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The National Attorneys General Training & Research Institute The National Attorneys General Training & Research Institute

Center for Consumer Protection Monthly July 2020

Consumer Chief of the Month: Michael Wertheimer, Connecticut

They call Connecticut the Land of Steady Habits, but even here the last few months have been anything but steady. The COVID-19 pandemic forced us to adjust to full-time tele-working at the very time that our workload doubled. We found ourselves building systems remotely to handle a massive influx of price gouging complaints as we pursued other COVID-related investigations and balanced our already busy workload. These challenging times remind us of why we do what we do. Protecting consumers and ensuring the fairness of the marketplace is always important, but never more so than when consumers are at their most vulnerable.

I was raised in Garrett Park, Maryland and I returned to the D.C. area after law school to clerk for the Honorable Royce C. Lamberth on the United States District Court for the District of Columbia, hands down the best legal job ever. From there I spent four years in the Enforcement Division of the United States Securities and Exchange Commission, where I was surrounded by top-notch investigators and litigators and learned a lot. Then, in (gulp) 1996, my wife and I moved to her home state of Connecticut where I joined the Attorney General's Office.

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Article of the Month: 

U.S. Coin Shortage: What Consumers Need to Know

Anna Boadwee, Steiger Fellow, National Association os Attorneys General

What is the coin shortage and why is it happening?

June 2020 marked the onset of yet another COVID-19-induced shortage: a deficit of pennies, nickels, dimes, and quarters in the cash registers of American businesses was imminent. On June 11, the Federal Reserve announced a temporary cap on distribution of coins to banks. By July, retailers such as Walmart, Kroger, and CVS were unable to provide change in coins to all their customers.

The coin shortage resulted from disruptions to the normal circulation of coins through the economy due to the COVID-19 pandemic.According to the Federal Reserve, there are enough coins in circulation to meet demand. However, a slowdown in consumer spending, concerns over virus exposure from handling contaminated coins, and an increase in cash locked in the registers of shuttered businesses have bottlenecked channels that usually keep coins moving through the economy. This reduced circulation has depleted inventories in certain areas, leaving businesses, banks, and consumers without the coins they need. Reduced coin deposits by banks to the Federal Reserve and decreased production at the U.S. Mint due to COVID-19 employee protection measures have made responding to the shortage more challenging.

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Federal Consumer Protection News

Consumer Financial Protection Bureau:

  • By a 5-4 vote, the U.S. Supreme Court held that the structure of the Consumer Financial Protection Bureau (CFPB or "Bureau"), which is "led by a single Director, who serves for a longer term than the President and cannot be removed by the President except for inefficiency, neglect, or malfeasance," violates the separation of powers doctrine. Seila Law LLC v. Consumer Financial Protection Bureau, No. 19-7. The Court went on to hold (by a 7-2 vote) "that the CFPB Director's removal protection is severable from the other statutory provisions bearing on the CFPB's authority. The agency may therefore continue to operate, but its Director . . . must be removable by the President at will." Thereafter, the Bureau issued a ratification of a number of its prior actions. The ratification enumerates the actions ratified but also provided that it was "not a statement that the ratified actions would have been invalid absent this ratification."

  • The CFPB issued a final rule revoking the requirement that payday lending firms must conduct an underwriting analysis to ensure borrowers could repay the loans. The Bureau stated that its revocation of the underwriting rule was done in order to provide consumers a greater range of borrowing options; however, critics, including the National Consumer Law Center and the Pew Charitable Trusts, criticized the action as removing critical protections for low income borrowers from predatory lending.

  • The CFPB filed a lawsuit against Townstone Financial, Inc., a nonbank retail-mortgage creditor based in Chicago, for engaging in illegal redlining through various acts, including discouraging prospective applicants living in African-American neighborhoods in the Chicago MSA from applying to Townstone for mortgage loans. According to the CFPB complaint, Townstone violated the Equal Credit Opportunity Act (ECOA); its implementing regulation, Regulation B; and the Consumer Financial Protection Act. ECOA and Regulation B prohibit mortgage lenders from discriminating against applicants in credit transactions on the basis of race, color, national origin, or other prohibited bases.

  • The CFPB settled with Timemark, Inc., a Florida company that provides debt-relief services to consumers with federal student-loan debt, and with its owners. The Bureau alleged that the defendants charged illegal advance fees in violation of the Telemarketing Sales Rule to consumers who were seeking to renegotiate, settle, reduce, or alter the terms of their loans. If entered by the court, the proposed settlement order will permanently ban defendants from providing debt-relief services and impose a judgment totaling approximately $3.8 million in consumer redress and civil money penalties. However, the full payment will be suspended if the individual defendants pay $22,000 within 10 days of the entry of the order. The full amount of redress was suspended because of their limited ability to pay.

Federal Trade Commission:

  • The U.S. Supreme Court granted the Federal Trade Commission's (FTC) petition for a writ of certiorari in the related cases of AMG Capital Mgmt., LLC v. FTC, 19-508 and FTC v. Credit Bureau Center, LLC, 19-825. At issue is whether the FTC has the statutory authority to obtain restitution. As more fully set out in the FTC's petition: "Under Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b), the Commission may sue those who violate the laws under its purview in federal district court. The statute authorizes district courts in such cases to issue 'a permanent injunction.' Seven courts of appeals have held that district courts exercising that authority may enter an injunction that requires defendants to return to the victims of their wrongdoing funds obtained through their illegal activity. One has held the opposite. The question presented is: Whether Section 13(b) authorizes district courts to enter an injunction that orders the return of unlawfully obtained funds."
  • A federal court in California has ruled in favor of the FTC in a case against operators of a student loan debt relief scheme, banning defendants from telemarketing or providing debt relief services and imposing a $27.6 million judgment which may be used to provide redress for consumers. The court found that defendants operating as Federal Direct Group, Mission Hills Federal, The Student Loan Group, and National Secure Processing, charged consumers hundreds to thousands of dollars in illegal upfront fees after falsely claiming that consumers' loans would be forgiven or their payments reduced to a specific amount, and that defendants would take over servicing of consumers' loans and apply most or all of consumers' monthly payments to pay down their student loans. The defendants also obtained consumers' student loan credentials to log in and change consumers' contact information, effectively hindering or entirely preventing consumers' loan servicers from communicating with consumers.
  • The FTC sued a California-based purveyor of background reports, MyLife.com, Inc., alleging that the company has deceived consumers with "teaser background reports" that often falsely claimed to include information about arrest, criminal, and sex offender records, and also engaged in misleading billing and marketing practices. According to the complaint, MyLife is a consumer reporting agency and violated the Fair Credit Reporting Act by, among other things, failing to maintain reasonable procedures to verify how its reports would be used, to ensure the information was accurate, and to make sure that the information it sold would be used only for legally permissible purposes.
  • The FTC settled with operators of a Florida-based company that allegedly defrauded financially distressed and often older-adult consumers with deceptive robocalls claiming they could save them money by reducing the interest rates on their credit cards. According to the FTC's complaints, the conduct was deceptive and illegal under the FTC Act and Telemarketing Sales Rule. Consumers did not get a permanent reduction to zero percent interest, nor did they typically save thousands of dollars on their debt. Instead, the defendants obtained promotional or "teaser" zero percent interest rates that only lasted for a limited time, after which the interest rate increased significantly and victims incurred substantial, undisclosed additional bank or transaction fees. The proposed settlement order imposes a judgment of $13,881,865 against the defendants, which will be partially suspended based on their inability to pay.
  • The FTC sent a report to Congress on the use of social media bots in online advertising. The report summarizes the market for these bots and outlines the Commission's past enforcement work and authority in this area, including cases involving automated programs on social media that mimic the activity of real people. Commissioner Rohit Chopra issued a statement accompanying the report.
  • The California-based marketer of a supplement called Thrive, which consists mainly of Vitamin C and herbal extracts, is barred from continuing to make baseless claims that it can treat, prevent, or reduce the risk of COVID-19, under an administrative settlement with the FTC. The proposed order also bars the marketer of Thrive, Marc Ching, from making similarly unsupported cancer treatment or prevention claims for products containing CBD. The case against Ching is the FTC's first against a marketer of a supposed COVID-19-related health product.
  • The FTC is mailing checks totaling more than $1 million to individuals who lost money to a student loan debt relief scam. American Student Loan Consolidators and BBND Marketing, which did business under other names including United Processing Center, settled FTC allegations that the companies' operators pretended to be affiliated with the U.S. Department of Education or with loan servicers to trick consumers into paying hundreds of dollars in illegal upfront fees for help with their student loans. The FTC alleged that the defendants falsely promised to forgive student loans, lower monthly payments, and reduce interest rates. The FTC is mailing 41,048 checks to victims of the scam.
  • The FTC finalized a settlement with a digital game maker, Miniclip, S.A., over allegations it misled consumers about its membership in the Children's Advertising Review Unit's (CARU) Children's Online Privacy Protection Act (COPPA) safe harbor program even though Miniclip's membership had been terminated in 2015. The CARU program is aimed at ensuring companies adhere to requirements of COPPA.
  • The FTC charged an online marketer with falsely promising consumers next-day shipping of facemasks and other personal protective equipment (PPE) to deal with the coronavirus pandemic. In a federal court complaint against SuperGoodDeals.com, Inc. and its owner, Kevin J. Lipsitz, the FTC alleged that beginning in March, SuperGoodDeals' website said PPE was "in stock," and touted "Pay Today, Ships Tomorrow." But according to the FTC, it frequently took weeks for SuperGoodDeals to ship the PPE merchandise customers ordered.
  • Following a public comment period, the FTC has approved a final consent order settling charges that home products and kitchenware company Williams-Sonoma, Inc. ("Williams-Sonoma") made false, misleading, or unsubstantiated claims that all of its Goldtouch Bakeware products, its Rejuvenation-branded products, and Pottery Barn Teen and Pottery Barn Kids-branded upholstered furniture products are all or virtually all made in the United States. Under the terms of the final order, Williams-Sonoma is required to pay $1 million to the FTC.

In other federal news:

  • The Supreme Court of the United States, in Barr v. American Ass'n of Political Consultants Inc., 19-631, held that a 2015 exception to the Telephone Consumer Protection Act of 1991 (TCPA) for calls "made solely to collect a debt owed to or guaranteed by the United States" violated the First Amendment. The Court held that this exception makes the statute content based, and that the exception cannot survive heightened scrutiny. The Court further held that the proper remedy is to sever the 2015 government-debt exception from the remainder of the statute, leaving the basic robocall restriction in place.
  • The U.S. Department of Justice (DOJ), announced that Indivior Solutions pleaded guilty to a one-count felony information and, together with its parent companies Indivior Inc. and Indivior plc, agreed to pay a total of $600 million to resolve criminal and civil liability associated with the marketing of the opioid-addiction-treatment drug Suboxone. The information alleged that Indivior misrepresented Suboxone's rate of accidental pediatric exposure to Suboxone film. Together with a $1.4 billion resolution with Indivior's former parent, Reckitt Benckiser Group PLC, announced in 2019, and a plea agreement with Indivior plc's former CEO, Shaun Thaxter, announced last month, the total resolution relating to the marketing of Suboxone is more than $2 billion, the largest-ever resolution in a case brought by the DOJ involving an opioid drug.
  • The Justice Department announced a settlement of its race discrimination lawsuit against Guaranteed Auto Sales, a used car dealership in Glen Burnie, Maryland. The agreement also settles the United States' claims against the dealership's owner Kelly Ann West and manager Robert Chesgreen. The settlement resolves claims that Guaranteed Auto Sales discriminated against African Americans in violation of the Equal Credit Opportunity Act by offering different terms of credit based on race to those seeking to purchase and finance used cars. The settlement requires the dealership to implement specific practices to ensure that loan terms are offered to customers on a nondiscriminatory basis.
  • Federal prosecutors in Miami have charged four Florida residents who allegedly marketed "Miracle Mineral Solution," a toxic bleach, as a cure for COVID-19 with conspiracy to defraud the United States, conspiracy to violate the Federal Food, Drug and Cosmetic Act, and criminal contempt. According to the criminal complaint affidavit, Mark Grenon, 62, and his sons, Jonathan Grenon, 34, Jordan Grenon, 26, and Joseph Grenon, 32, all of Bradenton, Florida, manufacture, promote, and sell Miracle Mineral Solution ("MMS"), a chemical solution containing sodium chlorite and water. The Grenons allegedly directed their customers to ingest MMS orally, which causes the solution to become chlorine dioxide, a powerful bleach, typically used for industrial water treatment or bleaching textiles, pulp, and paper. FDA has received reports of people requiring hospitalizations, developing life-threatening conditions, and dying after drinking MMS.
  • The FBI has seen a spike in fraudulent unemployment insurance claims complaints related to the ongoing COVID-19 pandemic which involve the use of stolen personally identifiable information. U.S. citizens from several states have been victimized by criminal actors impersonating the victims and using the victims' stolen identities to submit fraudulent unemployment insurance claims online.
  • The Federal Communications Commission (FCC) adopted rules to further encourage phone companies to block illegal and unwanted robocalls before they reach consumers. To encourage the blocking of scam robocalls and maliciously spoofed telemarketing campaigns, and continue the FCC's implementation of the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act, the rules offer companies two safe harbors from liability for the unintended or inadvertent blocking of wanted calls, thus eliminating a concern that some companies said kept them from implementing robust robocall blocking efforts.
  • Through a Further Notice of Proposed Rulemaking, the FCC is seeking information about additional steps to protect consumers from robocalls and better inform them about provider blocking efforts. The Further Notice specifically seeks comment on whether to obligate phone companies to better police their networks against illegal calls, and whether to require them to provide information about blocked calls to consumers for free. In addition, the Further Notice seeks comment on notification and effective redress mechanisms for callers when their calls are blocked, and on whether measures are necessary to address the mislabeling of calls.
  • The FCC fined HobbyKing $2,861,128 for marketing drone transmitters which did not comply with FCC licensing rules. HobbyKing markets devices that provide a video link between transmitters mounted on unmanned aircraft systems and users flying drones. An FCC investigation found that dozens of devices marketed by the company transmitted in unauthorized radio frequency bands and, in some cases, operated at excessive transmission power levels and could interfere with government and public safety services including aviation systems and weather radar systems.
  • The U.S. Food and Drug Administration (FDA) issued warning letters notifying ten companies, including Cool Clouds Distribution Inc. (doing business as Puff Bar), to remove their flavored disposable e-cigarettes and youth-appealing e-liquid products from the market because they do not have the required premarket authorization.
  • The FDA issued the report "Cannabis and Cannabis-Derived Compounds: Quality Considerations for Clinical Research, Draft Guidance for Industry," which describes the FDA's current thinking on several topics relevant to clinical research related to the development of drugs containing cannabis or cannabis-derived compounds. The draft guidance also introduces key FDA regulatory concepts to stakeholders who may be less familiar with the FDA and the FDA's authorities. The deadline for submitting comments on the Draft Guidance is September 21, 2020.
  • The Securities and Exchange Commission charged former Georgia state legislator and former member of the Georgia Board of Regents Clarence Dean Alford with defrauding at least 100 investors in his now-bankrupt energy development company, Allied Energy Services LLC. According to the SEC's complaint, from 2017 to 2019, Alford fraudulently raised at least $23 million by selling promissory notes to investors, primarily Indian-American professionals, that he guaranteed would provide high annual rates of return.

Attorney General Consumer Protection News and Other Items of Interest

Editor's Note: Attorneys general from across the country have issued numerous consumer alerts and guidance for avoiding COVID-19 related scams. Attorneys general have also issued cease and desist letters and engaged with private industry urging action to halt price gouging on important consumer goods and safety equipment. Space does not permit inclusion of a summary of each such release in the Consumer Protection Monthly, however a representative sample of such releases is provided in the news items below. Each such release is available on consumerresources.org, our public-facing consumer protection website.

Led by California Attorney General Xavier Becerra and Massachusetts Attorney General Maura Healey, a coalition of 23 attorneys general filed a lawsuit against Secretary of Education Betsy DeVos and the U.S. Department of Education (ED) challenging their action to repeal and replace the 2016 "borrower defense" regulations. The complaint alleged that ED's repeal of the 2016 regulations violated the Administrative Procedure Act. The complaint also alleged the 2016 regulations were replaced with new regulations that make it nearly impossible for victimized students to obtain financial relief, while rolling back oversight over unscrupulous and predatory schools.

Led by New York Attorney General Letitia James, a coalition of 18 attorneys general wrote a letter urging the U.S Department of Education to abandon a proposed rule that severely restricts the use of federal CARES Act funds earmarked for students suffering from the devastating economic impact of COVID-19.

California Attorney General Xavier Becerra, Illinois Attorney General Kwame Raoul, and New York Attorney General Letitia James filed a lawsuit against the Office of the Comptroller of the Currency (OCC) challenging the recently announced final rule that exempts buyers of high-interest loans from state interest-rate caps. Under existing federal law, federally regulated banks are exempt from state interest-rate caps. The OCC's final rule extends these exemptions to any lender that buys loans that are originated by an exempt federal bank. The lawsuit argues that the OCC's decision to extend National Bank Act preemption to non-banks violates the Administrative Procedure Act because, among other things, it conflicts with the National Bank Act, fails to comply with requirements established by the Dodd-Frank Act, and exceeds the OCC's statutory authority.

Arkansas Attorney General Leslie Rutledge announced a consent judgment against Dennis Bailey and the businesses he controls for his alleged illegal use of the criminal court system to collect debts. The judgment requires that Bailey pay $50,000 in restitution, $250,000 in suspended civil penalties and withdraw all outstanding affidavits previously submitted for criminal prosecution, valued at approximately $125,000.

California Attorney General Xavier Becerra announced a more than $1.4 million judgment against Orange County, California based telemarketers who defrauded investors and timeshare owners of over $250,000. The defendants included Property Protection Team, LLC (PPT) and four individuals, including owners Thomas S. White and Lacy Jae Treece, who allegedly cheated more than 50 victims, many of them elderly, by collecting illegal advance fees for bogus "investment recovery" services. According to the complaint, PPT targeted vulnerable investors who had lost money in prior investments or who sought relief from money-losing timeshare interests.

Colorado Attorney General Phil Weiser announced a lawsuit against JUUL Labs, Inc. for allegedly targeting youth with deceptive advertising that downplayed its addictive nicotine concentration and health risks, and falsely suggesting its usage is a healthy alternative to smoking cigarettes. In July 2018, Colorado led the nation in youth vaping, with 27% of high school students stating they had vaped in the previous 30 days, almost double the national rate.

Delaware Attorney General Kathy Jennings announced a joint effort with other state agencies on foreclosure and eviction prevention to support Delaware homeowners and renters financially impacted by the COVID-19 shutdown and to prevent Delaware residents from losing their homes due to a COVID-19-related job loss, loss of income or illness.

Florida Attorney General Ashley Moody and the FTC announced the distribution of more than $16 million to victims of a debt relief scam in culmination of a joint lawsuit against a group of defendants known as Helping America Group for allegedly convincing victims to pay hundreds or thousands of dollars a month by falsely promising to pay, settle or obtain dismissal of debts and improve payors' credit scores. Instead, victims reported debts left unpaid, accounts in default and credit scores severely damaged. Some were sued by creditors, and others were forced into bankruptcy.

Consumer specialists in the Office of Idaho Attorney General Lawrence Wasden and the Boise Police Department are warning Idahoans after a recent increase in reported fraud attempts involving tech support scams. Over the last several weeks, three Boise area seniors lost a total of $14,700. Local cashiers prevented another $6,000 in losses by recognizing the fraud when potential victims went to purchase large sums of gift cards. All recent victims have been seniors.

Indiana Attorney General Curtis Hill sued a Florida-based travel and vacation company, Executive Tour and Travel Services Inc. with deceptive practices that allegedly harmed hundreds of Hoosiers. According to the complaint, the defendant offers travel certificates that are designed to make consumers believe they have been awarded a free vacation but are subjected to unwanted promotions, hidden charges and denial of accommodations on the terms promised. Of the nearly 500 Indiana consumers who paid the company an activation fee between Jan. 1, 2017, and Oct. 31, 2019, just 48 had hotel rooms booked for their use by the company, the complaint says.

Iowa Attorney General Tom Miller and Nebraska Attorney General Douglas Peterson announced separate law suits against an Omaha-based stem cell therapy center for allegedly targeting consumers with deceptive claims that the therapy can reverse aging and treat, cure or prevent a variety of medical conditions, including chronic obstructive pulmonary disease, neuropathy, and Alzheimer's disease. The Iowa and Nebraska lawsuits allege that Regenerative Medicine and Anti-Aging Institutes of Omaha and their owners, Travis and Emily Autor, made deceptive and misleading claims in advertisements without adequate substantiation leading consumers to buy unproven procedures that cost hundreds or thousands of dollars.

Maine Attorney General Aaron M. Frey announced a favorable federal court ruling in favor of a landmark 2019 Maine privacy law that prevents broadband internet service providers operating in Maine from selling or sharing a customer's personal data without the customer's permission. The court rejected preemption and First Amendment challenges from telecom industry organizations.

Massachusetts Attorney General Maura Healey has reached an agreement with Columbia Gas that requires the company to pay $56 million for its role in the Merrimack Valley gas explosions and to leave Massachusetts by the upcoming heating season. Under the settlement agreement, the funds will provide debt relief to thousands of low-income gas customers and enable energy efficiency efforts in older homes and buildings in towns affected by the 2018 explosions. General Healey also announced that two New York-based companies, Pioneer Products Inc., Noble Industrial Supply Corp., and their owners and presidents have paid $850,000 to settle allegations that their high-pressure, misleading telemarketing operation victimized cities and towns across Massachusetts, inducing municipalities to spend large amounts on supplies that they did not want or need. The defendants also falsely stated the cities had agreed to purchase the goods in an earlier sales call and even threatened to take legal action and refer cities and towns to debt collectors, resulting in additional sales and payments.

Michigan Attorney General Dana Nessel warned consumers about fraudulent cards that falsely claim to exempt the holder from wearing face coverings in businesses and other areas where such personal protective equipment is required. Face Mask Exempt Cards have been offered by some groups to residents as an attempt to bypass health and safety measures at retailers and other establishments. Some of these cards may even have a logo for the U.S. Department of Justice although it does not endorse the cards. The cards also contain an implied threat that any business that denies access for failure to wear a mask will be reported as having violated the Americans with Disabilities Act.

Minnesota Attorney General Keith Ellison and other Minnesota officials announced a commitment by 31 Minnesota financial institutions to provide mortgage-relief options to consumers facing financial hardship caused by COVID-19 not covered by the CARES Act. Participating financial institutions have agreed to offer a 90-day forbearance period for customers facing financial hardship caused by COVID-19.

Missouri Attorney General Eric Schmitt announced a lawsuit against timeshare exit companies Vacation Consulting Services LLC, VCS Communications, LLC, The Transfer Group, LLC, Real Travel LLC, and Brian Scroggs. The suit alleges that timeshare exit company employees, at the direction of Scroggs, solicited large sums of money from customers on the promise to either transfer or terminate consumer timeshare interests within one year or Scroggs' companies would buy out the interests themselves. On numerous occasions, despite payments from consumers, Scroggs and his companies failed to provide the promised relief. The complaint also alleges that Scroggs and his timeshare exit groups instructed clients to cease making maintenance payments on their timeshares because the exit groups would cover the costs themselves. However, Scroggs and the exit groups did not make those payments as promised. As a result, many customers have found themselves in arrears with their respective timeshare holding companies.

Montana Attorney General Tim Fox warned Montanans of contact tracing scams and to be cautious when answering contact tracing phone calls, texts, or emails.

New York Attorney General Letitia James' office ordered Cloud X Vapes, HQD Tech USA, and PodVapes to immediately cease and desist selling vaping products online to consumers in New York, which is a violation of New York state law. In addition, they allegedly illegally sold products to minors (under 21), offering flavored nicotine vaping products, including cotton candy, pineapple mist, green apple, and others. As of May 18, it is illegal to sell flavored nicotine products in New York, and as of July 1, it is illegal to sell vaping products online and through mail order to New York consumers.

North Dakota Attorney General Wayne Stenehjem issued a cease & desist order against three Florida residents Richard Wade, Lemuel Thompson, David Anderson, and Better Business Marketing, Inc., doing business as "Berry Law Group," operating an allegedly bogus debt settlement company. According to the cease and desist order, the individuals and company violated North Dakota's consumer fraud, home solicitations, and do not call laws.

Ohio Attorney General Dave Yost is encouraging Ohioans to notify his office if they have not received ticket refunds for events canceled because of the COVID-19 pandemic. The health crisis has prompted the cancellation of tens of thousands of events across the country, leaving many ticket buyers unsure about refunds. Depending on the cancellation and refund policies in place at the time of purchase, Ohio's consumer protection laws may provide an avenue to obtain refunds.

Pennsylvania Attorney General Josh Shapiro announced an important win in a decision from the U.S. Court of Appeals of the Third Circuit, as part of the Pennsylvania's ongoing court battle with Navient, the nation's second-largest servicer of federal and private student loans. The court rejected Navient's core argument that the Federal Consumer Financial Protection Act (CFPA) prohibits states from bringing CFPA claims where there is already a pending lawsuit by the CFPB to address the same violative conduct. The court also rejected Navient's effort to have state law claims tossed by arguing that the Federal Higher Education Act preempts state laws that prohibit unfair and deceptive acts and practices.

Tennessee Attorney General Herbert H. Slatery III has reached a settlement agreement with Florida-based Medicaid Done Right (MDR) following allegations that the company misrepresented itself as authorized by or affiliated with the government to assist with Tennessee Medicaid applications. MDR contracts with nursing homes to provide Medicaid application assistance to patients and their families. In some instances, nursing home patients believed they were required to use MDR's services and that it was part of the state Medicaid program. MDR's webpage has featured text and illustrations that gave the impression the company was affiliated with Medicaid and that it approved Medicaid applications, which is not true. MDR also failed to disclose that other state agencies can often perform application assistance for free. The settlement provides for consumer restitution and corrective conduct.

Texas Attorney General Ken Paxton, in partnership with the U.S. Attorney's Offices for the Northern, Southern, Western, and Eastern Districts of Texas, informed the public about several fraudulent schemes involving masks, PPE, and other COVID-19 related equipment. They urge everyone to exercise increased due diligence and caution when dealing with new suppliers or vendors, especially when using a third-party broker.

Vermont Attorney General T.J. Donovan released guidance to assist businesses in complying with changes to Vermont's Security Breach Notice Act. As of July 1, 2020, more types of information, including health and genetic information, login credentials, and additional government IDs like passport numbers, are considered "Personally Identifiable Information" that requires notice to consumers if stolen or otherwise subject to a breach. By helping businesses understand the law, the guidance aims to help ensure that timely notice is provided to Vermont consumers so they can protect themselves if their sensitive information is exposed.

Virginia Attorney General Mark R. Herring issued an advisory opinion outlining the various state and federal tenant protections that are currently in place to help Virginians stay in their homes during the COVID-19 pandemic. Attorney General Herring highlighted protections included in the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act); state protections included in the 2020 Virginia Act of Assembly; and listed other entities that have authority to assist tenants in these situations.

Washington Attorney General Bob Ferguson announced that Frontier Communications Northwest will pay $900,000 to the State of Washington to resolve an investigation into Frontier Northwest's alleged failure to adequately disclose fees when advertising and selling its products, and misleading subscribers about Internet speeds it could provide. Frontier's conduct impacted thousands of Washington consumers, primarily in rural areas. Under the legally binding agreement, the Internet, phone, and television provider is ordered to clearly and conspicuously disclose all fees and be transparent about its available Internet speeds. The Attorney General's Office will set aside the majority of the $900,000 payment to provide restitution to impacted customers.

West Virginia Attorney General Patrick Morrisey filed suit against Dutt & Wagner of Virginia Incorporated, operating as Green Valley Poultry Farms, alleging the egg supplier unlawfully increased the wholesale price of eggs in some cases by almost 300 percent. The lawsuit alleges Dutt & Wagner violated the state's price gouging law by charging grocery stores exorbitantly higher prices amid the coronavirus pandemic. The complaint alleges the wholesale price of Green Valley Farms eggs increased between 228 and 297 percent, far exceeding the cap of no greater than 10 percent during a state of emergency or preparedness. The state seeks an immediate court order to ensure the company complies with state law.

The U.S. Supreme court granted certiorari to review the Ninth Circuit decision that use of a number storing autodialer violated the Telephone Consumer Protection Act (TCPA) in Facebook, Inc. v. Drugid. There currently is a split in the circuits on the issue with the Seventh and Eleventh Circuits holding that such equipment, if not used to randomly dial numbers, does not violate the TCPA. The Second Circuit has joined the Ninth Circuit and shortly after the grant of cert, the Sixth Circuit joined them, adding to the split in circuits on the issue. The D.C. and Third Circuits have issued narrower rulings that also support the narrow construction of the Seventh and Eleventh Circuits.

On July 16, 2020, the Court of Justice of the European Union issued a judgment declaring as "invalid" the European Commission's Decision (EU) 2016/1250 of July 12, 2016, on the adequacy of the protection provided by the EU-U.S. Privacy Shield. As a result of that decision, the EU-U.S. Privacy Shield Framework is no longer a valid mechanism to comply with EU data protection requirements when transferring personal data from the European Union to the United States. This decision does not relieve participants in the EU-U.S. Privacy Shield of their obligations under the EU-U.S. Privacy Shield Framework.

The U.S. District Court for the Eastern District of Virginia unsealed documents detailing Microsoft's work to disrupt cybercriminals that were taking advantage of the COVID-19 pandemic in an attempt to defraud customers in 62 countries around the world. Microsoft's civil case has resulted in a court order allowing Microsoft to seize control of key domains in the criminals' infrastructure so they can no longer be used to execute cyberattacks.

Charities

Legislation

The Senate Committee on Science, Commerce and Transportation's Subcommittee on Communications, Technology, Innovation, and the Internet held a hearing titled: "The PACT Act and Section 230: The Impact of the Law that Helped Create the Internet and an Examination of Proposed Reforms for Today's Online World." The hearing examined online platforms' content moderation practices and discussed what legislative measures can be taken to ensure consumers are protected and empowered while on the internet.

The U.S. Senate passed S. 4065, the "Reinforcing American-Made Products Act of 2020," sponsored by Senator Mike Lee of Utah. The Act amends the Violent Crime Control and Law Enforcement Act of 1994 (15 U.S.C. 45a) by inserting language expressly superseding any provisions of state law "expressly relating to the extent to which a product is introduced, delivered for introduction, sold, advertised, or offered for sale in interstate or foreign commerce with a [Made in America] label..." According to a press release issued by the sponsor: "The Reinforcing American-Made Products Act would ensure that the federal government maintains authority in setting country-of-origin labeling standards and that states do not create a patchwork of different standards governing interstate and exported goods."

Veterans and Military News

In observance of National Military Consumer Protection Month, Montana Attorney General Tim Fox offered tips to help protect active and retired military personnel and their families from consumer fraud.

Upcoming Events

Due to the COVID-19 pandemic, NAAG has canceled the Consumer Protection Fall Conference in Washington, D.C. that was supposed to take place in October. The meeting will not be rescheduled. We look forward to the 2021 NAAG Consumer Protection Spring Conference and have great hope that schedules will normalize by that time. 

Todd Leatherman, 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 tleatherman@naag.org or call 202-326-6044.

 

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