuit against Verizon Communications Inc., for failing to deliver promised incentive items to consumers who enrolled in certain two-year contracts with the company. In other Pennsylvania news, General Shapiro announced that his Bureau of Consumer Protection filed a lawsuit against T.E.N., LLC, Erika Sherlock, and Torrie Kolb, on claims they failed to perform home renovations or performed the work in a substandard manner after entering into contracts to perform home improvement services for renovations to consumers’ homes.
West Virginia Attorney General Patrick Morrisey urged anyone faced with wind damage to be cautious when hiring a contractor to make repairs.
The BBB warns of “shady” school trips.
The National Consumers League reported its top 10 scams of 2018.
California Attorney General Xavier Becerra announced a settlement with charitable organization Giving Children Hope for filing misleading documents to increase the charity’s ranking and generate more donations.
Florida Attorney General Ashley Moody directed her Consumer Protection Division to investigate a fake fundraising account that used the image of a fallen Florida Highway Patrol Master Sergeant to solicit donations. The account, now offline, was hosted on the fundraising website GoGetFunding and used the name and image of FHP Master Sgt. Daniel Hinton. It also claimed Hinton’s wife served as fundraising administrator. Sgt. Hinton suffered cardiac arrest during a training exercise and later passed away at the hospital.
Pennsylvania Attorney General Josh Shapiro announced a legal action against a healthcare charitable organization for allegedly violating Pennsylvania’s charities laws.
California Attorney General Xavier Becerra and Assembly member Marc Levine unveiled legislation that would close a loophole in the state’s existing data breach notification law by requiring businesses to notify consumers of compromised passport numbers and biometric information.
Oregon Attorney General Ellen Rosenblum testified before the Oregon House Business and Labor Committee in support of stronger protections for Oregon student loan borrowers who are amassing educational debt at staggering rates.
Veterans and Military News
Iowa Attorney General Tom Miller announced that a Nashua investment adviser accused of illegally selling advice to veterans must change her business practices under a settlement with the Iowa Attorney General’s Office.
The Justice Department announced that PHH Mortgage Corporation has agreed to pay $750,000 to six servicemembers to resolve allegations that it violated the Servicemembers Civil Relief Act by unlawfully foreclosing on their homes without obtaining the required court orders.
Consumer Protection Trivia
- Prior to the 1960s, what type of consumer protection laws existed?
A. "Blue Sky" laws that provided regulations as safeguards for investors against securities fraud.
B. "Little FDA Acts" or other regulation of food labeling.
C. "Immoral" advertising laws such as the prohibition of liquor.
D. All of the above.
- In which year did the National Conference of Commissioners on Uniform State Laws draft the Uniform Deceptive Trade Practices Act?
*Trivia answers can be found below.
- D. All of the above.
- 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.