The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly October 2018
Consumer Chief of the Month: Victoria Butler, Florida
Many thanks to NAGTRI for this opportunity to highlight the great work of the Florida Attorney General’s Consumer Protection Division and the opportunities I have had to contribute over my short 20-year career with this office. And a short 20 years it truly has been as the busy years have flown by with each day bringing new issues and new challenges in this rewarding and dynamic world of consumer protection enforcement.
I did not set out to work in consumer protection—I’m pretty sure I had never even heard of the unfair and deceptive trade practices act before applying to the attorney general’s office.
Article of the Month:
Recognizing and Combating Interstate Moving Fraud
Lawrence Hawthorne III, Transportation Specialist Commercial Enforcement and Investigations Division, Federal Motor Carrier Safety Administration (FMCSA)
Recently, the U.S. Department of Justice charged several company officials operating as Flagship Van Lines. Flagship Van Lines, along with many affiliated companies including Unified Van Lines, Public Moving Services, and Presidential Moving, were identified by investigators as hiking prices after the customer has committed to the original price and/or refusing to release more than 160 shipments without excessive payments from the customer.
Federal Consumer Protection News
Bureau of Consumer Financial Protection:
- The Bureau released a 50 state “complaint snapshot” report.
- The Bureau announced a settlement with Cash Express, LLC, a small-dollar lender based in Cookeville, Tennessee, that offers high-cost, short-term loans, such as payday and title loans, as well as check-cashing services. Cash Express owns and operates approximately 328 retail lending outlets in four states: Tennessee, Kentucky, Alabama, and Mississippi.
- The Bureau offered tips on how to tell the difference between a legitimate debt collector and scammers.
- The Bureau and Bluestem Brands, Inc.; Bluestem Enterprises, Inc.; and Bluestem Sales, Inc. (the Bluestem companies), have filed an administrative consent order resolving the Bureau’s allegations that after consumers made payments to the Bluestem companies on debts that the companies had already sold, the Bluestem companies substantially delayed sending those payments to the third-party debt buyers.
Commodity Futures Trading Commission:
- A New York federal court has ordered New York corporation Gelfman Blueprint, Inc. and its Chief Executive Officer Nicholas Gelfmanof Brooklyn, New York, to pay in total more than $2.5 million in civil monetary penalties and restitution in what is the first anti-fraud enforcement action involving Bitcoin filed by the CFTC.
- The CFTC issued an order filing and settling charges against Kamaldeep Gandhi, in which Gandhi admits to engaging in manipulative and deceptive schemes, along with other individuals, which involved thousands of acts of spoofing (bidding or offering with the intent to cancel the bid or offer before execution) with respect to a variety of futures products traded on the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, and the Commodity Exchange, Inc.
- The CFTC announced that Judge John Robert Blakey of the U.S. District Court for the Northern District of Illinois entered a Consent Order for Permanent Injunction, which resolves charges against defendant Thomas C. Lindstrom, of Winnetka, Illinois, for engaging in fraud in connection with his trading of options on 10-year U.S. Treasury note futures.
- A federal judge of the U.S. District Court for the District of Massachusetts, entered an order holding that the CFTC sufficiently alleged that a specific virtual currency was a commodity and that the CFTC has the power to prosecute fraud involving virtual currency.
- The CFTC filed a civil enforcement action in the U.S. District Court for the Western District of Washington charging defendant Aaron Michael Scott of Portland, Oregon, with fraud and misappropriation in connection with contracts of sale of precious metals, specifically gold and silver.
Federal Trade Commission:
- Online student loan refinancer SoFi has agreed to stop misrepresenting how much money student loan borrowers have saved or will save from refinancing their loans with the company, in order to settle FTC charges that it deceptively advertised inflated figures for more than two years.
- The FTC approved final amendments to its R-Value Rule for home insulation products.
- The FTC announced the agenda for the sixth session of its Hearings Initiative, with two and a half days of sessions on November 6–8, 2018, to be held at American University Washington College of Law in Washington, D.C. Additionally, the FTC will hold four days of hearings in December and February to examine the FTC’s authority to deter unfair and deceptive conduct in data security and privacy matters.
- In testimony before the U.S. Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, the FTC described its enforcement of antitrust laws, its advocacy work, and the public hearings it is hosting on a variety of competition and consumer protection issues.
- The FTC has given final approval to a settlement with Uber Technologies, Inc. over allegations that the ride-sharing company deceived consumers about its privacy and data security practices.
- As part of its efforts to address evolving privacy and data security challenges, the FTC is announcing a call for presentations for its fourth annual PrivacyCon, to be held on June 27, 2019.
- At the FTC’s request, a federal district court in California has temporarily halted a company’s advertising of three dissolvable oral film strips that the FTC alleges were deceptively marketed as effective smoking cessation, weight-loss, and sexual-performance aids.
- Staff of the FTC released a new paper today outlining key takeaways from a December 12, 2017, workshop examining injuries consumers may suffer from privacy and security incidents.
- A new report released by the FTC details the agency’s comprehensive efforts to protect older consumers from fraud, identity theft, and other problems in the marketplace.
- A California-based physician and the two companies he controls have settled charges of deceptively advertising that “amniotic stem cell therapy” can treat serious diseases, including Parkinson’s disease, autism, macular degeneration, cerebral palsy, multiple sclerosis, and heart attacks.
- The FTC, along with the Department of Homeland Security, the National Institute of Standards and Technology, and the Small Business Administration, launched a national education campaign to help small business owners understand common cyber threats and how they can help protect their businesses.
- The FTC is making consumer complaint data more accessible by releasing its aggregated data on a quarterly basis in a new interactive format.
- The FTC filed a complaint against defendants Forms Direct, Inc., also known as American Immigration Center, and owner Cesare Alessandrini, alleging that they falsely implied that their websites were affiliated with U.S. Citizenship and Immigration Services.
- The marketer of a scheme to make money on Amazon, and his companies, are banned from marketing and selling business opportunities and business coaching services under a settlement with the FTC.
- A group of car dealerships and their president and vice president have settled FTC allegations that they mailed more than 21,000 fake “urgent recall” notices to consumers in 2015 and 2017, to lure them to visit dealerships.
- The staff of the FTC will examine consumer protection and competition issues related to the online event-ticket marketplace at a public workshop on March 27, 2019.
- The FTC has completed its regulatory review of the Picture Tube Rule and, following a second public comment period announced in March, authorized the publication in the Federal Register of a final rule notice that repeals the Rule, effective 90 days after publication.
- The FTC is mailing checks totaling $89,736 to 246 small businesses who paid DOTAuthority.com Inc. or related defendants service fees for commercial vehicle registrations based on allegedly deceptive advertising and practices.
Securities and Exchange Commission:
- The SEC announced it has agreed to a settlement with Christopher A. Faulkner—the self-proclaimed “Frack Master”—in connection with his wide-ranging securities-fraud scheme that raised over $80 million from hundreds of investors nationwide. Faulkner has simultaneously entered into a plea agreement relating to the same misconduct under which he will serve 12 years in federal prison for securities fraud, money laundering, and tax evasion.
- The SEC suspended trading in the securities of a company amid questions surrounding its statements about partnering with a claimed SEC-qualified custodian for use with cryptocurrency transactions and a purportedly registered public offering of preferred stock.
- The SEC announced charges against an investment adviser with a history of violating the securities laws for defrauding his close friends and community members.
- The SEC issued an investigative report cautioning that public companies should consider cyber threats when implementing internal accounting controls. The report is based on the SEC Enforcement Division's investigations of nine public companies that fell victim to cyber fraud, losing millions of dollars in the process.
- The SEC announced that it has obtained an emergency court order halting a planned initial coin offering (ICO), which backers falsely claimed was approved by the SEC. The order also halts ongoing pre-ICO sales by the company, Blockvest LLC and its founder, Reginald Buddy Ringgold, III.
- The SEC charged a Virginia real estate developer with skimming investor funds that were intended for use in purchasing an office building near the site of a planned commuter rail station on the Washington Metropolitan Area Transit Authority’s Silver Line.
- The SEC has filed an emergency action and obtained an asset freeze against two individuals and their companies in a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies. SEC investigators unraveled the multi-year scheme with the assistance of more than a dozen international regulators and sophisticated analysis of nearly 400 bank and brokerage accounts.
- The SEC announced that Elon Musk, CEO and Chairman of Silicon Valley-based Tesla, Inc., has agreed to settle the securities fraud charge brought by the SEC against him. The SEC also charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle. The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla—including Musk’s removal as Chairman of the Tesla board—and the payment by Musk and Tesla of financial penalties.
The United States Department of Justice:
- The USDOJ announced that a New York resident plead guilty to a multimillion dollar elder fraud scheme and to defrauding the FTC.
- The USDOJ announced that seven U.S. citizens were charged in an indictment for their roles in a Costa Rica-based telemarketing scheme that allegedly defrauded victims in the United States, including the elderly.
In other federal news:
- The Federal Communications Commission proposed a $63,465,500 fine against American Broadband and Telecommunications Company, a wireless reseller based in Ohio, for apparent repeated, systematic, and large-scale violations of FCC rules governing the Lifeline program, which helps make communications services more affordable for low-income Americans.
- IC3 posted a PSA to its website titled “Business Email Compromise: Gift Cards."
- Health and Human Services Secretary Alex Azar announced a notice for proposed rulemaking that will implement price transparency requirements for direct to consumer advertising on television by drug companies.
- The United States Department of Transportation published Preparing for the Future of Transportation: Automated Vehicles 3.0 which provides a framework for the safe development, testing and integration of automated vehicle technology.
Attorney General Consumer Protection News and Other Items of Interest
A bipartisan coalition of 34 attorneys general called on the Federal Communications Commission to create new rules to allow telephone service providers to block more illegal robocalls being made to unsuspecting consumers across the country.
Alabama Attorney General Steve Marshall and the Alabama Home Builders Licensure Board are warning consumers to be wary of home repair fraud that may occur in the wake of Hurricane Michael.
Arizona Attorney General Mark Brnovich announced Orangutan Home Services, Inc. will pay $150,000 in civil fines for calling Arizonans on the “Do Not Call” Registry. In other Arizona news, General Brnovich filed an Arizona Antitrust and Consumer Fraud lawsuit against dental supply company, Benco, for its alleged anticompetitive and deceptive acts that stifled competition in the Arizona dental industry and harmed Arizona consumers. Additionally, General Brnovich warned consumers about purchasing vehicle history reports through suspicious websites.
Arkansas Attorney General Leslie Rutledge and Alert America LLC have reached a settlement to resolve allegations that Alert America violated the Arkansas Deceptive Trade Practices Act. The company sold third-party alarm-monitoring services to Arkansas consumers, and many of its contracts included a prepaid service contract. In other Arkansas news, General Rutledge warned that some online services may not be all that they appear. Additionally, General Rutledge filed a consumer-protection lawsuit against Jonathan and Paula Funk and their company Jonathan Funk Photography for alleged violations of the Arkansas Deceptive Trade Practices Act.
Apple gives U.S. users a tool to see what data is collected from them.
The BBB warned that political scams are expected to increase as the midterm election approaches.
Google is shutting down Google+ in the aftermath of a privacy glitch.
Illinois Attorney General Lisa Madigan, with the Illinois Department of Financial and Professional Regulation announced an agreement with Diamond Residential Mortgage Corporation under which the company will pay $1.2 million to eligible consumers who were defrauded by one of the company's branch managers.
Iowa Attorney General Tom Miller announced that a Utah satellite TV company will offer to refund money or cancel contracts for more than 1,100 Iowans after the Iowa Attorney General’s Office accused it of violating the Iowa Consumer Fraud Act.
Louisiana Attorney General Jeff Landry and Consumer Financial Protection Bureau Acting Director Mick Mulvaney hosted a town hall focused on protecting Louisiana’s elderly from financial exploitation.
Massachusetts Attorney General Maura Healey announced that an unregistered Massachusetts home improvement contractor has been ordered to pay $489,884 in restitution and penalties and will be permanently debarred from operating as a home improvement contractor as a result of a judgment issued in Massachusetts state court. In other Massachusetts news, General Healey announced the filing of a lawsuit in Massachusetts state court against Connecticut-based competitive electricity supplier, Starion, two of its principals, Ruzhdi Dauti and Dashmir Murtishi, and several related telemarketing companies, Telelink, LLC, Telestars, LLC, F E Z, LLC, and StartelDM, LLC. The complaint alleges that the parties violated the state’s consumer protection laws by engaging in unfair sales tactics including unsolicited telemarketing calls and pre-recorded robocalls that deceived Massachusetts customers by falsely promising them lower electricity rates while signing them up for expensive contracts that ultimately made them pay millions more on their bills.
Microsoft released a report on the state of tech support scams in 2018.
Minnesota Attorney General Lori Swanson filed a lawsuit against the nation’s three major manufacturers of insulin used to treat diabetes after prices more than doubled in recent years. The lawsuit alleges that the drug companies—Sanofi-Aventis U.S. LLC, Novo Nordisk, Inc., and Eli Lilly and Co.—deceptively raised the list prices of insulin, making it less affordable to patients in high deductible health plans, the uninsured, and senior citizens on Medicare.
Montana Attorney General Tim Fox highlights the importance of knowing how to minimize the risk of cyber threats and how to respond if personal data may have been compromised.
New York Attorney General Barbara D. Underwood announced a court win for New York consumers against Rochester-based home improvement contracting business A-S Contracting, and their operators Alvis Sprague and Sarah Crawford. In other New York news, General Underwood announced a settlement with major biopharmaceutical company, Pfizer Inc., following an investigation into the company’s business and advertising practices for its copayment coupon program. As part of the program, consumers were told that they would “pay no more than” $15 or $20, for example, for certain drugs – but ended up spending far more at the pharmacy cash register. Additionally, General Underwood announced that Wells Fargo & Company will pay a $65 million penalty following the attorney general’s investigation into the bank’s fraudulent statements to investors in connection with its “cross-sell” business model, related sales practices, and the bank’s publicly reported cross-sell metrics.
North Carolina Attorney General Josh Stein wrote Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichal to demand answers about each company’s security and safety of their users’ data. Additionally, General Stein announced that he has launched an investigation into Juul, the e-cigarette company.
Ohio Attorney General Mike DeWine announced a consumer protection lawsuit against a home improvement contractor accused of failing to deliver promised services to Cleveland-area consumers. In other Ohio news, General DeWine warned consumers to beware of tech support scams, which have been reported by dozens of Ohioans. Additionally, General DeWine announced consumer protection lawsuits against two different Cleveland used car sellers accused of failing to deliver vehicle titles to Ohio consumers.
As part of an ongoing investigation into allegations of redlining in the Philadelphia region, Attorney General Josh Shapiro issued a call to all mortgage borrowers and home loan applicants in the area to file complaints with his office if they believe they may have been victims of redlining or experienced irregularities when looking for a mortgage or home loan. The Office of Attorney General is investigating evidence of financial institutions refusing to make mortgage loans in Philadelphia neighborhoods because of their racial or ethnic makeup, or otherwise unlawfully dissuading minorities from applying for mortgage loans.
The Texas Attorney General’s Office announced that Consumer Protection Division Assistant Attorneys General Rick Berlin and Stephanie Eberhardt received the prestigious Rising Star award from the National Consumer Law Center.
Vermont Attorney General T.J. Donovan is warning Vermonters about a spike in scams by fraudsters pretending to be utilities.
Virginia Attorney General Mark R. Herring and the Virginia Department of Motor Vehicles are urging consumers in the market for a new or used car to be on the lookout for vehicles with water damage in the wake of flooding caused by Hurricane Florence that has damaged or destroyed countless vehicles.
West Virginia Attorney General Patrick Morrisey also urged consumers to exercise caution when purchasing used vehicles potentially submerged by Hurricane Florence’s flooding rains.
In other West Virginia news, General Morrisey filed suit seeking to block a Putnam County flooring contractor from any future work in the area of home improvement sales and installation. The lawsuit alleges Xpert Tile and Hardwood Installation, by way of its owner Chad Akers, violated the state’s consumer protection law by entering into unlawful contracts and failing to complete the agreed upon work.
Wyoming Attorney General Peter Michael announced that his office sued Purdue Pharma for allegedly unfairly and deceptively marketing and promoting opioids in Wyoming.
Yahoo agrees to pay $50 million in damages over biggest security breach in history.
West Virginia Attorney General Patrick Morrisey reminds consumers to use caution as they open their wallets to help those impacted by Hurricane Michael.
Veterans and Military News
A bipartisan coalition of 33 attorneys general called on the Bureau of Consumer Financial Protection (Bureau) and Acting Director Mick Mulvaney to continue protecting military servicemembers against predatory lenders under the Military Lending Act (MLA). The attorneys general urged the Bureau to reconsider its reported decision to stop examining lenders to ensure they are complying with the MLA.
New York Attorney General Barbara D. Underwood announced a lawsuit against Harris Jewelry – a jewelry retailer headquartered in New York, with dozens of locations across the country including one near Fort Drum in New York – for allegedly engaging in false and deceptive acts and illegal lending in the financing of jewelry sales to active-duty servicemembers. This lawsuit is the result of an ongoing multistate investigation co-led by New York and Tennessee. In related news, North Carolina Attorney General Josh Stein issued a civil investigative demand to Harris Jewelry including stores in Fayetteville near Fort Bragg and Jacksonville near Camp Lejeune. General Stein, as part of an active investigation, is requiring Harris Jewelry to produce significant documentation to further the Department of Justice’s investigation into the jewelry store’s business practices.
The U.S. Department of Veterans Affairs published a “Disaster Assistance for Veterans” brochure.
Consumer Protection Trivia
- In which month does the Federal Trade Commission typically promote the National Consumer Protection Week?
- Which federal act limits the amount of interest on certain financial obligations incurred prior to military service to no more than six percent per year?
A. The Military Lending Act
B. The Uniformed Services Employment and Reemployment Rights Act
C. The Patriot Act
D. The Servicemembers Civil Relief Act
*Trivia answers can be found below.
- C. March
- D. The Servicemembers Civil Relief 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 firstname.lastname@example.org or call (202) 326-6263.