The National Attorneys General Training & Research Institute
Center for Consumer Protection Monthly September 2020
Consumer Chief of the Month: Olivia Martin, Alabama
The Alabama Attorney General reorganized the office's Civil Division in October 2015 by combining the Environmental, Utilities, and Consumer sections into the Consumer Interest Division. After being Section Chief of Utilities for 19 years, I was selected by the Attorney General as chief of the new division. Although there is considerable overlap between environmental and utility matters, I had a lot to learn about consumer protection. Fortunately, the Attorney General selected a few of the office's best attorneys to join the division. Many of you have met and worked with Tina Hammonds and Michael Dean on multistate cases. They, too, were experienced attorneys, but new to consumer protection, and we approached our new mission with enthusiasm and a focus on teamwork.
Evolution of Health Claim Substantiation
Stephanie N. Guyon, Deputy Attorney General, Idaho Attorney General's Office
"Life is pain. Anybody that says different is selling something."
If you browsed a newspaper during the 1918 flu pandemic, you would have found ads for Owl's throat gargle, Dr. McKenzie's smelling bottle, J.W. Gardocky's onions, Horlick's malted milk, and Boyer's massages. From miracle water to sensible shoes, sellers offered dozens of fake treatments to capitalize on a deadly disease that gripped the world between 1918 and 1920. Reading these outrageous health claims now is both laughable and ominous.
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The 2020 NAAG Consumer Protection Fall Conference will be held virtually from October 26-28, 2020. The agenda aims to address pressing and relevant issues specific to your role in consumer protection. On Tues., Oct. 27, the private, nonprofit, and government sectors are invited to attend the public portion of the conference, which will include an optional virtual networking session. The sessions on Wed., Oct. 28 and Thurs., Oct. 29 are open to attorney general office staff only.
If you are attorney general staff or a private sector registrant who does not need CLE credit, the attendance fee will be waived. If you are a private sector registrant who would like CLE, there will be a registration fee of $30.00. Early registration is recommended as space is limited.
The 2020 NAAG/NASCO Charities Conference will be held virtually from November 17-19, 2020. Save the date!
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Federal Consumer Protection News
Consumer Financial Protection Bureau:
- The Consumer Financial Protection Bureau (CFPB or Bureau) sued debt collectors Encore Capital Group, Inc. and its subsidiaries, Midland Funding, LLC; Midland Credit Management, Inc.; and Asset Acceptance Capital Corp. The Bureau alleges Encore and its subsidiaries have violated the terms of a 2015 consent order and again violated the Fair Debt Collection Practices Act and Consumer Financial Practices Act. The suit seeks injunctions, damages, consumer redress, disgorgement, and civil penalties. The complaint alleges that since September 2015, the defendants have violated the consent order by suing consumers without possessing required documentation, suing and collecting on time-barred debt, using law firms and an internal legal department to engage in collection efforts without providing required disclosures, failing to provide consumers with required loan documentation after consumers requested it, and other violations.
- The CFPB signed a consent order with Lobel Financial Corporation, an auto-loan servicer, resolving allegations that Lobel engaged in unfair practices with respect to its Loss Damage Waiver (LDW) product, in violation of the Consumer Financial Protection Act. When a borrower has insufficient insurance, rather than force-placing collateral-protection insurance, Lobel places the LDW product, which is not itself insurance, on borrower accounts and charges a monthly premium of approximately $70 for the LDW coverage. The LDW product provides that Lobel will pay for the cost of covered repairs and, in the event of a total vehicle loss, cancel the borrower's debt. The Bureau found that Lobel continued to bill certain consumers for LDW coverage but then failed to provide it and assessed fees from consumers that they were not obligated to pay. The consent order requires Lobel to pay $1,345,224 in consumer redress to approximately 4,000 harmed consumers and a $100,000 civil penalty.
Commodities Futures Trading Commission
- The Commodity Futures Trading Commission (CFTC) and 30 state regulators that are members of the North American Securities Administrators Association (NASAA) announced the filing of a joint civil enforcement action against two precious metals dealers and their companies for perpetrating a $185 million fraudulent scheme targeting elderly persons nationwide. The complaint charges defendants TMTE, Inc., d/b/a Metals.com, Chase Metals, LLC, Chase Metals, Inc. (collectively "Metals.com"), Barrick Capital, Inc. and its principals, Lucas Asher a/k/a Lucas Thomas Erb a/k/a Luke Asher and Simon Batashvili with executing an ongoing nationwide fraud that solicited and received more than $185 million in investor funds to purchase fraudulently overpriced gold and silver bullion. On September 22, 2020, the U.S. District Court for the District of Northern District of Texas entered a restraining order freezing the assets of the defendants and permitting the CFTC and the states to inspect all relevant records. The court also appointed a receiver to take control of Metals.com, Barrick, and Tower Equity, as well as the assets of Asher and Batashvili. This enforcement action is the largest joint filing in CFTC history with state regulators, and the first resulting from a 2018 information sharing agreement between the CFTC and NASAA, which represents state and provincial securities regulators in the United States, Canada, and Mexico.
- The CFTC and Securities and Exchange Commission (SEC) announced that the court-appointed receiver has completed a final distribution to victims in a $1.3 billion Ponzi scheme case brought by the CFTC in 2009. The distribution pertains to customers in a commodity pool operated by defendants Paul Greenwood and Stephen Walsh among other defendants.
- The CFTC, SEC, and U.S. Department of Justice (DOJ) announced a $920 million settlement with JPMorgan Chase & Co. (JPMorgan) to resolve criminal and civil charges related to two distinct schemes to defraud: the first involving tens of thousands of episodes of unlawful trading in the markets for precious metals futures contracts, and the second involving thousands of episodes of unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds. The $920.2 million settlement is the largest amount of monetary relief ever imposed by the CFTC and includes restitution ($311,737,008), disgorgement ($172,034,790), and civil penalties ($436,431,811).
- The CFTC announced it has issued an order settling charges against Citibank N.A., Citigroup Energy Inc., and Citigroup Global Markets, Inc. for failing to diligently supervise their audio preservation system. Citibank operated and maintained an audio preservation system on behalf of all three Citi entities. This system was the primary means of ensuring that audio recordings were maintained as required by CFTC regulations. However, due to a known design flaw, the system deleted millions of audio files, including recordings that were responsive to a CFTC subpoena and which Citibank had assured the Division of Enforcement were being preserved. The order requires the Citi entities to pay a $4.5 million civil penalty.
Federal Trade Commission:
- The Federal Trade Commission (FTC) announced that online children's education company Age of Learning, Inc., which operates ABCmouse, will pay $10 million and change its negative option marketing and billing practices. The settlement resolves charges that the company made misrepresentations about cancellations and failed to disclose important information to consumers, leading tens of thousands of people to have their initial memberships renewed and be charged for memberships without proper consent. The FTC's complaint also alleges that ABCmouse users were unfairly billed without their authorization and that the company made it difficult for consumers to cancel their memberships, preventing consumers from avoiding additional charges. Although ABCmouse advertised "Special Offer" 12-month memberships for $59.95, it failed to tell consumers that the plans would automatically renew indefinitely, leading them to incur additional charges.
- Approximately $147 million is being mailed to 33,000 consumers in the second distribution of refunds resulting from the law enforcement actions brought against Western Union by the FTC, the DOJ, and the U.S. Postal Inspection Service. Affected consumers are receiving compensation for 100 percent of their verified losses. More information about the Western Union refund program and its compensation to victims is available on the Western Union remission website at westernunionremission.com.
- The FTC, along with more than 50 federal and state law enforcement partners (including attorneys general) announced "Operation Corrupt Collector," a nationwide law enforcement sweep to protect consumers from phantom debt collection and abusive and threatening debt collection practices. This crackdown encompasses more than 50 enforcement actions against debt collectors engaged in these illegal practices brought by the FTC, three federal partners, and partners from 16 states.
- Boston-based supplement marketer NutraClick LLC and its two officers have agreed to pay $1.04 million and be banned from negative option marketing in order to settle FTC allegations that the company's deceptive sales and billing practices violated federal law and a 2016 federal court order from a prior FTC case. According to the FTC's complaint and proposed contempt order, NutraClick and the other defendants violated the Restore Online Shoppers' Confidence Act, the FTC's Telemarketing Sales Rule, and the previous court order by failing to clearly and conspicuously disclose all material terms of their negative option sales offers, despite agreeing to do so in the 2016 order.
- The FTC obtained a settlement with Online Trading Academy (OTA) requiring the company to offer debt forgiveness to thousands of consumers who purchased its "training programs," while the company's founder and other individuals will together pay between $5 million and $9.1 million and turn over assets. The settlement is expected to result in more than $10 million to benefit injured consumers. In February, the FTC brought a lawsuit alleging that OTA, led by Eyal Shachar, had deceived consumers for years with claims that purchasers of OTA's investment training were likely to generate significant income. The settlement will require OTA to offer debt forgiveness to consumers who have debt owed to OTA for its training. The company will be required to give these consumers notice of the offer of debt forgiveness and consumers will have 45 days to request forgiveness. Consumers who elect forgiveness will lose access to any OTA courses they have purchased. The settlement terms allow that for every dollar of debt forgiveness that OTA customers accept, Shachar's required payment will be decreased by 70 cents, up to $4 million.
- The operators of a student loan debt relief scheme will pay at least $835,000 to settle FTC allegations that they charged illegal upfront fees and made false promises to consumers struggling with student loan debt. The settlement resolves FTC litigation against Carey G. Howe, Anna C. Howe, Shunmin Hsu, Ruddy Palacios, and Oliver Pomazi, five individuals who were named as defendants in the agency's 2019 complaint alleging that Arete and the other defendants pretended to be affiliated with the Department of Education and deceptively promised loan forgiveness, consolidation, and repayment programs to reduce or eliminate monthly payments and principal balances. Litigation continues against other defendants in the case, Jay Singh and the two corporate defendants he controls, as well as against seven defaulted corporate defendants.
- The FTC is sending 70,142 checks and PayPal payments totaling $3,864,824 to consumers nationwide who bought Quell, a wearable device that supposedly would treat chronic pain throughout the body when placed below the knee. According to the FTC, Massachusetts-based NeuroMetrix, Inc. and its CEO, Shai Gozani, sold Quell, a transcutaneous electrical nerve stimulation device, to consumers, touting it as "clinically proven" and "FDA cleared" for widespread chronic pain relief. The FTC says that the defendants lack scientific evidence to support widespread chronic pain-relief claims, and their claims about clinical proof and the scope of FDA clearance for this use are false. Under an order settling the FTC's charges, NeuroMetrix, Inc. and its CEO agreed to pay $4 million to the Commission for refunds and to stop making the allegedly deceptive claims.
- The Third Circuit reversed a court-ordered $448 million penalty against pharmaceutical companies AbbVie Inc., Abbot Laboratories, Unimed Pharmaceuticals LLC, and Besins Healthcare for allegedly delaying generic forms of the testosterone treatment AndroGel through sham litigation, citing the U.S. Supreme Court's decision in Liu v. SEC while concluding the FTC lacked disgorgement authority.
Securities and Exchange Commission:
- The SEC announced charges against Unikrn Inc., an operator of an online eSports gaming and gambling platform headquartered in Seattle, Washington, for conducting an unregistered initial coin offering of digital asset securities. Unikrn agreed to settle the charges by paying a $6.1 million penalty, substantially all of the company's assets, to be distributed to investors. The SEC's order finds that Unikrn offered and sold UnikoinGold tokens as investment contracts, which constituted securities, yet failed to register the offering or qualify for an exemption.
- The SEC charged Park View School, Inc., a state-funded, nonprofit charter school operator based in Prescott Valley, Arizona, and its former President, Debra Kay Slagle, with misleading investors in an April 2016 municipal bond offering. Park View allegedly provided investors in $7.6 million in bonds an offering document that included misleading statements about profit and expense projections and showed that Park View would be profitable in the upcoming fiscal year and able to repay the bondholders. Park View also allegedly withheld information showing significant operating losses.
- The SEC filed an emergency action against Adam Rogas, the former CEO of Las-Vegas-based NS8 Inc., which purports to provide fraud detection and prevention software to e-commerce merchants, seeking an asset freeze and charging Rogas with defrauding investors by falsely claiming millions of dollars in revenue. According to the SEC's complaint, Rogas allegedly sent the falsified bank statements and revenue figures on a monthly basis to NS8's finance department, which used them to prepare NS8's financial statements. The SEC alleges that as a result of Rogas's fraud, NS8 raised approximately $123 million in 2019 and 2020, and that Rogas ultimately pocketed at least $17.5 million of investor funds.
In other federal news:
- The Federal Communications Commission (FCC) adopted new rules to further promote implementation of the STIR/SHAKEN caller ID authentication framework to protect consumers against malicious caller ID spoofing. The new rules make clear the obligations and deadlines for voice service providers regarding caller ID authentication, advance the use of caller ID authentication across the nation's phone networks, and prohibit voice service providers from adding any line item charges to the bills of consumer or small business customer subscribers for caller ID authentication technology. The new rules require voice service providers to either upgrade their non-IP (Internet Protocol) networks to IP and implement STIR/SHAKEN, or work to develop a non-IP caller ID authentication solution. They also require intermediate providers to implement STIR/SHAKEN so that IP calls retain caller ID authentication throughout the call path. The new rules also prohibit carriers from adding a line item to the bills of consumers and small businesses for caller ID authentication technology. The rules grant limited extensions to small voice providers provided they implement robocall mitigation programs.
- The FCC issued a declaratory ruling clarifying its position that only the broadcasters of unsolicited faxes are liable for violation of the Telephone Consumer Protection Act, not the advertisers themselves.
- The U.S. Department of Health and Human Services and the U.S. Food and Drug Administration (FDA) took actions to help provide safe, effective, and more affordable drugs to American patients as part of the Safe Importation Action Plan, fulfilling the aspect of the July executive order on drug pricing to complete the rulemaking to allow states to import certain prescription drugs from Canada. The final rule implements a provision of federal law that allows FDA-authorized programs to import certain prescription drugs from Canada under specific conditions that ensure the importation poses no additional risk to the public's health and safety while achieving a significant reduction in the cost of covered products to the American consumer. The final guidance for industry describes procedures drug manufacturers can follow to facilitate importation of prescription drugs, including biological products, that are FDA-approved, manufactured abroad, authorized for sale in any foreign country, and originally intended for sale in that foreign country.
- The FDA announced that Fortune Food Product, Inc., an Illinois-based processor of sprouts and soy products, has agreed to stop production until it, among other things, undertakes remedial action and complies with the Federal Food, Drug, and Cosmetic Act. The action marks the first consent decree of permanent injunction against a firm or grower for violating public safety standards under the Produce Safety Rule enacted under the Food Safety Modernization Act of 2011. The Produce Safety Rule requires, among other things, that covered sprout operations take measures to prevent the introduction of dangerous microbes, including Listeria, into seeds or beans used for sprouting and take corrective actions when needed. The action follows several inspections showing regulatory violations and a July, 2018 FDA warning letter outlining food safety violations.
- Connecticut list brokerage firm Macromark Inc. pleaded guilty to knowingly providing lists of potential victims to fraudulent mass-mailing schemes, USDOJ announced. The fraudulent schemes tricked consumers, many of them seniors, into paying fees for falsely promised cash prizes and purportedly personalized "psychic" services. Thousands of consumers lost more than $9.5 million to the schemes. An officer of the firm, Steven Keats, was found guilty in July 2018. Another officer, Norman Newman, is awaiting trial.
- A North Carolina man pleaded guilty to charges that his company, Garland F. Fulcher Seafood Company Inc., at his direction, falsely labeled hundreds of thousands of dollars' worth of foreign crabmeat as "Product of USA," USDOJ announced. According to information in the public record, Jeffrey A. Styron pleaded guilty to substituting South American and Asian crabmeat for domestic blue crab from 2014-2017 due to a shortfall in the supply of domestic blue crab. Styron is scheduled to be sentenced on December 7, 2020.
- Two U.S. and two Canadian individuals were charged by USDOJ for their roles in operating mass-mailing fraud schemes which allegedly defrauded thousands of elderly and vulnerable victims collectively of tens of millions of dollars in victim losses. New York residents Sean Novis and Gary Denkberg and, separately, Canadian nationals Alex Quaglia and Patrick Fraser were charged with running fraudulent mass-mailing schemes that tricked thousands of consumers into paying fees for falsely promised prizes for over a decade during the 2000's and mid 2010's.
- The U.S. Department of the Treasury released the National Strategy 2020 on behalf of the Financial Literacy and Education Commission. The National Strategy details the federal government's financial literacy priorities and underscores its plan to collaborate with state, local, and tribal governments and the private sector to strengthen financial capability for all Americans. The National Strategy highlights evidence-based best practices and other methods to improve consumers' knowledge and skills.
Attorney General Consumer Protection News and Other Items of Interest
Led by Iowa Attorney General Tom Miller, 48 attorneys general and the CFPB announced $330 million in debt relief for former ITT Tech students. The settlement is with PEAKS Trust, which operated a private loan program for the benefit of the bankrupt for-profit school along with affiliated Deutsche Bank entities. ITT filed bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT's access to federal student aid.
Led by California Attorney General Xavier Becerra and Washington Attorney General Bob Ferguson, a coalition of 49 attorneys general announced a $60 million settlement with surgical mesh manufacturer C.R. Bard, Inc. (Bard) and its parent company, Becton, Dickinson and Company. The settlement resolves allegations that Bard deceptively marketed transvaginal surgical mesh devices to patients. The attorneys general allege that thousands of women implanted with surgical mesh have suffered serious complications resulting from these devices. Although use of surgical mesh involves the risk of serious complications and is not proven to be any more effective than traditional tissue repair, millions of women were implanted with the device. The attorneys general also allege Bard misled women about serious and life-altering risks of surgical mesh devices, such as chronic pain, scarring and shrinking of body tissue, painful sexual relations, and recurring infections, among other complications. Bard stopped selling and promoting its surgical mesh products in the United States by December 31, 2016. The settlement with Bard follows Attorney General Becerra securing a $344 million Superior Court judgment in January against Johnson & Johnson for false and deceptive marketing of its pelvic mesh products for women.
Led by Connecticut Attorney General William Tong, a coalition of 44 attorneys general obtained a $39.5 million multistate settlement with Anthem stemming from the massive 2014 data breach that involved the personal information of 78.8 million Americans. Through the settlement, Anthem has also agreed to a series of data security and good governance provisions designed to strengthen its practices going forward. In addition to this settlement, Anthem previously entered into a class action settlement that established a $115 million settlement fund for affected customers. The deadline to submit claims for that fund has passed.
Led by Minnesota Attorney General Keith Ellison, New York Attorney General Letitia James, and North Carolina Attorney General Josh Stein, a coalition of 24 states wrote a letter to the Office of the Comptroller of the Currency (OCC) objecting to a proposed federal rule that would authorize lenders operating under agreements with National Banks to charge high interest rates on loans and essentially preempt state usury laws in so called "rent-a-bank" schemes, which, according to the letter, would upend longstanding law applying such laws to the "true lender." OCC and industry supporters hailed the rule as a "Madden Fix" related to the Second Circuit Court of Appeals' Madden v. Midland Funding decision. The Madden court stated that extending National Bank Act preemption to non-banks would "create an end-run around usury laws for non-national bank entities that are not acting on behalf of a national bank."
Led by Illinois Attorney General Kwame Raoul, a bipartisan coalition of 31 states filed an amicus brief in the U.S. Court of Appeals for the 6th Circuit to support states' authority to enforce price gouging regulations to protect consumers during emergencies, such as the COVID-19 pandemic. Raoul and the coalition are urging the appellate court to overturn a district court's decision in a lawsuit filed by the Online Merchants Guild against the Commonwealth of Kentucky. The court entered a preliminary injunction preventing Kentucky Attorney General Danial Cameron from enforcing price gouging regulations against retailers selling products on Amazon, stating that the law, as applied, violated the dormant commerce clause of the U.S. Constitution.
Arkansas Attorney General Leslie Rutledge announced a lawsuit against a medical center for fraudulently targeting Arkansan Latino communities with expensive COVID-19 treatments. The state's complaint alleges that Arkansas Regenerative Medical Center LTD (ARMC), the firm's medical director Sarah Knife Chief, M.D., and chiropractor Serge Francois, D.C. promoted to Northwest Arkansas's Latino community expensive stem cell and ozone therapies, costing upwards of $3,000, to combat COVID-19. ARMC advertised on its website and Facebook page stem cell treatments and ozone therapy, claiming that they were "very effective" against COVID-19 and would allow employees to return to work more quickly. Consumers were charged upwards of $3,000 for the useless treatments.
California Attorney General Xavier Becerra, the California Air Resources Board (CARB), the U.S. Environmental Protection Agency, and U.S. DOJ announced a $1.5 billion settlement against Daimler AG, Mercedes-Benz USA, LLC, and their affiliates and subsidiaries (collectively, "Daimler") for undisclosed emission control devices on its diesel Sprinter vans and passenger vehicles from model years 2009 through 2016. Under the proposed settlement, Daimler will recall and repair the emissions systems in Mercedes-Benz diesel vehicles sold in the United States between 2009 and 2016 and pay $875 million in civil penalties and roughly $70.3 million in other penalties. The company will also extend the warranty period for certain parts in the repaired vehicles, perform projects to mitigate excess ozone-creating nitrogen oxides emitted from the vehicles, and implement new internal audit procedures designed to prevent future emissions cheating. In addition, California will receive about $300 million, including $17.5 million to the California Department of Justice for future environmental enforcement, monitoring, and investigation, as well as to support environmentally beneficial projects in California. Copies of the consent decree lodged with the court are available here. Further information about the settlement is available on EPA's website.
Colorado Attorney General Phil Weiser announced that a local lawn care company, Fit Turf, will pay $125,000 after enrolling consumers in automatically renewing services without their consent and calling thousands of numbers on the Colorado No-Call list. An investigation uncovered that Fit Turf used telemarketers to enroll thousands of Colorado consumers in lawn care services without disclosing that those services will automatically renew unless the consumer cancels them. The company also ignored the No Call list when, from 2015-2019, Fit Turf made calls to more than 132,000 phone numbers on the list.
Connecticut Attorney General William Tong is urging cable companies to reimburse customers for lost services during the widespread days-long power outages caused by Tropical Storm Isaias in August. The letter was sent to seven cable providers in Connecticut, following ongoing complaints from consumers that their cable providers are not reimbursing them for cable outages.
Florida Attorney General Ashley Moody issued a consumer alert that the deadline to claim restitution resulting from the Florida Attorney General's multimillion-dollar action to stop several tech support scams is fast approaching. The deadline to file a claim is Friday, Oct. 2. Thousands are eligible for restitution nationwide and consumers have already claimed hundreds of thousands of dollars. The claims process follows a massive tech support scam investigation by the Florida Attorney General's Office into the several companies. Banc of America Merchant Services, which provided payment processing for the accused companies entered into an agreement to provide a claims process to make $7,200,000 available for victims. For more information on how to submit a claim, visit FloridaAGReimbursement.com or call the toll free number 1(877) 315-6101.
Indiana Attorney General Curtis Hill sued an Indiana monument company accused by consumers of taking their money without providing gravestones they ordered. This civil action against the company, Greenfield Granite, seeks consumer restitution and costs under the Indiana Deceptive Consumer Sales Act. As of Sept. 15, 2020, the Greenfield Police Department had taken approximately 70 reports in which consumers reported that Greenfield Granite failed to properly fulfill orders.
Iowa Attorney General Tom Miller announced a partnership with social enterprise Summer to assist Iowa's student loan borrowers in securing relief in the face of the COVID-19 pandemic. Summer, a certified B Corp, gives student loan borrowers guidance to save on and simplify their student loan repayment. Summer's technology tools and team of student loan experts help borrowers find, compare, and enroll in loan assistance and forgiveness programs. Iowans can now access Summer's digital platform free of charge to receive customized loan savings recommendations at www.meetsummer.org/IA/.
Michigan Attorney General Dana Nessel finalized a settlement agreement requiring a major Texas-based Voice Over Internet Protocol (VoIP) service provider to implement strict, first-of-their-kind measures aimed at collaboratively stopping illegal robocalls. This settlement agreement with All Access Telecom Inc. requires the VoIP service provider to modify its business practices to specifically clamp down on illegal robocalls. The settlement agreement requires All Access to conduct "know-your-customer" reviews of all existing and prospective customers, including their business practices, industry ratings, regulatory filings, legal histories, network modifications, and even the legal history of the customer's ownership. The sentence also requires that they immediately terminate customers that are problematic, namely if they are located overseas, are tied to illegal robocalls traced by law enforcement, send robocalls without notice, send a certain percentage of call traffic lasting less than 6 seconds, are blocked by another carrier pursuant to FCC approval, and do not deploy caller-ID authentication technology.
Nebraska Attorney General Doug Peterson announced that his office has reached a settlement with Celebrity Homes, Inc. ("Celebrity Homes"), an Omaha homebuilder, to resolve allegations that the company used non-disparagement provisions in their sales contracts for custom homes in violation of the Nebraska Consumer Protection Act and the Consumer Review Fairness Act (CRFA). The CRFA is a federal statute which prohibits businesses from using form contract provisions to prohibit consumers from writing or posting negative reviews online or threatening the consumers with legal action if they do. Under the terms of the settlement, the company is required to notify customers whose contracts contained these illegal clauses that the provisions are void and cannot be enforced. Those customers can publish honest reviews on any social media or internet platform, even if their comments are negative. Finally, the company has agreed to pay $15,000 to the Attorney General's Office.
New Jersey Attorney General Gurbir S. Grewal announced actions against a dozen merchants for consumer protection violations related to COVID-19, with penalties totaling tens of thousands of dollars. Among those subject to enforcement actions are two North Jersey businesses that allegedly made false or unsubstantiated claims in the sale of COVID-19 antibody tests and a New Jersey business that was selling face masks at as much as six times the manufacturer's retail prices.
New Mexico Attorney General Hector Balderas, the New Mexico Identity Theft Coalition, and the Identity Theft Resource Center hosted a phone bank to assist victims of COVID-19-related scams and identity crime. The phone bank was held as part of a nationwide effort to help victims of COVID-19 scams and identity crime. Victims of COVID-19 scams or identity theft were encouraged to call in during the phone bank to receive resources and direct assistance.
New York Attorney General Letitia James filed a lawsuit to put an end to an allegedly flagrant debt collecting scheme based out of Buffalo, New York. The state obtained a temporary restraining order, halting the operation, and the corporate respondents' bank accounts were also frozen. Using a call spoofing service, the respondents allegedly disguised their phone numbers with contact information associated with the consumer's local county courthouse or sheriff's office. While impersonating these government officials, the debt collectors allegedly threatened consumers with pick-up orders, bench warrants, license suspensions, and other serious fraudulent threats. Attorney General James also announced that she has secured protections for thousands of student borrowers who defaulted on student loans and who were subject to misleading and unlawful actions by Transworld Systems, Inc. (Transworld), one of the nation's largest debt collectors. The agreement resolves an investigation of Transworld, the principal debt collector for the National Collegiate Student Loan Trusts, and allegations that Transworld violated multiple federal and state consumer protection laws by making false, misleading, and deceptive statements in National Collegiate Student Loan Trusts collection lawsuits and in communications with borrowers, and for filing these lawsuits beyond the applicable statute of limitations. Under the settlement agreement, Transworld has agreed to make significant changes to its debt collection practices and to pay $600,000, which will be disbursed as restitution to New York borrowers and/or penalties to the state. General James also announced a settlement with Dunkin' Brands, Inc. (Dunkin') resolving a privacy lawsuit over the company's failure to respond to successful cyberattacks that compromised tens of thousands of customers' online accounts. The settlement requires the company to notify customers impacted in the attacks, reset those customers' passwords, and provide refunds for unauthorized use of customers' stored value cards. Dunkin' will also be required to maintain safeguards to protect against similar attacks in the future, follow incident response procedures when an attack occurs, and pay $650,000 in penalties and costs to the state of New York.
North Carolina Attorney General Josh Stein reached a $120,000 consent judgment with a North Carolina real estate business resolving allegations the company bilked homeowners and tenants. Stein's office sued J.S. Enterprises of Swansboro LLC and James Morris Stallings III alleging violations of North Carolina's Unfair and Deceptive Trade Practices Act related to home buying schemes. The judgment requires the defendants to pay $110,000 to eligible affected consumers and $10,000 in recoveries for the state of North Carolina, and also requires them to stop using illegal purchase, sale, and lease agreements and land trust schemes in their real estate property transactions. The state's lawsuit alleged the defendants bought properties from distressed homeowners with promises to deliver cash in hand or pay all closing costs, amongst other false advertising. In reality, the defendants gave promissory notes with small monthly payments and zero percent interest over a long period instead of the cash at the time of sale. In other instances, the defendants acquired consumers' homes without paying off their existing mortgages, and without making consumers aware that they would remain obligated to pay the underlying mortgages. Once they bought the properties, the defendants then leased them to consumers in financial hardship or with poor credit histories using lease agreements that violated North Carolina's landlord-tenant law. These agreements led consumers to believe that they would ultimately own the home and asked them to make and pay for repairs to the properties they were leasing.
Ohio Attorney General Dave Yost announced settlements in a groundbreaking lawsuit against allegedly illegal robocall service Globex and related companies and individuals. The lawsuit against ten defendants, six companies and four individuals, alleges the defendants deceived Ohio consumers with illegal robocalls offering bogus credit card interest rate reduction services. Ohio partnered with the FTC in suing the defendants in 2019. In the settlement, Globex Telecom, Inc. and associates agreed to pay Ohio and the FTC a total of $2.1 million. Attorney General Yost and the FTC alleged in the lawsuit that Globex knowingly facilitated illegal robocalls for Educare Centre Services, Inc., which defrauded consumers in Ohio and other parts of the country out of millions of dollars with a debt relief scheme. This groundbreaking lawsuit was the first of its kind in the country to go after a Voice over Internet Protocol (VoIP) service provider that was knowingly facilitating the scheme.
Oregon Attorney General Ellen Rosenblum issued a scam Alert about how to avoid disaster scams in the wake of devastating wildfires affecting many western communities.
Pennsylvania Attorney General Josh Shapiro announced that his office has filed a lawsuit against Gillece Services, it's owner Thomas Gillece, and two former service and field managers for allegedly misleading Pennsylvania consumers into paying for unnecessary home improvement work, including the unnecessary replacement of sewer pipes. The office seeks the return of lost money to Pennsylvania consumers, civil penalties, and to ban Gillece from the plumbing industry. The lawsuit alleges that Gillece's technicians routinely fail to make a good faith effort to unclog consumers' sewer pipes with a sewer snake before recommending costly excavation work to clear the clogs.
Vermont Attorney General T.J. Donovan has prevailed on a motion to dismiss filed by Clearview AI in the lawsuit to stop the facial recognition company from collecting and selling images of Vermonters. The court's ruling means the case, which was filed in April, may now move forward. In its motion, Clearview failed to persuade the court that it has a First Amendment right to engage in its facial recognition surveillance practices and "near absolute immunity" from suit under Section 230 of the Communications Decency Act. Clearview also argued that the state's claims were void for vagueness under the U.S. Constitution and that the state lacked standing to bring the suit. The court rejected all of these arguments. In its decision, the Court struck two of the State's claims: one of the six deception claims and a claim that Clearview violated the state's Data Broker law.
Virginia Attorney General Mark R. Herring announced that his office has reached a settlement with a Nashville-based open-end credit plan internet lender, Shiva Finance, LLC d/b/a Advance Financial 24/7 ("Advance Financial"). Advance Financial has agreed, as part of the settlement, to provide $1.2 million in total relief to approximately 1,500 consumers. Advance Financial offers short-term loans with periodic interest rates as high as 360% to Virginians in the form of open-end cash advances. During the period from October 2017 through January 20, 2020, Advance Financial's contract with Virginia consumers included a clause which required all parties to either participate in binding arbitration or file suit in a small claims court to resolve all disputes. Advance Financial then proceeded to file nearly 2,000 collection cases in general district courts throughout the Commonwealth with an attorney, rather than in small claims courts. The settlement resolves allegations that this conduct violated the Virginia Consumer Protection Act by misrepresenting the forum through which Advance Financial would resolve consumer disputes.
Washington Attorney General Bob Ferguson filed a consumer protection lawsuit against e-cigarette company JUUL Labs, Inc. and PAX Labs, Inc. Ferguson's lawsuit asserts JUUL violated the state Consumer Protection Act by designing and marketing its products to appeal to underage consumers and deceiving consumers about the addictiveness of its product. The complaint alleges JUUL's conduct fueled a pervasive and staggering rise in e-cigarette use and nicotine addiction among youth. In addition, Ferguson's lawsuit asserts that JUUL failed to meet Washington's tobacco vapor product licensing requirements and that from August 2016 until April 2018, every sale of a JUUL device in Washington was unlawful.
Verizon Wireless and AT&T Mobility have agreed to pay a combined $127 million to settle whistleblower lawsuits claiming they overcharged California, Nevada and other state government customers for wireless services. Verizon will pay $76 million and AT&T will pay $51 million to settle claims that, for more than a decade, they knowingly ignored cost-saving requirements included in multibillion-dollar contracts offering wireless services to state and local government users in California, Nevada, and other states. Sprint and T-Mobile previously reached settlements totaling $11.7 million. Combined, the four major telecom providers will pay $138.7 million to settle allegations in the lawsuits. The carriers denied liability.
In price gouging news, a New York Supreme Court Judge has dismissed the New York Attorney General's price gouging lawsuit against Quality King Distributors in a one-page ruling. Although the court found that price increases "were seemingly priced to the extreme . . . pricing overall did not indicate any use of unfair leverage, an abuse of bargaining power or unconscionable means; nor did the pricing represent a gross disparity between the price of the goods and their value measured by the price at which they were sold immediately prior to March 7, 2020." The court also found that the wholesale distributor's costs had increased. In August, in a one page order a Texas court dismissed the Texas Attorney General's price gouging lawsuit against Cal-Maine, the nations largest wholesale distributor of eggs. The order did not explain the court's reasoning and has been appealed by the Texas Attorney General.
- A sprawling fundraising operation that allegedly scammed consumers out of millions of dollars will be permanently banned from charitable fundraising along with its owner and others involved in its operation as a result of a lawsuit brought by the FTC and Attorneys General of New York, Virginia, Minnesota, and New Jersey. The operation is made up of multiple companies all under the control of owner Mark Gelvan, along with his associates Thomas Berkenbush, William English, and Damian Muziani. The complaint filed by the FTC and the states alleges that the defendants served as the primary fundraisers for a number of sham charities that were the subject of numerous law enforcement actions. The complaint alleges that the sham charities claimed to use consumers' donations to help homeless veterans, retired and disabled law enforcement officers, breast cancer survivors, and others in need. In fact, these organizations spent almost none of the donations on the promised activities.
- Minnesota Attorney General Keith Ellison secured repayment and a permanent charitable-sector ban against a charity promoting accessible housing. Under a settlement agreement, Blake Huffman, the former president of the charity Journey Home Minnesota ("JHM"), must pay back $60,000 in funds that he misused from the charity. The settlement also permanently bans Huffman from operating a charity, having access to charitable assets, and soliciting charitable contributions in Minnesota. In addition, JHM must liquidate its assets, distribute them to a Minnesota-based veterans charity, and dissolve its operations.
Veterans and Military News
The Justice Department announced that it has reached an agreement with the City of San Antonio, Texas to resolve allegations that the city violated the Servicemembers Civil Relief Act (SCRA) by auctioning or otherwise disposing of cars owned by protected servicemembers without first obtaining court orders. Under the agreement, San Antonio must pay $47,000 to compensate two servicemembers who complained that the city unlawfully auctioned off their cars while they were in military service. The city must also establish a $150,000 settlement fund to compensate other servicemembers whose SCRA rights may have been violated and pay a $62,029 civil penalty to the U.S. Treasury. The department's enforcement of the SCRA is conducted by the Civil Rights Division's Housing and Civil Enforcement Section and U.S. Attorneys Offices throughout the country. Since 2011, the Department has obtained over $474 million in monetary relief for over 120,000 servicemembers through its enforcement of the SCRA. For more information about the Department's SCRA enforcement efforts, visit servicemembers.gov.
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 email@example.com or call 202-326-6044.