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North Carolina AG Announces Settlement with Student Loan Debt Relief Company
On March 27, the North Carolina Department of Justice announced it had settled a lawsuit against a student loan debt relief company for allegedly charging upfront fees while failing to perform promised debt relief services. NC Attorney General Josh Stein stated that the terms of the consent order will provide restitution of more than $375,000 to 377 affected borrowers and will further prohibit the company from engaging in similar conduct in the future. The consent order is not presently available to the public.
SEC Announces Investigation Concerning Alleged $6.7 Million Michigan Real Estate Scheme
On March 30, the SEC announced charges against a Michigan pastor, his company, and business associate (Defendants) for allegedly cheating church members, retirees, and laid-off autoworkers out of approximately $6.7 million by convincing them to invest in a “successful” real estate scheme. The complaint alleges the pastor presented the investment opportunity at churches nationwide and through media outlets using “faith-based rhetoric” and guaranteed high returns. The Defendants—who were never registered to sell investments—raised the money from more than 80 investors who were told their money would be kept in qualified IRAs and could be rolled over tax-free. However, investors stopped receiving agreed-upon interest payments, and to date, Defendants owe more than 40 Michigan-based investors $2 million in past due promissory notes and also allegedly have obligations to investors outside the State of Michigan. The complaint claims violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, and seeks disgorgement of ill-gotten gains plus interest, penalties, and permanent injunctions.
FTC Releases 2016 Annual Highlights
On March 28, the FTC released its 2016 Annual Highlights Report, which outlines the agency’s ongoing efforts over the past year to protect consumers and promote competition. Acting Chairman Maureen K. Olhausen stated, “2016 was a historic year for the FTC. We obtained almost $12 billion in redress for consumers, and took action in more than a dozen merger cases to preserve competition.” Key highlights in four sections—enforcement, policy, education, and stats and data—covered multiple sectors such as health care, technology, and other consumer products and services. Regarding enforcement highlights in 2016, the report covered a range of administrative and court actions related to, among other things, privacy and data security issues, particularly in the mobile marketplace, as well as the Commission’s largest false advertising settlement in its history with a global auto manufacturer. The policy section of the report highlights eight amicus briefs filed on topics such as reverse payments and the FDCPA, as well as its efforts to provide guidance and recommendations on topics such as sharing economy platforms, big data, and fraud. The education section covers topics such as consumer guidance on fraud, scams, and deceptive business practices prevention, and notes that it published almost 200 blog posts for consumers. Notably, according to the stats and data section of the report, the FTC received more than three million consumer complaints in 2016, consisting of 858,090 debt collection complaints, 503,967 “other” complaints, and 406,578 imposter scam complaints.
FDIC Releases List of Enforcement Actions Taken Against Banks and Individuals in February 2017
On March 31, the FDIC released its list of administrative enforcement actions taken against banks and individuals in February. Several of the consent agreements included on the list seek civil money penalties for, among other things, violations of the Flood Disaster Protection Act of 1973 and its flood insurance requirements. Other violations cited in the enforcement actions relate to unsafe or unsound banking practices, breaches of fiduciary duty, and violations of the Bank Secrecy Act. There are no administrative hearings scheduled for April 2017. The FDIC database containing all of its enforcement decisions and orders may be accessed here.
OCC Announces February 2017 Enforcement Actions
On March 17, the Office of the Comptroller of the Currency (OCC) released a list of administrative enforcement actions taken against banks and bank officers in February. Several of the reported actions included payment of civil money penalties (CMPs) for, among other things, violations of the Federal Trade Commission Act, Bank Secrecy Act (BSA) deficiencies, and unsafe or unsound practices by institution-affiliated parties for breaches of fiduciary duty. Among the actions containing CMPs a Tennessee bank fined $1 million for deficiencies related to billing practices with regard to an identity protection product consumers paid for but never received, and a California bank fined $1 million for continuous non-compliance with a 2010 Consent Order for BSA deficiencies including “inadequate risk assessment process[es], inadequate system of internal controls, inadequate suspicious activity monitoring and reporting process[es], inadequate customer due diligence and enhanced due diligence programs, ” as well as having a “BSA/AML independent audit [that] failed to identify . . . significant internal control weaknesses.”
CFPB Fines National Credit Reporting Company $3 Million for Alleged Deceptive Practices
On March 23, the CFPB ordered a nationwide credit reporting company and its subsidiaries to pay $3 million for allegedly deceiving consumers about how credit scores they marketed and sold were used by lenders. The consent order claims the company developed its own proprietary credit scoring model (PLUS Score), which was used to generate credit scores from information in a consumer’s credit file. The company then allegedly deceptively marketed and sold the “educational” credit score as the same type of score lenders use to make credit decisions, when in fact lenders did not use the scores. Moreover, there were instances of significant discrepancies between the “educational” credit scores that the company sold to consumers and the actual credit scores used by the lenders. The Bureau also alleges the company—up until March 2014—violated the Fair Credit Reporting Act (FCRA) by requiring consumers to view advertisements before they could access their credit reports. Pursuant to the consent order, the company must pay a $3 million civil money penalty, truthfully inform consumers about the nature of the credit scores it sells, and develop and implement an effective compliance management system to ensure its advertising practices comply with federal consumer laws. As previously reported in InfoBytes, earlier this year the CFPB issued consent orders against two different nationwide credit reporting companies for similar allegations.
FDIC Announces 22 January 2017 Enforcement Actions
On February 24, the FDIC released its list of administrative enforcement actions taken against banks and individuals in January. Several of the consent agreements included on the list seek the payment of civil money penalties for, among other things, violations of the Flood Disaster Protection Act of 1973 and its flood insurance requirements. Other violations cited in the enforcement actions relate to unsafe or unsound banking practices and breaches of fiduciary duty. The FDIC database containing all of its enforcement decisions and orders may be accessed here.
CFPB Temporarily Enjoined from Naming Company Under Investigation
On February 17, U.S. District Judge Rudolph Contreras issued an Order granting in part a motion filed by a unnamed "John Doe" recipient of a CFPB civil investigative demand (CID) for an injunction preventing the Bureau from disclosing its identity pending its petition to the Court of Appeals for a stay of the CID. Specifically, Judge Contreras ordered that: “Defendants are ENJOINED, until March 3, 2017” from “publicly disclosing the identify of Plaintiff John Doe Company, by taking actions including, but not limited to, the public filing of either the civil investigative demand . . . or the Director’s Decision and Order [denying] Plaintiff’s Petition" to set aside the CID.
As previously covered by InfoBytes, the John Doe company filed an action against the CFPB back in January seeking to enjoin the Bureau from, among other things, disclosing the existence of an investigation and taking any action against the company unless and until the CFPB is constitutionally structured. The company argued, among other things, that the agency should not be able to identify it as the target of an investigation as publication of the company’s name would bring “irreparable harm” as it tries to defend itself against any enforcement action. Immediately following the District Court's ruling against the company, it lawyers filed a Notice of Appeal with the U.S. Court of Appeals for the D.C. Circuit to try to stop the agency from moving forward.
CFPB Files Suit Against Nation's Largest Student Loan Company
On January 18, the CFPB initiated an enforcement action against the nation’s largest student loan servicer based upon alleged violations of the CFPA, FCRA, and FDCPA. In a complaint filed with the Middle District of Pennsylvania, the Bureau charged that the student lender “systematically and illegally” created “obstacles to repayment” and “cheated” many borrowers out of their rights to lower repayments, causing them to pay much more than they had to for their loans. The CFPB “seeks to obtain permanent injunctive relief, restitution, refunds, damages, civil money penalties, and other relief.”
Later that day, the lender issued a statement categorically rejecting the CFPB's charges, explaining: “[T]he suit improperly seeks to impose penalties [] based on new servicing standards applied retroactively and applied only against one servicer. The regulator-asserted standards are inconsistent with Department of Education regulations, and will harm student loan borrowers, including through higher defaults.” The company also noted that “the timing of this lawsuit—midnight action filed on the eve of a new administration—reflects their political motivations.”
New Fed. R. Crim. P. 41(b) Takes Effect; Cyber Warrants Can Now Cross State Borders
A change to Rule 41(b) of the Federal Rules of Criminal Procedure took effect on December 1. Amended Rule 41(b) now allows courts to issue warrants for remote access to electronic data outside their jurisdiction if the location of the information has been “concealed through technological means” or when the data is in five or more districts. Thus, under the revised rule, a magistrate judge has the authority to issue a warrant outside of their district without specific knowledge of the location of the computers being searched. By contrast, warrant requests were previously limited to the search and seizure of property within the court’s own district.