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.
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.
Last week, Illinois AG Madigan announced a $41 million settlement with a New York-based investment bank for its alleged misconduct in connection with the marketing and selling of at risk residential mortgage-backed securities (RMBS) prior to the economic collapse in 2008. Specifically, according to an investigation led by AG Madigan’s office, the investment bank allegedly failed to disclose the actual risk of RMBS investments. Under the terms of the settlement, $16 million of the settlement funds will go toward consumer relief, with the remainder being distributed to the Teachers Retirement System of the State of Illinois, the State Universities Retirement System of Illinois, and to the Illinois State Board of Investment. Finally, the investment bank’s settlement with Illinois is part of a $5 billion national settlement led by the DOJ – as well as additional federal entities – and the state AGs of New York and California.
California AG Harris Announces Settlement with San Francisco-Based Bank Over Consumer Privacy Violations
On March 28, California AG Harris announced an $8.5 million settlement with a San Francisco-based bank for alleged violations of California consumer privacy laws. Specifically, AG Harris’s and five district attorneys’ investigation into the bank found that its employees failed to “timely and adequately disclose the recording of communications they had with members of the public” in violation of sections 632 and 632.7 of the California Penal Code. Without admitting liability, the bank agreed to (i) implement changes to its policies; (ii) comply fully with California’s laws concerning the recording of communications between the bank and California consumers, making a clear, conspicuous, and accurate disclosure (the Recorded Call Disclosure) at the beginning of any communication that is subject to recording; and (iii) implement an internal compliance program to “promote full compliance with the requirements of Penal Code sections 632.7 and 632, and the Recorded call disclosure.” Of the $8.5 million civil money penalty, $384,000 will be used to reimburse the prosecutors’ investigative costs, and $500,000 will be contributed to two California organization dedicated to advancing consumer protection and privacy rights.
Massachusetts AG Healey Continues Subprime Auto Loan Review; Lenders to Pay $7.4 Million in Consumer Relief
On March 16, Massachusetts AG Maura Healey announced that two national auto lenders, based in South Carolina and California respectively, agreed to collectively pay $7.4 million in relief to more than two thousand Massachusetts consumers to resolve allegations that they charged excessive interest rates on subprime auto loans. Under the terms of the assurance of discontinuance, the companies will eliminate the alleged excessive interest on certain loans resulting from add-on GAP insurance coverage, forgive outstanding interest on the loans, and reimburse consumers that already paid interest. The South Carolina-based lender will pay approximately $1.7 million in relief to consumers, while the California-based lender will pay the remaining $5.7 million. The settlement agreements further require the lenders to pay $225,000 for implementation of the agreements and to undergo additional auditing to determine if other loans are subject to refunds.
These settlements are part of AG Healey’s subprime loan review initiative. In November 2015, as part of this initiative, AG Healey announced a $5.4 million settlement with a national auto lender to resolve allegations similarly related to the practice of charging inflated interest rates because of add-on GAP insurance coverage.