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OFAC sanctions entities connected to Mexican cartel
On June 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14059, against three individuals and one entity connected to the Cartel de Jalisco Nueva Generación (CJNG). The CJNG is a Mexico-based organization responsible for a significant proportion of fentanyl and other drugs trafficked into the U.S. OFAC explained that two individuals are senior members of CJNG who engaged in trafficking firearms into the U.S. and fuel theft in Mexico. These sanctions follow similar actions taken earlier this year against other Mexican arms dealers working in collaboration with the CJNG (covered by InfoBytes here). Additionally, one individual and her currency exchange house (responsible for laundering over $6 million between 2020 and 2022) have been identified for laundering money on behalf of the CJNG, OFAC stated.
As a result of the sanctions, all property and interests in property of the designated persons located in the U.S. or held by U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons unless authorized by an OFAC-issued general or specific license, or an exemption. OFAC further warned that “U.S. persons may face civil or criminal penalties for violations of E.O. 14059 and the Kingpin Act.”
U.S., UK enter agreement in principle on data flow
On June 8, President Biden presented an agreement in principle to allow for the free flow of data between the U.S. and the UK. Announced as part of the administration’s “Atlantic Declaration for a Twenty-First Century U.S.-UK Economic Partnership,” the “data bridge” would facilitate data flows between the two countries while ensuring strong, effective privacy protections. “The trusted and secure flow of data across our borders is foundational to efforts to further innovation,” the White House said in the announcement. “We are working to finalize our respective assessments swiftly to implement this framework.” A joint statement issued by the UK Secretary of State for Science, Innovation, and Technology, the Rt. Hon. Chloe Smith MP, and U.S. Secretary of Commerce Gina M. Raimondo reiterated the two countries’ commitment to establishing “a data bridge that would restore a robust and reliable mechanism for UK-US data flows.” The data bridge would also help facilitate data transfers to U.S. organizations that rely on other data transfer mechanisms under UK law, the joint statement said.
Meanwhile, the U.S. and the EU are working to finalize the EU-US Data Privacy Framework (covered by InfoBytes here)—a replacement for the EU-U.S. Privacy Shield, which was annulled by the Court of Justice of the EU in 2020 after the court determined that data transferred under the EU-U.S. Privacy Shield would not be subject to the same level of protections prescribed by the EU’s General Data Protection Regulation.
New Jersey says realty company misled consumers about homeowner program
On June 6, the New Jersey attorney general and the New Jersey Division of Consumer Affairs filed an action against a realty company and its principals (collectively, “defendants”) for allegedly violating the state’s Consumer Fraud Act by making deceptive misrepresentations about its “Homeowner Benefit Program” (HBP). Concurrently, the New Jersey Real Estate Commission in the Department of Banking and Insurance filed an order to show cause alleging similar misconduct and taking action against the real estate licenses belonging to the company and certain related individuals.
According to the complaint, the defendants’ HBP was marketed to consumers as a low-risk opportunity to obtain quick, upfront cash between $300 and $5000 in exchange for giving defendants the right to act as their real estate agents if they sold their homes in the future. The HBP was not marketed as a loan and consumers were told they were not obligated to repay the defendants or to ever sell their home in the future. However, the press release alleged that the HBP functions as a high-interest mortgage loan giving the defendants the right to list the property for 40 years, and that the loan survives the homeowner’s death and levies a high early termination fee against the homeowners. The complaint further charged the defendants with failing to disclose the true nature of the HBP and failing to present the terms upfront. Moreover, in order to sell the HBP, the defendants allegedly placed unsolicited telephone calls to consumers despite not being licensed as a telemarketer in New Jersey. The complaint seeks an order requiring defendants to discharge all liens against homeowners, pay restitution and disgorgement, and pay civil penalties and attorneys’ fees and costs.
The order to show cause alleges violations of the state’s Real Estate License Act and requires defendants to show why their real estate licenses should not be suspended or revoked, as well as why fines or other sanctions, such as restitution, should not be imposed. Defendants have agreed to cease any attempt to engage New Jersey consumers in an HBP agreement pending resolution of the order to show cause.
District Court puts hold on CFPB’s $2.7 billion request in telemarketer case
On June 7, the U.S District Court for the District of Utah denied the CFPB’s motion for an award of monetary and injunctive relief, assessment of civil money penalties, and final judgment in an action taken against a group of Utah-based credit repair telemarketers and their affiliates (collectively, “defendants”). As previously covered by InfoBytes, the CFPB sued the defendants in 2019 for allegedly committing deceptive acts and practices in violation of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA) by charging consumers a fee for credit repair services when they signed up for the services through telemarketing, and then monthly thereafter. Certain defendants also allegedly made false and misleading claims guaranteeing, or ensuring the high-likelihood, that loans or rent-to-own housing offers would be available through affiliates after signing up for credit repair services when the products were not available. In March, the court granted the Bureau’s motion for partial summary judgment, ruling in favor of the agency on claims that the defendants violated the TSR’s prohibitions against charging upfront fees for credit repair services.
According to the June 7 order, the Bureau asked the court to award more than $2.7 billion in monetary relief, justifying the amount as “either a ‘refund of moneys’ or, alternatively, as legal (as opposed to equitable) ‘restitution.’” The Bureau also requested civil money penalties of $35.2 million and $17.6 million against different defendants, as well as extensive injunctive relief. Defendants argued that the maximum civil money penalty should fall within the range of $1 and $17.6 million as their alleged conduct “did not merit the maximum Tier 1 penalty,” and that, in any event, “the Tier 1 daily limit in the statute should apply to the aggregate penalty amount imposed on all [d]efendants collectively.” Defendants also asked the court to deny the requested injunction or clarify its requirements.
In denying the Bureau’s motion, the court wrote that “outstanding issues of fact” preclude it from entering the agency’s requested relief at this time. “Given the existence of these factual disputes, the court finds it will be most efficient to consolidate further discussions of relief with final pretrial proceedings,” the court said, denying the agency’s request without prejudice.
District Court: Plaintiff failed to prove damages in RESPA suit
The U.S. District Court for the Northern District of Texas recently granted summary judgment in favor of a defendant mortgage servicer related to alleged RESPA violations. Plaintiff obtained a refinanced loan that was serviced by the defendant. Plaintiff later sued the defendant after becoming frustrated by receiving repeated calls suggesting he refinance the loan. Once litigation commenced, the defendant began sending the monthly mortgage statements to plaintiff’s counsel. In 2021, plaintiff sent a request for information to the defendant seeking a range of monthly billing statements, which the defendant allegedly only partially provided. Plaintiff’s attorney further claimed to have received an escrow review statement from the defendant referencing an escrow surplus check that the plaintiff also claimed not to have received. The plaintiff claimed violation of RESPA by pointing to the defendant’s alleged failure to adequately respond to his requests for statements or to provide the surplus check. The defendant moved for summary judgment, arguing that neither the facts nor the law supported the plaintiff’s claims.
The plaintiff eventually conceded that there is no private right of action under RESPA’s escrow payment regulation and withdrew the claim. The court also took issue with his claim that the defendant failed to adequately respond to his request for information. Even if the defendant failed to adequately respond, the plaintiff could not plead or prove actual damages, the court said. “Neither party disputes that RESPA requires plaintiffs to plead and prove actual damages from an alleged violation,” the court wrote. “Instead, they focus their arguments on the sufficiency of the alleged damages. [Defendant] alleges that [plaintiff] provides no evidence to demonstrate how he suffered damages from the fact that it provided only three of the fourteen requested monthly statements.” Plaintiff tried to argue he was owed monetary damages due to being deprived of the escrow surplus funds and by being unfairly assessed convenience fees when making payments through the defendant’s online portal. He further claimed he suffered medical and mental anguish. However, the court concluded that evidence presented by the defendant refuted these claims (the convenience fee claim, the court said, could not be connected to the RESPA claim) and said plaintiff also failed to support his claims of medical and mental anguish. Further, plaintiff failed to present evidence supporting his claim for statutory damages, the court said, finding no genuine dispute of material fact in the record.
6th Circuit: Single RVM confers standing
The U.S. Court of Appeals for the Sixth Circuit recently held that receiving one ringless voicemail (RVM) was enough to confer standing upon a plaintiff under the TCPA. In that case, plaintiff asserted he received several RVMs to his cell phone but never consented to receiving the messages. He filed a putative class action suit for violations of the TCPA, alleging the defendant used an automated telephone dialing system (autodialer) to deliver multiple RVMs to his cell phone advertising its services. According to the plaintiff, the RVMs tied up his phone line, cost him money, and invaded his privacy. During discovery, an expert concluded that only one of the 11 voicemails plaintiff claimed to have received was from the defendant. The defendant moved to dismiss, arguing the plaintiff lacked standing because he did not suffer a concrete injury. The district court granted defendant’s motion, ruling that receiving a single RVM did not constitute a concrete harm sufficient for Article III standing, because, among other things, plaintiff could not recall what he was doing when the RVMs were sent, he was not charged for the RVM, the RVM did not tie up his phone line, and he spent a very small amount of time reviewing the message.
On appeal, the 6th Circuit noted that it had not previously considered whether receiving a single RVM for commercial purposes is sufficient to confer standing under the TCPA. To determine whether an intangible harm—such as receiving an unsolicited RVM—rises to the level of concrete injury, the appellate court reviewed U.S. Supreme Court rulings on standing. “[Plaintiff’s] receipt of an unsolicited RVM bears a close relationship to the kind of injury protected by the common law tort of intrusion upon seclusion; and his claimed harm directly correlates with the protections enshrined by Congress in the TCPA,” the 6th Circuit wrote, reversing and remanding the district court’s judgment and stating that “[plaintiff] suffered a concrete injury in fact sufficient for Article III standing purposes.”
CFPB highlights borrower risk as suspension on student loans nears end
On June 7, the CFPB released updated figures on risks facing student loan borrowers when payments paused during the pandemic are set to resume 60 days after June 30. Examining a deidentified sample of credit records, the Bureau studied roughly 32 million borrowers whose federal student loans will soon start accruing interest again. Findings found that:
- “More than one-in-thirteen student loan borrowers are currently behind on their other payment obligations. These delinquencies are higher than they were before the pandemic, despite a small seasonal decrease in the most recent data.”
- “About one-in-five student loan borrowers have risk factors that suggest they could struggle when scheduled payments resume.”
- “Median scheduled payments on other debt obligations have increased by 24 percent for student loan borrowers likely returning to repayment. In percentage terms, these increases are especially large for younger borrowers (252 percent, or $65 to $229).”
- “More than four-in-ten borrowers in [the] sample will return to repayment with a new student loan servicer.”
Bureau researchers found that the ebb and flow of the percent of delinquencies can be linked to the pause on student loan payments, pandemic stimulus payments, and other policy interventions. Attributing the slight decrease this March to an expected seasonal trend, the Bureau said the percentage is again rising as pandemic relief is expiring. This increase in delinquencies is not only specific to student loan borrowers, but also to all non-student loan borrowers, especially in the age range of 30-49, the agency reported. The research further found that “while borrowers in moderate- or higher-income Census tracts are less likely overall to have a non-student-loan delinquency than borrowers in lower-income Census tracts, these delinquencies grew faster for borrowers in higher-income areas over the last several months.” Without enrolling in income-driven repayment plans, the Bureau said it expects student loan borrowers with large balances relative to their income to have a higher risk of struggling to resume their payments.
The Bureau also explained that student loan borrowers’ non-student loan debts (which have increased by at least 10 percent) could also complicate the transition to repayment for millions of borrowers. Another concern flagged by the Bureau is that more than 44 percent of student loan borrowers will have to work with a new servicer as many servicers exited their contracts with the Department of Education over the past three years. The Bureau noted it plans to continue to monitor whether these risks materialize into financial distress.
OFAC sanctions individuals and entities connected to Russia’s corruption in Moldova
On June 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against seven leading members of a Russian intelligence-linked group and an entity connected to one of these individuals, for their role in “the destabilization campaign and continued malign influence campaigns in Moldova.” OFAC previously sanctioned individuals and entities endeavoring in similar efforts to undermine Moldova’s democracy, (covered by InfoBytes here). OFAC also mentioned in the announcement that the EU sanctioned Russian and Moldovan individuals for the same crimes. The designated individuals for these sanctions, OFAC said, are part of a global information operation connected to the Russian Federation—targeting not only Moldova, but other Balkan countries, the EU, UK, and U.S.—that provokes anti-government demonstrations designed to instill fear that undermines faith in democratic principles. Notably, the actors designated were part of a plot to “capitalize on these protests in Chisinau and seize the Moldovan Government House,” OFAC stated. As a result of these sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. Additionally, OFAC warned that financial institutions and other persons that engage in certain transactions or activities with the sanctioned persons may themselves be exposed to sanctions or be subject to an enforcement action.
OFAC sanctions Iranian tech company and employees
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13846, against an Iran-based technology company, two senior employees, and an affiliate based in the UAE. According to OFAC, the sanctioned persons and entities partook in facilitating the Iranian regime’s censorship of the internet in Iran. The technology company is a key partner in Iran’s development of the National Information Network, which, OFAC states is, “a countrywide intranet that is being used to disconnect the Iranian people from the global internet.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Additionally, OFAC warned that “persons that engage in certain transactions with the individuals and entities designated today may themselves be exposed to sanctions or subject to an enforcement action.” Also, OFAC noted that unless an exception applies, any foreign financial institution that knowingly takes part in a significant transaction or provides significant financial services for any of the persons designated could also be subject to U.S. sanctions.
In conjunction with the sanctions, OFAC issued several Iran-related general licenses (see General License P).
Texas enacts Money Services Modernization Act
On May 29, the Texas governor signed SB 895 (the “Act”) to enact the Money Services Modernization Act, the money transmitter model law created by industry and state experts. The goal of the Act is to create a set of consistent and coordinated standards relating to the regulation of money service businesses. Among other things, the Act outlines networked supervision criteria to allow the commissioner to participate in multistate supervisory processes coordinated through the Conference of State Bank Supervisors, the Money Transmitter Regulators Association, and other related affiliates and successors for all money services licenses that hold licenses in Texas and other states. To efficiently minimize regulatory burden, the commissioner may, among other things, coordinate and share information with other state and federal regulators, enter into information-sharing contracts or agreements, conduct joint examinations or investigations, and accept examination or investigation reports made by other states. Texas now joins several other states in adopting common licensing and regulatory standards to add efficiencies to the multi-state process (continuing InfoBytes coverage here).
Additionally, the commissioner has enforcement, examination, and supervision authority, may adopt implementing regulations, and may recover costs and fees associated with applications, examinations, investigations, and other related actions. The Act also includes additional consumer protection provisions. The Act includes in the definition of “money” or “monetary value” a stablecoin that “(i) is pegged to a sovereign currency; (ii) is fully backed by assets held in reserve; and (iii) grants a holder of the stablecoin the right to redeem the stablecoin for sovereign currency from the issuer.” Among the various exemptions, the Act provides for an exemption for an agent of the payee to collect and process a payment from a payor to the payee for goods or services, other than money transmission services. The amendments also outline numerous licensing application and renewal procedures including net worth, surety bond, and permissible investment requirements. The Act is effective September 1.