Virginia AG Herring Announces Settlement with Banks Over Alleged Mortgage-Backed Securities Fraud

On January 22, Virginia State AG Mark Herring announced a settlement with eleven banks over their alleged misrepresentation of residential mortgage-backed securities to the Commonwealth of Virginia and the Virginia Retirement System. Virginia recovered more than $63 million collectively from the banks involved, making it the “largest non-healthcare-related recovery ever obtained in a suit alleging violations of the Virginia Fraud Against Taxpayers Act,” and, according to AG Herring, “one of the largest of its kind in the nation.” As part of the settlement, the Commonwealth dismissed the claims against the defendants with prejudice and the defendants did not admit liability.

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Massachusetts AG Healey Expands Abandoned Housing Initiative

On January 25, Massachusetts AG Maura Healey announced that she was expanding her Abandoned Housing Initiative (AHI) in response to an increasing number of cities and towns seeking assistance to revitalize their neighborhoods. Under the AHI, the AG’s office seeks to have delinquent owners bring their distressed and abandoned residential properties into code compliance. If the owner refuses, a court-approved receiver completes repairs on the property and receives compensation, utilizing funds from the nationwide state-federal settlement over unlawful foreclosures, once the property is sold. According to Helen Zucco, Executive Director at Chelsea Restoration Corporation, the program “gives banks an incentive to approve construction loans, allows funds to be loaned to receivers at very low interest, and creates a streamlined process for receivers to obtain the funds they need to achieve their important role in [the] process.”

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New York AG Schneiderman Takes Action Against Auto Dealers for Deceptive Practices

On January 20, New York AG Schneiderman announced a lawsuit against several auto dealerships located in Queens, New York, alleging that the dealerships used deceptive sales tactics to sell add-on products and services, including credit repair and identity theft protection services. According to the lawsuit, the dealerships charged “consumers for services while concealing such charges from the consumers, or [misrepresented] that the services were free,” collecting more than $1 million from consumers between January 2013 and November 2014 for the identity theft and credit repair services alone. The lawsuit further alleges that consumers did not receive the services for which they were charged, including VIN etching and key replacement services. AG Schneiderman alleges these products and services were “bundled into the vehicle sales price and not separately itemized,” ultimately inflating the stated price of the car on the purchase and lease documents. The lawsuit seeks a court order that would (i) prohibit the dealerships from engaging in deceptive practices; and (ii) order the dealerships to refund “all illegally obtained overcharges” back to consumers. Read more…

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FTC and Florida AG Take Action Against Payment Processing Operation

On January 8, the FTC and Florida Attorney General Pam Bondi announced an amended complaint against a California-based processing sales organization, its three executives, and three telemarketing company owners (collectively “the defendants”) for alleged violations of the (i) Telemarketing and Consumer Fraud and Abuse Protection Act; (ii) the FTC Act; (iii) the FTC’s Telemarking Sales Rule; and (iv) the Florida Deceptive and Unfair Trade Practices Act. According to the complaint, the defendants operated a nation-wide debt relief scam by cold calling consumers and making false promises that they could “reduce consumers’ interest rates on their credit cards, save consumers thousands of dollars in a short time period, and refund consumers’ money if the promised savings were not realized.” The FTC and AG Bondi allege that, from at least November 2012 to October 2014, the defendants solicited at least 26 “‘straw men’” to act as signatories on “shell businesses and dummy merchant accounts” that were used to process consumer credit card payments. The FTC is seeking injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, the disgorgement or ill-gotten monies, and other equitable relief; Florida AG Bondi is seeking injunctive relief, restitution, costs and attorneys’ fees, as well as other equitable relief.

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FTC Announces New Enforcement Actions Under the Operation Collection Protection Initiative

On January 7, the FTC announced four separate actions under its Operation Collection Protection initiative against collectors allegedly engaging in abusive and deceptive debt collection practices. It also announced that other federal and state law enforcement officials have taken 12 more actions as part of the initiative. The FTC’s actions targeted the following practices: (i) impersonating investigators, law enforcement agencies, or process servers; (ii) threatening consumers with arrest, lawsuits, or wage garnishment for nonpayment; (iii) failing to inform consumers of the amount of debt and the creditor’s name, as well as their right to dispute the alleged debt, as required by the FDCPA; and (iv) collecting on debts that consumers did not owe. The four actions, each with a separate set of defendants, include the following:

This brings the Operation Collection Protection initiative to a total of 130 actions with more than 70 law enforcement agencies participating in the last year.

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New York AG Announces Settlement Payments to Consumers Affected by Alleged Predatory Lending Scheme

On December 22, New York AG Schneiderman announced that more than 3,000 consumers received partial compensation from funds stemming from a global settlement negotiated by AG Schneiderman and the CFPB. In July 2014, the CFPB and 13 state AGs announced a consent order with a military consumer lender requiring it to provide $92 million in debt relief to approximately 17,000 U.S. servicemembers and other consumers affected by the company’s alleged predatory lending scheme. At the time of the order, the company was in Chapter 7 bankruptcy and the redress requirement was suspended until it complied with the debt-relief provisions of the consent order. The recent redress payment exceeds $3.7 million and was issued to 82 victims in New York.

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Massachusetts AG Takes Action Against Debt Collection Law Firm

On December 21, Massachusetts AG Maura Healey filed a lawsuit against a Massachusetts-based debt collection law firm and its two owners for allegedly violating consumer protection laws by suing consumers for debts that were inaccurate or for debts they did not owe. The AG claims that, since 2011, the law firm: (i) pursued consumers who had exempt income, serving some of them with civil arrest warrants; (ii) demanded payments on old debts without having meaningful proof that the consumer owed the debt or that the debt amount was accurate; (iii) sued consumers without meaningful attorney involvement in the lawsuits; (iv) used sworn statements by debt buyers in collection lawsuits, even though it knew the affidavits were often generated without meaningful documentation or knowledge of the debt; (v) demanded payment of debts that may not have been within the statute of limitations for bringing a lawsuit; and (vi) continued to demand payments on alleged debts even after the cases were dismissed in court for lack of proof. The AG’s suit seeks injunctive relief, restitution to consumers, and civil penalties.

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New York Attorney General Announces Joint Initiative to Protect Consumers from Foreclosure Rescue Scams

On December 7, New York Attorney General Eric Schneiderman announced a joint initiative with three New York media associations to curtail unlawful advertisements for foreclosure rescue scams. The three media associations sent letters to their members requesting that each member participate in the joint initiative and encouraged community media outlets “to review ads placed by foreclosure rescue companies to ensure that they comply with state disclosure laws.” Noting that scammed homeowners have frequently reported to the Attorney General’s office and local housing counseling partners that they were lured by ads placed in local media outlets, Schneiderman emphasized that foreclosure rescue ads often violate state and federal laws that “require individuals who advertise foreclosure prevention or loan modification services to include specific disclosures in their advertisements.”

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Massachusetts AG Announces Settlements with Student Debt Relief Companies; Reveals Initiative to Aid Student Borrowers

On November 24, Massachusetts AG Maura Healey announced settlements with two student debt relief companies over allegations of charging consumers upfront fees prior to delivering the services offered. According to the AG’s Office, at least 200 students were affected by the companies’ deceptive practices, which included misleading consumers to believe that the companies were affiliated with the government or had special connections with the Department of Education and, therefore, could assist borrowers lower their monthly loan payments. To resolve the AG’s allegations, the companies will pay $56,000 and $40,000, respectively and agree to no longer provide or advertise services in Massachusetts.

Concurrent with the settlement announcements, the AG’s Office revealed an initiative designed to assist borrowers repay their loans. Working with trained attorneys in the Insurance and Financial Services Division, the new Student Loan Assistance Unit will provide borrowers with access to a dedicated hotline and mediation program. The program will review current student loan and payment situations to help borrowers (i) get out of default or delinquency; (ii) apply for various income-driven repayment plans offered by the federal government; and (iii) advocate for complete discharges of the loans in appropriate circumstances.

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State AGs Urge Card Companies to Advance Consumer Protection by Implementing Chip and PIN Technology

On November 16, nine state attorneys general sent a letter urging leading card brands to expedite the implementation of chip and PIN technology in the United States. The letter summarizes research connected to recent data breaches, stating “individuals whose credit or debit cards were breached in the past year were nearly three times more likely to be an identity fraud victim.” Addressing concern that PIN technology would be burdensome or confusing to consumers, the AGs maintain that many consumers are accustomed to financial transactions that rely on PIN technology, such as transactions involving debit cards, and point to a November 2014 poll that indicated cardholders were supportive of chip and PIN technology. The AGs emphasize that PIN technology is “nothing new” and is considered the “gold standard” for payment card security, noting that countries around the world have seen a dramatic decrease in fraud since implementing the technology. Finally, while the letter stresses that chip and PIN technology would better protect both consumers and businesses from data breaches, it does not suggest that the technology be legally mandated at the federal or state level: “[T]his letter calls upon you as good corporate citizens to voluntarily expedite the implementation of existing technology that offers the most substantial security benefits, and to continue to adapt and improve security as quickly as possible as technology advances.”

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Massachusetts AG Settles with Auto Lender Over Alleged “Excessive” Interest Rate Charges

On November 5, Massachusetts AG Maura Healey announced a settlement with a national auto lender to resolve allegations that the lender charged excessive interest rates on subprime auto loans. The company agreed to provide over $5 million – approximately $11,000 per consumer – in relief to those affected by its alleged practice of charging consumers excessive interest rates as a result of including fees from an add-on GAP insurance product. Under the terms of the assurance and discontinuance, the company will (i) eliminate the alleged excessive interest on certain loans as a result of the GAP fee; and (ii) forgive outstanding interest on loans. In addition, the company must pay $150,000 to Massachusetts and perform supervised audits of its existing loan portfolio to ensure that no additional consumers were overcharged because of GAP fees.

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FTC Partners with Federal, State, and Local Law Enforcement Agencies to Announce Nationwide “Crackdown” on Abusive Debt Collection

On November 4, the FTC announced the first coordinated federal, state, and local initiative to combat alleged abusive and deceptive debt collection practices, Operation Collection Protection. This announcement included authorities listing 30 new actions, including five enforcement actions by the FTC. These actions targeted the following practices: (i) extracting payments from consumers by using intimidation and inaccurate representations; (ii) impersonating servers or attorneys and threatening arrest or litigation; and (iii) collecting on debts that never existed or had already been paid. These cases bring the total number of actions taken under the Operation Collection Protection initiative this year to 115 and the total number of participating law enforcement partners to 70.

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New York Attorney General Asks Banks to Examine Consumer-Screening Protocols

On October 27, New York Attorney General Eric Schneiderman issued a letter to nearly 100 banks operating in New York requesting that they examine and revise their screening policies for deposit accounts to expand access to mainstream banking to the unbanked and underbanked communities. The letter is part of a 2013 initiative that led to agreements with five banks regarding their screening of applicants seeking to open checking or savings accounts. According to the New York AG’s office, its prior examination revealed that “many financial institutions reject applicants for minor financial missteps, even when those missteps occurred years ago, involved de minimis amounts, or otherwise did not reflect a consumer’s ability to pay responsibly.” In the prior agreements, the five banks committed to taking a number of steps to reform deposit account screening criteria to expand access. The recent letter urges approximately 100 banks to examine their practices and adopt similar measures.

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State AGs File Amicus Brief With U.S. Supreme Court in FCRA Standing Case

On September 9, the Massachusetts Attorney General announced that her office, along with 12 other states and the District of Columbia, had filed with the U.S. Supreme Court an amicus brief supporting the plaintiff-respondent in Spokeo v. Robins. (Previous InfoBytes coverage can be seen here). The putative class-action plaintiff in that case claimed that an online data broker published inaccurate information about him in violation of the Fair Credit Reporting Act (FCRA). Reversing the district court, the U.S. Court of Appeals for the Ninth Circuit held that the violation of a statutory right created by FCRA was, in itself, a sufficient injury to confer standing to sue under Article III of the Constitution. In their multistate amicus brief, the AGs argued that the Supreme Court should affirm this holding. The states asserted that businesses frequently rely on consumer data profiles to make important credit, employment, housing, and insurance decisions. However, “the damage done by . . .  an inaccurate data profile is frequently impossible for the affected consumer to detect or quantify,” they argued.  Accordingly, “Congress rightly has authorized statutory damages for a willful violation of the FCRA.” The AGs asserted that, given their limited resources, statutory damage cases and private class actions are needed to supplement their own consumer protection actions.

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NAAG Urging Congress to Refrain From Passing Federal Data Breach Legislation Preempting State Authority

On July 7, as Congress considers proposed legislation on data breach notification and security, the National Association of Attorneys General (NAAG) sent a letter to leaders of both houses of Congress urging them to refrain from passing federal data breach and identity theft laws that would preempt states’ authority to enforce their own legislation, or pass legislation that exceeds federal standards. The 47 state attorneys general argued that “preempting state law would make consumers less protected than they are right now” because (i) states are closer to people affected consumers and can better respond to their concerns; (ii) states are “better equipped to quickly adjust to the challenges presented by a data-driven economy”; (iii) although helpful for a national data breach, a single federal agency would be unable to “respond effectively” to the large number of smaller data breaches that “have a large impact in a particular state or region”; and (iv) “with the increasing speed rate of technological developments,” states need the ability to surpass minimal and continually obsolete federal requirements.  Accordingly, the state attorneys general asserted it was “crucial” that they “maintain their enforcement authority under their states’ laws, and that any legislation be tailored to ensure complementary enforcement authority.”

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