The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly March 2018
Consumer Chief of the Month: Alissa Gardenswartz, Colorado
I've been in the Colorado Attorney General's Office for eleven years, and became Deputy Attorney General for Consumer Protection in 2015.
I started my legal career in Washington, D.C. at the Federal Trade Commission in the Bureau of Competition, reviewing proposed mergers for possible anticompetitive effects. About four years in I decided to shift gears, and went to a large international law firm to do antitrust regulatory counseling and litigation.
Article of the Month:
The State of the Restatement of Consumer Contracts
Jane Azia, Bureau Chief & Christopher L. McCall, Assistant Attorney General
On Behalf of the Office of the New York Attorney General
According to the United States Census Bureau, Americans spent almost $395 billion in online transactions in 2016. Most of these transactions were governed by standard form contracts drafted solely by the online retailer and presented to consumers on a take-it-or-leave-it basis. In recognition of the ubiquity and unique nature of consumer contracts, in 2012, the American Law Institute (ALI) commissioned its first Restatement of the Law of Consumer Contracts, an effort that culminated in a 2017 draft formally designated the Restatement of the Law of Consumer Contracts Preliminary Draft No. 3 (Draft Restatement).
Cell Phone "Port-Out" Scam.
Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The CFPB issued a report on the 2017 activities of the Bureau and FTC to combat illegal debt collection practices.
- The CFPB issued a Request for Information on the Bureau's adopted regulations and new rulemaking authorities. The Bureau is seeking comments and information from interested parties to assist the Bureau in considering whether it should amend any rules it has issued since its creation or issue rules under new rulemaking authority provided by the Dodd-Frank Act.
- The CFPB issued a Request for Information about the Bureau's public reporting of consumer complaints. The Bureau is seeking comments and information from interested parties on the usefulness of complaint reporting and analysis, as well as specific suggestions or best practices for complaint reporting.
- The CFPB issued a Request for Information about the Bureau's rulemaking processes. The Bureau is seeking comments and information from interested parties to help assess the overall efficiency and effectiveness of its rulemaking processes.
Commodity Futures Trading Commission:
- The CFTC filed a civil enforcement action charging Lon Olen Friedrichsen of Alton, Iowa, with fraud and failing to register with the CFTC as a Commodity Trading Advisor, as required. Friedrichsen, as alleged, also solicited clients under the names of Lon Kummer and Lon Richardson, but did not disclose that these were false names.
- A federal court in New York has entered a preliminary injunction against Patrick K. McDonnel and his company CabbageTech, Corp. d/b/a Coin Drop Markets in connection with a fraudulent virtual currency scheme.
- A federal court has ordered a former church pastor and others to pay more than $8.6 million for a commodity fraud scheme that preyed on a church congregation.
Federal Trade Commission:
- The FTC has released its annual summary of complaints reported by consumers.
- The operators of a deceptive and abusive debt collection scheme are banned from the debt collection business and from buying or selling debt under settlements with the FTC and the New York Attorney General's Office.
- At the request of the FTC, a federal court has halted the activities of four individuals who allegedly promoted deceptive money-making schemes involving cryptocurrencies. These schemes falsely promised that participants could earn large returns by paying cryptocurrency such as bitcoin or Litecoin to enroll in the schemes.
- The FTC has filed a complaint and motion for preliminary injunction in federal district court alleging that Alliance Security Inc., a home security installation company, and its founder, directly and through its authorized telemarketers, called millions of consumers whose numbers are on the National Do Not Call Registry. Two of Alliance's authorized telemarketers and their principals also have agreed to settle charges that they made illegal calls on Alliance's behalf.
Securities and Exchange Commission:
- The SEC charged a former chief information officer of a U.S. business unit of Equifax with insider trading in advance of the company's September 2017 announcement about a massive data breach that exposed the social security numbers and other personal information of about 148 million U.S. customers.
- The SEC charged a New York based company with illegally brokering dozens of investments by foreign nationals seeking U.S. residency.
- The SEC announced that it charged the New York Stock Exchange and two affiliated exchanges with regulatory failures in connection with multiple episodes, including several disruptive market events.
- The SEC announced charges and a preliminary injunction and asset freeze against Niket Shah, a New Jersey resident, who stole more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.
In other federal news:
- The United States filed a civil enforcement action to stop an Arkansas compounding pharmacy from manufacturing and distributing adulterated drugs.
- The Department of Justice announced that an individual who ran a multibillion dollar prize promotion scam that targeted elderly victims was sentenced to serve 87 months in prison.
- A federal court entered a permanent injunction against and imposed a civil penalty on three Utah-based telemarking companies and their owner. The order permanently enjoins the Utah-based telemarketers from engaging in deceptive and abusive telemarketing practices.
- The United States has reached an agreement with Barclays Capital, Inc. and several of its affiliates (together, Barclays) to settle a civil action filed in December 2016 in which the United States sought civil penalties for alleged conduct related to Barclays' underwriting and issuance of residential mortgage-backed securities between 2005 and 2007.
- The Department of Justice announced that a federal court enjoined Riddhi USA Inc., of Ronkonoma, New York, and its owner, Mohd M. Alam, from distributing adulterated and misbranded dietary supplements pending required remedial action.
Attorney General Consumer Protection News and Other Items of Interest
Arizona Attorney General Brnovich announced Adobe Carpet Cleaning, LLC is banned from making telemarketing calls for six years after repeatedly calling consumers on the Do Not Call Registry. In a consent judgment reached with the Attorney General's Office, Adobe Carpet Cleaning also agreed to pay the state $1,000,000 in civil penalties after making illegal telemarketing calls.
Arkansas Attorney General Leslie Rutledge announced that she has filed a lawsuit against the opioid manufacturers Purdue Pharma, Johnson & Johnson, and Endo on behalf of the State of Arkansas.
Delaware Attorney General Matt Denn announced that 35 Delawareans victimized by a national debt services provider recently received refunds for fees and costs paid for unlawful debt management services rendered by Cornerstone Credit Services, a Wisconsin company.
Kentucky Attorney General Andy Beshear is warning of scammers posing as law enforcement officials demanding payment and threatening arrest via text messages.
Louisiana Attorney General Jeff Landry is reminding consumers how to protect their identities from being compromised in the wake of the Equifax data breach.
Massachusetts Attorney General Maura Healey announced a settlement with a for-profit online college based in Boston over allegations of failing to make proper disclosures of its programs for prospective students and engaging in excessive recruitment calls. In other Massachusetts news, General Healey announced that a subprime automobile finance company has agreed to provide $765,000 in restitution and loan relief to consumers who purchased cars from two Massachusetts used auto dealers that routinely sold defective and inoperable cars.
Michigan Attorney General Bill Schuette cautioned Michigan drivers searching for a new vehicle to be on the lookout for flood damaged cars, trucks, and SUVs. In other Michigan news, General Schuette called attention to best practices to be used by Michigan consumers when protecting themselves from bankrupt retailers. This notice results from the nationwide shutdown of toy store, Toys "R" Us, which has left consumers with questions on current orders and Toys "R" Us gift cards.
Mississippi Attorney General Jim Hood sent a letter to Facebook, Inc. putting the social media giant on notice to preserve any relevant information for his investigation into the company's user privacy practices in light of recent news about the company providing users' personal information to third parties without users' consent or knowledge.
New Hampshire Attorney General Gordon J. MacDonald has issued a consumer alert based on reports that scam artists are attempting to contact New Hampshire citizens seeking personal banking information.
New Mexico Attorney General Hector Balderas announced he filed a lawsuit against Vivint Solar, Inc. and related companies (Vivint). Attorney General Balderas' lawsuit claims Vivint was engaging in unfair and unconscionable business practices including clouding titles to consumers' homes, fraud, and racketeering in connection with its residential solar power purchase agreements and purchase of solar equipment. In other New Mexico news, General Balderas issued a scam alert warning New Mexicans to be extra cautious about people pretending to be able to help them with their Facebook data in the wake of the Facebook privacy breach.
New York Attorney General General Eric T. Schneiderman announced a $230 million settlement with UBS in connection with the packaging, marketing, sale, and issuance of residential mortgage-backed securities to investors leading up to the financial crisis. In other New York news, General Schneiderman released "Information Exposed: 2017 Data Breaches in New York State," documenting the record number of data breach notices filed with his office in 2017.
North Dakota Attorney General Wayne Stenehjem announced that two unlicensed contractors have been banned from doing business in North Dakota after a court found they had violated consumer fraud and licensing laws.
Ohio Attorney General Mike DeWine filed a consumer protection lawsuit against a contractor accused of taking money for home improvement services he never provided to consumers in central and eastern Ohio. In other Ohio news, General DeWine is warning consumers to beware of online puppy scams, which cost victims about $1,000 on average according to dozens of complaints filed with the Attorney General's Office.
Pennsylvania Attorney General Josh Shapiro filed a lawsuit against Uber Technologies, Inc. for allegedly violating Pennsylvania's data breach notification law.
Virginia Attorney General Mark R. Herring and his Consumer Protection Section are warning Virginians to be wary of pawnshops that charge illegal interest or fees.
Washington Attorney General Bob Ferguson filed a consumer protection lawsuit against CLA Estate Services, Inc. and CLA USA, Inc. for allegedly operating a "trust mill" by misleading hundreds of Washington seniors about estate planning, and persuading them to purchase high-commission insurance products.
The National Association of Attorneys General sent a letter to Facebook Chief Executive Officer Mark Zuckerberg asking him to answer a series of questions about Facebook's user privacy policies and practices following reports that at least 50 million Facebook personal profiles may have been misused.
Twitter is taking measures to prevent cryptocurrency-related accounts from running scams on its platform.
Iowa Attorney General Tom Miller announced a settlement barring the National Association of Chiefs of Police of Titusville, Florida, and two principals, Barry Shepherd and Brent Shepherd, from continuing to mail donation appeals that are alleged to violate the state's Consumer Fraud Act to Iowans.
Maryland Attorney General Brian E. Frosh announced a settlement agreement reached with a look-a-like cancer charity based in Maryland that unlawfully used a name similar to the American Cancer Society to collect donations from unsuspecting donors.
Michigan Attorney General Bill Schuette announced a settlement with Texas-based clothing donation bin operator ATRS. The settlement resolves the Attorney General's lawsuit alleging that ATRS's 251 clothing bins operated for the Michigan Humane Society were deceptively labeled.
Nebraska Attorney General Doug Peterson announced a settlement today with United States Amateur Confederation of Rolling Skating (USARS), a Nebraska nonprofit corporation. The settlement results from a complaint that alleged that USARS was reimbursing employees for expenses unrelated to the charitable mission which led to an investigation into USARS's oversight of its charitable assets, policies, and procedures.
New York Attorney General Eric T. Schneiderman announced the guilty plea of Christina Sanford Gordon, who stole more than $200,000 from Buffalo churches, community organizations, and local businesses by misrepresenting herself as a grant writing expert and successful fundraiser. In other New York news, General Schneiderman announced that his office reached a settlement that shuts down Menacola Marketing, Inc., a telemarketing company that solicited on behalf of the National Vietnam Veterans Foundation - a sham charity previously shut down by the Attorney General - and other shell charities that exploited popular causes in order to line fundraisers' pockets.
The Second Circuit upheld a New York state law requiring tax-exempt non-profit organizations to disclose their donors, saying it was unconvinced by conservative advocacy group Citizens United's claims that revealing donors to the attorney general's office breached First Amendment protections because it would scare people away from donations to controversial causes. Citizens United v. Schneiderman.
North Dakota Attorney General Wayne Stenehjem has issued a cease and desist order against Thomas Burke of Pennsylvania, for violations of the charitable solicitations and consumer fraud laws. Burke allegedly organized "Officers Down 5K" races in North Dakota supposedly to raise funds in support of law enforcement efforts.
Alabama Attorney General Steve Marshall announced the final passage of the Alabama Data Breach Notification Act. Passage of the consumer protection legislation ensures that Alabama will no longer be the only state without a law requiring entities experiencing a data breach to notify consumers if their personal information has been compromised.
Arizona has passed a law making it the first state in the nation to enact a groundbreaking regulatory fintech "sandbox." In Arizona's sandbox, startups, entrepreneurs, and even established companies can launch products on a limited, temporary scale to consumers to test innovative products, services, business models, and delivery mechanisms in the real market without incurring the regulatory costs and burdens that would otherwise be imposed. The Arizona Attorney General's Office will administer the sandbox.
A bipartisan group of attorneys general wrote to Congress expressing concerns with legislation that would preempt state data breach laws that require notice to consumers and state attorneys general of breaches when they occur.
A bipartisan group of attorneys general sent a letter to Congress urging them to reject legislation that would block states from preventing and combatting fraud and abuse by the student loan industry.
Connecticut Attorney General George Jepsen gave his support to legislation that would prohibit the country's three credit rating agencies from charging fees to place, temporarily lift, or remove credit security freezes.
Washington Attorney General Bob Ferguson's supported legislation, "The Student Loan Bill of Rights," has passed the Washington legislature and now heads to Governor Inslee for his signature.
Veterans and Military News
The Justice Department filed a lawsuit against California Auto Finance alleging that is violated the Servicemembers Civil Relief Act by repossessing protected servicemembers' motor vehicles without obtaining the necessary orders.
The Department of Justice filed a lawsuit against WiFi Alliance to enforce the employment rights of a United States Army Reservist under the Uniformed Services Employment and Reemployment Rights Act.
Virginia Attorney General Mark R. Herring has filed a lawsuit against Future Income Payments, LLC; FIP, LLC; and their owner, Scott Kohn for allegedly making illegal loans targeted toward veterans that carry annual interest rates as high as 183%, and for lending practices that violated the Virginia Consumer Protection Act.
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 email@example.com or call (202) 326-6263.