Nebraska AG Peterson and Department of Banking Announce Settlement with Loan Companies for Alleged Deceptive Practices

Recently, Nebraska AG Doug Peterson, in conjunction with the Director of the Department of Banking and Finance, Mark Quandahl, announced a settlement with four loan companies and their owners for alleged violations of three state laws, the Consumer Protection Act (CPA), the Uniform Deceptive Trade Practices (UDTPA), and the Nebraska Installment Loan Act (NILA). According to AG Peterson, three of the companies “managed and facilitated almost every aspect” of the fourth company’s business. The complaint alleged that the fourth company acted as an unlicensed lender to originate usury-based internet loans to Nebraska consumers by way of electronic transfer. In violation of the CPA and the UDTPA, AG Peterson alleged that the fourth company’s loan agreements deceptively stated that it was a “tribal entity subject to the exclusive jurisdiction of Cheyenne River Sioux Tribe, Cheyenne River Indian Reservation” when it was not; rather, according to the complaint, it is a limited liability company whose profits were distributed directly its owner. Pursuant to the Department of Banking and Finance’s authority to enforce the NILA, Director Quandahl alleged that the defendants “charged loan origination fees in excess of the state’s maximum origination fee permitted for installment loan licensees and non-licensed lenders.” Under the terms of the settlement, the companies and their owners will pay $150,000 to the state and establish a restitution fund of $950,000 to repay, pro rata, excess interest and fees paid by Nebraska consumers. In addition, more than $557,000 in loans taken out by Nebraska consumers and held by one of the four companies will be forgiven, and credit reporting agencies will be notified to remove the history of the loans. The companies and their owners are prohibited from originating loans in Nebraska until they comply with state law.


Supreme Court: Special Counsel Using State AG Letterhead Not in Violation of FDCPA

On May 16, the Supreme Court reversed the Sixth Circuit’s ruling that special counsel using Ohio AG letterhead to collect debts owed to the state is false or misleading in violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §1692. Sheriff v. Gillie, No. 15-338 (U.S. May 16, 2016). In a unanimous 8-0 opinion delivered by Justice Ginsburg, the Court opined that its “conclusion is bolstered by the character of the relationship between special counsel and the [AG].” Specifically, the Court determined that, because special counsel acts on behalf of the AG to provide legal services to state clients, a “debtor’s impression that a letter from special counsel is a letter from the [AG’s] Office is scarcely inaccurate.” The Court further opined that, being required by the AG’s office to send debt collection communications, special counsel “create no false impression in doing just what they have been instructed to do.” The Court rejects the Sixth Circuit’s argument that consumers may have concern regarding the letters’ authenticity: “[t]o the extent that consumers may be concerned that the letters are a ‘scam,’ the solution is for special counsel to say more, not less, about their role as agents of the [AG]. Special counsel’s use of the [AG’s] letterhead, furthermore, encourages consumers to use official channels to ensure the legitimacy of the letters, assuaging the very concern the Sixth Circuit identified.” The Court concludes by emphasizing the AG’s authority, as the top law enforcement official, to take punitive action against consumers who owe debts, commenting that §1692e of the FDCPA prohibits collectors from deceiving or misleading consumers, but “it does not protect consumers from fearing the actual consequences of their debts.” Read more…


AG Schneiderman Reports Increase in Data Breach Notifications; Unveils Electronic Submission Form

On May 4, New York AG Schneiderman announced that, from January 1, 2016 through May 2, 2016, his office received 459 data breach notices – more than a 40% increase compared to the 327 notices received during the same time last year. Due to the increased volume of data breach notices and in an effort to provide greater efficiency in the reporting process, AG Schneiderman announced an electronic breach reporting form. The new form allows companies to submit data breach notices via web submission: “[c]ompanies may now notify the Attorney General’s Office of a data breach via a web submission form in order to expedite and streamline the process. Previously, and consistent with most other state attorneys general offices, companies were required to mail, fax, or email a separate data breach form.” AG Schneiderman’s office expects to receive “well over” 1,000 data breach notices in 2016.


New York AG Schneiderman Opines on Legality of Electronic Signatures for the Purposes of Online Voter Registration

This week, New York AG Schneiderman issued an opinion regarding the legality of online voter registration, including the use of electronically affixed handwritten signatures. The opinion is in response to a February 8 letter from Suffolk County seeking the AG’s opinion as to “whether State law permits Suffolk County to implement online voter registration through the use of an electronic signature or whether the signature requirements of N.Y. Election Law § 5-210(5)(d)(xi) require signatures to be handwritten or ‘affixed by hand.’” AG Schneiderman opined that because Election Law § 5-210(5)(d)(xi) does not specifically require a signature written with ink on a voter registration application, the law does not preclude an electronically affixed signature. In accordance with the Election Law, AG Schneiderman commented that the electronic signature must be of a “quality and likeness to a signature written with ink,” and that an applicant completing an online registration application must either (i) print and mail the application to the local board of elections, or have a third party print and mail the application; or (ii) personally appear at the local board of elections.


New York AG Takes Action Against Credit Card Processing Company for Alleged Deceptive Practices

Recently, New York AG Schneiderman filed a lawsuit against a New York-based credit card processing company, several affiliated companies, and select owners and officers of the companies over alleged fraudulent and deceptive practices. According to the AG’s office, the companies “trapped small businesses into never-ending lease agreements for over-priced credit card processing equipment and abused the judicial process by suing to collect on [those] leases in the Civil Court of the City of New York, regardless of whether the debt is fraudulent, the claim is timely or legitimate efforts to terminate the lease were ignored.” The AG investigation found that the companies targeted small business owners through its deceptive practices, which included (i) inducing individuals to sign lease agreements without realizing they were doing so; (ii) falsely representing the lease as “free” or a way to save money; and (iii) falsely informing consumers that he or she could cancel the lease at any time. In addition, the AG investigation also revealed that in many instances consumers alleged that the signatures on the leases were not theirs or that material terms were added to the lease without their knowledge. AG Schneiderman also alleges that the companies harassed consumers with threatening phone calls and letters, asserting that consumers would be sued if they did not make the payments on their leases. According to AG Schneiderman, between 2010 and 2015, the companies filed over 30,000 collection actions in the New York City Civil Court (NYC Civil Court), and obtained more than 19,000 default judgments against individual consumers in NYC Civil Court since 2010. The AG’s lawsuit against the companies seeks to, among other things, (i) vacate default judgments against consumers; (ii) permanently prohibit the companies and its owners and officers “from continuing their deceptive business practices”; and (iii) pay restitution to consumers.

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POSTED IN: Consumer Finance, State Issues