The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly October 2019
Consumer Chief of the Month: Joseph E. Potchen
"Si Quaeris Peninsulam Amoenam Circumspice"
"If you seek a pleasant peninsula, look about you."
A version of the State of Michigan's motto is on display every day at the Michigan Attorney General's office. I am blessed to work with pleasant people everywhere I look. It is also a privilege to be working on consumer protection matters under Attorney General Dana Nessel, who has made consumer protection one of her key priorities since taking office earlier this year.
Before joining the Michigan AG's office in 1994, I spent four years practicing law in Chicago, where I met my wonderful wife. After the birth of our first child, I moved back to my home state and started with the office under Attorney General Frank Kelley, also known as the "Eternal General" because he served in the position for 37 years.
School Fundraising Scams on the Rise
John W. Garrigan, Assistant Attorney General, Consumer Protection and Antitrust Bureau, New Hampshire Department of Justice
The New Hampshire Attorney General's Office has a seen a sharp rise over the last few years in the number of instances of scams by out-of-state third-party companies that target local businesses under the guise of supporting local public schools and sports teams. These scams are difficult to prevent and even more difficult to address through state enforcement powers due to the logistical hurdles of engaging in legal process in other states.
Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The CFPB, along with the Attorneys General of Minnesota and North Carolina, and the Los Angeles City Attorney, announced an action to halt a student-loan debt-relief operation engaged in allegedly unlawful conduct and consisting of several related companies: Consumer Advocacy Center Inc., which does business as Premier Student Loan Center; True Count Staffing Inc., also known as SL Account Management; and Prime Consulting LLC, which is known as Financial Preparation Services. Defendants also include Albert Kim, Kaine Wen, and Tuong Nguyen, whom the CFPB alleges substantially assisted the student-loan debt-relief companies. The CFPB alleges that since at least 2015, the debt-relief companies operated as a common enterprise and deceived thousands of federal-student-loan borrowers and charged over $71 million in unlawful advance fees in connection with the marketing and sale of student-loan debt-relief services to consumers. A complaint and request for a temporary restraining order was filed in federal court in California.
- The U.S. Supreme Court will review the constitutionality of the CFPB structure.
- The CFPB announced that it will hold a symposium on Section 1071 of the Dodd-Frank Act on November 6, 2019 at 9:30 a.m. The event will be webcast on the CFPB's website.
- The CFPB Private Education Loan Ombudsman issued the 2019 Annual Report showing that from September 1, 2017 through August 31, 2019, the Bureau handled approximately 20,600 complaints related to private or federal student loans.
- CFPB Director Kathleen L. Kraninger announced the appointment of members to the Consumer Advisory Board, Community Bank Advisory Council, Credit Union Advisory Council, and Academic Research Council. These experts advise CFPB leadership on a broad range of consumer financial issues and emerging market trends.
- The CFPB issued a rule which finalizes certain aspects of its May 2019 Notice of Proposed Rulemaking under the Home Mortgage Disclosure Act (HMDA). It extends for two years the current temporary threshold for collecting and reporting data about open-end lines of credit under HMDA. The rule also clarifies partial exemptions from certain HMDA requirements which Congress added in the Economic Growth, Regulatory Relief, and Consumer Protection Act.
- The CFPB announced that it will establish a taskforce to examine ways to harmonize and modernize federal consumer financial laws.
Federal Trade Commission:
- The FTC sued a publisher called Agora Financial, LLC, alleging that it tricks seniors into buying books, newsletters, and other publications that falsely promise a cure for type 2 diabetes or promote a phony plan to help them cash in on a government-affiliated check program.
- The FTC announced a joint warning letter issued with the U.S. Food and Drug Administration to Rooted Apothecary, LLC for selling products containing cannabidiol online with potentially unsubstantiated claims that the products can treat autism, attention-deficit/hyperactivity disorder, as well as Parkinson's and Alzheimer's, among other conditions.
- The FTC has barred the developers of three "stalking" apps from selling apps that monitor consumers' mobile devices unless they take certain steps to ensure the apps will only be used for legitimate purposes. The settlement resolves allegations that these apps compromised the privacy and security of the consumer devices on which they were installed. The apps are MobileSpy, PhoneSheriff, and TeenShield.
- The FTC released a report to Congress that details fraud reports from older consumers.
- The FTC extended the deadline to submit comments on the effectiveness of the amendments the agency made to the Children's Online Privacy Protection Rule in 2013 and whether additional changes are needed. The deadline was originally October 23, 2019; it is now December 9, 2019.
- The FTC issued the National Do Not Call Registry Data Book for Fiscal Year 2019.
- NatureCity, LLC, Carl Pradelli, and Beth Pradelli, Florida-based marketers and sellers of two aloe vera-based supplements, have agreed to settle FTC charges that they deceived consumers with false and unsupported claims that two products, TrueAloe and AloeCran, were effective treatments for a range of conditions affecting seniors, including chronic pain, ulcerative colitis, diabetes, and acid reflux.
- The FTC has announced a call for research presentations on consumer privacy and security issues, with a particular focus on health applications (apps), for the agency's fifth annual PrivacyCon, which will take place on July 21, 2020.
- Craig N. Chrest, the operator of a job placement company that deceived consumers with false promises of access to high-paying finance jobs and resume repair services for non-existent jobs, will be permanently banned from providing employment services under the terms of a settlement with the FTC.
- A federal court has entered a temporary restraining order against Utah-based Zurixx, LLC and affiliated companies, which the FTC and the Utah Division of Consumer Protection allege used deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars.
- The FTC has issued orders to six e-cigarette manufacturers seeking information to study the companies' sales, advertising, and promotional methods. The orders were sent to: JUUL Labs, Inc.; R.J. Reynolds Vapor Company; Fontem US, Inc.; Logic Technology Development LLC; Nu Mark LLC; and NJOY, LLC.
- According to a new FTC analysis of consumer complaint data, millennials are 25 percent more likely to report that they have lost money to fraud than consumers aged 40 and over.
- Multi-level marketer AdvoCare International, L.P. and its former chief executive officer agreed to pay $150 million and be banned from the multi-level marketing business to resolve FTC charges that the company operated an illegal pyramid scheme that deceived consumers into believing they could earn significant income as "distributors" of its health and wellness products.
Securities and Exchange Commission:
- The SEC Office of Investor Education and Advocacy issued a warning to investors about phony certificates of deposit.
- The SEC's Office of Investor Education and Advocacy and Retail Strategy Task Force released new videos and Investor Alerts to help show investors what fraud looks like.
In Other Federal News:
- The U.S. Department of Justice announced that a federal judge in the Eastern District of New York has ordered 15 individuals and companies to permanently cease their involvement with fraudulent mailings. According to a complaint filed by the United States in November 2018, the defendants mailed, or assisted the mailing of, thousands of solicitations stylized as individualized notices, which falsely stated recipients had won large sums of money or valuable prizes, but needed to pay a fee to claim the winnings.
- The U.S. Department of Justice announced that a California resident was charged with leading a telemarketing conspiracy to defraud and extort U.S. Spanish-speaking consumers.
- A federal court largely upheld the Federal Communications Commission's repeal of net neutrality rules, but the court struck down a provision that blocked states from passing their own net neutrality laws.
- The U.S. Commodity Futures Trading Commission charged Jon Barry Thompson of Easton, Pennsylvania, with knowingly or recklessly making false representations to customers in connection with the purported purchase of bitcoin worth over $7 million.
- The FBI's Internet Crime Complain Center (IC3) released a PSA titled "High-Impact Ransomware Attacks Threaten U.S. Businesses and Organizations."
Attorney General Consumer Protection News and Other Items of Interest
Forty-six attorneys general sent letters to leading U.S. online vendors, asking them to undertake certain steps to curtail illegal alcohol sales online. Letters were sent to Craigslist, eBay, and Facebook.
Forty-two attorneys general reached a $116.9 million settlement with Johnson & Johnson and its subsidiary Ethicon, Inc. for their deceptive marketing of transvaginal surgical mesh devices. The settlement is the result of an investigation that found the companies violated state consumer protection laws by misrepresenting the safety and effectiveness of the devices and failing to sufficiently disclose risks associated with their use. The companies will also be required to provide comprehensive information about the product's risks going forward.
Twenty-five attorneys general filed two briefs in federal bankruptcy court opposing a request by Purdue Pharma to stop all lawsuits against the company and the Sackler family.
Four attorneys general announced that they secured a $48 billion agreement in principle with Cardinal Health, McKesson, AmerisourceBergen, Johnson & Johnson, and Teva for their roles in fueling the opioid epidemic. The framework agreed upon includes $22.25 billion in cash and $26 billion in medication-assisted treatment drug provision and distribution over 10 years.
Arizona Attorney General Mark Brnovich announced his office filed a consumer fraud lawsuit against Choice Home Warranty for allegedly making false promises to consumers who purchased a home warranty policy.
Arkansas Attorney General Leslie Rutledge took legal action against three online e-cigarette retailers for allegedly violating the Arkansas Deceptive Trade Practices Act by selling and shipping nicotine products and devices, including e-cigarettes, to Arkansas children without age verification.
California Attorney General Xavier Becerra released to the public proposed regulations under the California Consumer Privacy Act (CCPA). The CCPA was introduced as Assembly Bill 375 and signed into law on June 28, 2018. The law provides consumers with groundbreaking new rights on the use of their personal information. The law mandates that on or before July 1, 2020, the Office of the Attorney General promulgate and adopt implementing regulations for the CCPA. The comment period regarding these proposed regulations has now begun. In other California news, Attorney General Becerra filed an amended complaint in his lawsuit against Purdue Pharma, adding eight members of the Sackler family.
Florida Attorney General Ashley Moody announced a lawsuit against Air Time Air Conditioning and Heating, Inc. and its principal Anthony Gonzalez. Air Time allegedly deceived many consumers, including seniors, with high-priced quotes for unnecessary service or unneeded replacement of air conditioning systems or parts. In other Florida news, Attorney General Moody announced a major investigation into vaping companies doing business in Florida. The consumer protection action is looking into the marketing and selling practices of e-cigarette products by more than 20 companies selling in Florida.
Georgia Attorney General Chris Carr announced the release of a new cybersecurity resource, the Cybersecurity in Georgia guide, for Georgia small businesses, non-profit organizations, and houses of worship.
Indiana Attorney General Curtis Hill filed a lawsuit against three drug distributors responsible for a commanding share of the prescription opioids sold to Indiana pharmacies during the relevant time period. The complaint alleges that AmerisourceBergen Drug Corp., Cardinal Health and McKesson Corp. violated Indiana law by: 1) designing flawed systems that failed to adequately identify, report and prevent the shipment of suspicious orders for opioids; 2) failing to adhere to the terms of their own anti-diversion programs for opioids; and 3) unfairly and deceptively marketing prescription opioids.
Maryland Attorney Brian E. Frosh announced that his Consumer Protection Division has filed charges against John Eberl for allegedly taking money from consumers for home improvement projects, but failing to provide the work or refund the money.
Michigan Attorney General Dana Nessel issued a notice of intended action against a puppy mill allegedly running an inhumane and unsanitary puppy peddling operation in Hillsdale County, Michigan.
Minnesota Attorney General Keith Ellison announced that his office has obtained a court order halting Steven Meldahl, the landlord of 25 properties in North Minneapolis, from retaliating against his tenants when they contact city housing inspectors. The order was a result of his office's lawsuit against Meldahl alleging he preys on low-income tenants in a systematic and widespread "eviction for profit" scheme.
Nevada Attorney General Aaron D. Ford and his Home Again: Nevada Homeowner Relief Program unveiled a series of commercials to raise awareness about free housing and resources to guard against scams.
North Carolina Attorney General Josh Stein submitted additional filings related to his cases against Purdue Pharma and eight members of the Sackler family. Specifically, Purdue has sued Attorney General Stein seeking to stop his cases against it and the Sacklers due to the Purdue bankruptcy. Attorney General Stein's filings oppose that effort.
Northern Mariana Islands Attorney General Edward Manibusan encouraged residents to report incidents of price gouging in the wake of natural disasters.
Oregon Attorney General Ellen Rosenblum filed a lawsuit against the Vancouver, Washington company U.S. Air Ducts, its owners and their associated companies for allegedly violating Oregon's Unlawful Trade Practices Act by using deceptive marketing practices to make over 11 million unwanted robocalls to Oregon phone numbers and sending 20 million print advertisements promising a "whole house" or "seasonal" cleaning at a special price.
Tennessee Attorney General Herbert H. Slatery III announced that the Tennessee Division of Consumer Affairs will be transferred to the Office of the Attorney General of Tennessee from the state's Department of Commerce and Insurance.
Texas Attorney General Ken Paxton warned consumers in areas affected by recent bad weather to guard against contracting scams as they prepare to rebuild and offered tips to safeguard against unscrupulous individuals looking to take advantage of vulnerable Texans.
Washington Attorney General Bob Ferguson announced that Kirkland-and Portland-based Real Estate Investment Network, LLC will be required to dissolve and pay up to $85,000 for scamming foreclosed homeowners out of equity in the form of surplus funds remaining after the sale.
West Virginia Attorney General Patrick Morrisey's Consumer Protection Division alerted consumers to be on guard for Social Security, Medicare, call spoofing, sweepstakes scams, as recent calls and reports indicate ongoing occurrences of each in the Mountain State.
The BBB, FINRA, and the Stanford Center on Longevity published a report titled "Exposed to Scams: What Separates Victims From Non-Victims?"
Fraud.org reports that scammers are turning to fake Google Calendar invites to defraud consumers.
Juul announced the suspension of sales of some flavors of its e-cigarettes.
The FTC, the National Association of State Charities Officials, and state charities regulators across the country joined with partners around the globe for this year's International Charity Fraud Awareness Week (ICFAW), which took place October. 21-25, 2019. ICFAW is a coordinated international campaign to help charities and consumers avoid charity fraud and promote wise giving.
New York Attorney General Letitia James sued NYCharities.org, an online fundraising platform, for failing to distribute more than $750,000 in contributions to charities throughout New York.
A federal court struck down a New York donor law that required nonprofits to disclose certain donor information.
Senator Ron Wyden (D-OR) is advancing his data privacy bill, the "Mind Your Own Business Act." The bill would give the Federal Trade Commission more power, including the ability to fine tech companies for user privacy violations.
Representatives Eddie Bernice Johnson (D-TX) and Jeff Fortenberry (R-NE) introduced the Hotel Advertising Transparency Act of 2019 to do away with the practice of tacking on extra charges that aren't shown in the upfront room rate for hotels, often referred to as resort fees.
Veterans and Military News
The CFPB and the South Carolina Department of Consumer Affairs filed a lawsuit in federal district court in the District of South Carolina against Katharine Snyder, Performance Arbitrage Company, Inc., and Life Funding Options, Inc. The companies, owned and operated by Snyder, brokered contracts offering high-interest credit to veterans, many of whom are disabled, and to other consumers. The CFPB alleges that the companies and their owner violated the Consumer Financial Protection Act's prohibition against deceptive acts or practices.
The FTC announced that many members of the military will have access to free credit monitoring starting on October 31.
The SEC will host a Veterans Day program on Tuesday, Nov. 12. The program will feature a conversation with SEC Chairman Jay Clayton and Colonel James Tuite of the U.S. Army's "Old Guard" that will focus on financial readiness, including the basics of saving, investing, preparing for retirement and avoiding scams, for an audience of active duty service members and veterans.
The U.S. Department of Justice announced that a former civilian medical records administrator for the U.S. Army at the 65th Medical Brigade, Yongsan Garrison, South Korea, admitted to his role in an identity-theft and fraud scheme that victimized thousands of U.S. servicemembers and veterans.
The U.S. Department of Justice filed a complaint in the United States District Court for the District of Colorado on behalf of Naval Petty Officer Third Class Lindsey Hunger against Walmart Inc. The complaint alleges that Walmart violated the Uniformed Services Employment and Reemployment Rights Act when it declined to hire Hunger due to her upcoming naval reserve duties.
2019 Fall Consumer Protection Conference
November 5-7, 2019, Omaha, Nebraska
This year's NAAG Consumer Protection Fall Conference will be held in Omaha, Nebraska at the Omaha Marriott Downtown at the Capitol District from Nov. 5-7, 2019. The agenda aims to address pressing and relevant issues specific to your role in consumer protection. On Tuesday, November 5 from approximately 11:30 am until 7:30 pm, the private, nonprofit, and government sectors are invited to attend the public portion of the conference, which also includes lunch and an evening reception.
Sessions during the public portion of the conference include an attorney general welcome and comments, as well as sessions on CBD/Hemp Products, Data Security Issues Relating to Lawyers and Law Firms, and Payment Apps. There will also be an open-mic discussion of private sector issues. The public day agenda can be found here.
Click here for more information. While online registration is now closed, onsite registration will be available.
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.