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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.
Deputy Attorney General Yates Expands on DOJ's White-Collar Prosecution Policy
On November 16, the DOJ’s Deputy AG Sally Yates delivered remarks at the American Bankers Association and American Bar Association Money Laundering Enforcement Conference. Yates focused her remarks on recent revisions – originally outlined in a September 9 policy memorandum – to the United States Attorney’s Manual (USAM), as follows: (i) updating the corporate criminal cases section, specifically the “Principles of Federal Prosecution of Business Organizations” chapter, or the “Filip factors”; (ii) implementing an entirely new section to the civil cases chapter on enforcing claims against individuals in corporate matters; and (iii) updating its policy on parallel proceedings. First, the DOJ updated the Filip factors and the written guidance accompanying the factors to emphasize individual accountability in corporate cases and company cooperation in the DOJ’s investigation of individual wrongdoing. Yates highlighted the following policy change: “In the past, cooperation credit was a sliding scale of sorts and companies could still receive at least some credit for cooperation, even if they failed to fully disclose all facts about individuals. That’s changed now… providing complete information about individuals’ involvement in wrongdoing is a threshold hurdle that must be crossed before [the DOJ will] consider any cooperation credit.” Yates further noted that the new policy does not change the meaning of attorney-client privilege, but requires companies to turn over all relevant non-privileged information with the expectation that the companies respect the boundaries of attorney-client privilege. The USAM’s new chapter on civil cases mimics the individual accountability policies outlined in the Filip factors revisions, with the DOJ instructing its civil attorneys to abide by the same principles that guide criminal prosecutors’ efforts. Finally, revisions to the USAM’s parallel proceedings policy stress the importance of routine communication between criminal prosecutors and civil attorneys handling white collar matters to ensure a “resolution for both the individual and the corporation that is in the best interest of the public.”
DOJ Settles with For-Profit Education Company Over Alleged FCA Violations
On November 16, the DOJ announced a $95.5 million settlement with the country’s second-largest for-profit education company to resolve alleged federal and state violations of the False Claims Act (FCA). According to the DOJ’s complaint, the company’s admissions personnel received payment based on the number of students they enrolled, a violation of Title IV of the Higher Education Act’s (HEA) Incentive Compensation Ban (ICB) and the Regulatory Safe Harbor. The DOJ alleges that the company misrepresented its compliance with Title IV of the HEA to the Department of Education by certifying in Program Participation Agreements that it had not “paid to any persons or entities any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments, financial aid to students, or student retention.” The Department of Education calculated that, from July 1, 2003 through June 30, 2011, the company, having submitted “a variety of claims to the government for Title IV funding that it [knew] to be false based upon its non-compliance” with the ICB, received more than $11 billion in government funding. Under the terms of the settlement, the $95.5 million will be divided among the United States, the co-plaintiff states, and the whistleblowers and their counsel in the FCA cases filed separately in federal court in Pittsburgh, Pennsylvania and Nashville, Tennessee.
FTC Announces Agenda, Panel Topics for Debt Collection Dialogue
On November 12, the FTC announced the topics for its November 18 Debt Collection Dialogue in Atlanta, which will have two panels. The first panel, “State Regulation and Enforcement of Debt Collection,” will include representatives from state law enforcement agencies and industry. The second panel, “Federal Regulation and Enforcement of Debt Collection,” will feature representatives from the FTC, the CFPB, and the OCC. Panelists will discuss enforcement actions, consumer complaints, compliance issues, and industry best practices.
FinCEN Issues Final Civil Money Penalty Against U.S.-based Casino Over BSA Violations
On November 6, FinCEN issued a final assessment of civil money penalty against a Las Vegas-based casino and its branch offices for violating the BSA by failing to develop and implement a sufficient AML program and report suspicious activity in connection with its private gaming areas. As FinCEN previously announced on September 8, the terms of the assessment require the casino to pay an $8 million civil monetary penalty, hire an independent auditor to test its BSA/AML compliance program, and conduct a look-back review of all transactions through branch offices in Asia and California for recordkeeping and reporting compliance. FinCEN’s final assessment follows approval on October 19 of the settlement from the Bankruptcy Court for the Northern District of Illinois, as the casino remains a debtor in its bankruptcy case.
D.C. District Court Rules in Favor of Anonymity When Challenging a CFPB Civil Investigative Demand
Recently, the District Court for the District of Columbia issued an opinion recognizing a company’s right to maintain privacy when challenging a CFPB Civil Investigative Demand (CID). John Doe Company No. 1 v. CFPB, No. 1:15-cv-1177 (D.D.C. Oct. 16, 2015). After receiving a CID from the Bureau, the Plaintiffs requested that the CFPB allow counsel to be present at a voluntary investigative hearing; the Plaintiffs’ request and subsequent petition to the CFPB were denied. On July 22, 2015, Plaintiffs filed a complaint against the CFPB seeking a temporary restraining order (TRO) and a motion to seal the case, arguing that sealing was appropriate because (i) CFPB investigations are normally nonpublic; and (ii) sealing the case would protect Plaintiffs from the harm that an ongoing investigation would cause if it were disclosed to the public. The court applied a six-factor test established by the D.C. Circuit in United States v. Hubbard to determine whether the court records should be released, considering the need for public access to the documents, the strength of the property and privacy interests involved, the possibility of prejudice against the Plaintiffs, and other factors. In a “compromise [to maximize] the amount of information available to the public while still protecting the privacy interest Plaintiffs assert,” the court ruled to unseal the case but ordered Plaintiffs to file redacted versions of all files pertaining to the case, omitting the names of Plaintiffs and “any other information reasonably likely to lead to the disclosure of Plaintiffs’ identities.”
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.
Federal Reserve and New York DFS Announce $258 Million Penalty Against Global Bank
On November 4, the Federal Reserve and the New York DFS announced a combined $258 million penalty against a global bank for “violations in connection with transactions on behalf of countries and entities subject to U.S. sanctions.” According to the Fed’s cease and desist order, the bank failed to implement adequate risk management and compliance policies and procedures to “ensure that activities conducted at offices outside the United States complied with applicable OFAC Regulations and were timely reported in response to inquiries by the Federal Reserve Bank of New York.” Specifically, the Fed alleged that, from November 2001 to January 2006, foreign offices of the bank processed funds transfers with parties subject to OFAC Regulations through the bank’s New York-based subsidiary and other unaffiliated U.S. financial institutions without having the information necessary to determine that the transactions were consistent with U.S. law. The Fed’s order requires the bank to develop a compliance program that establishes (i) policies and procedures to ensure compliance with applicable OFAC regulations; (ii) an OFAC compliance reporting system; and (iii) requirements for employee training in OFAC-related issues. Under the terms of the DFS consent order, the bank agreed to hire an independent monitor to conduct a comprehensive review of its BSA/AML and OFAC sanctions compliance program, policies, and procedures.
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.
CFPB Files Suit Against Student Financial Aid Company
On October 29, the CFPB filed a complaint in the U.S. District Court for the Southern District of California against a California-based student financial aid operation and its owner (Defendants). According to the complaint, the Defendants represented that by paying a fee and sending in an application, consumers were applying for financial aid or the Defendants would apply for aid on behalf the students. The CFPB alleges, however, that consumers did not receive the promised services in exchange for their payment and that the Defendants collected more than $4 million from at least 76,000 consumers from January 2011 through the filing of the complaint. The CFPB alleges that the Defendants violated the CFPA by (i) deceiving students to pay for services that the Defendants did not actually provide; (ii) using letterhead that falsely indicated affiliation with the government and university financial aid offices; and (iii) pressuring students to enroll in the program and pay a fee by creating false deadlines and making deceptive statements about the consequences of missing the deadlines. The CFPB also alleges that the Defendants failed to provide privacy notices to consumers as required by Regulation P. The complaint seeks a civil money penalty, restitution to harmed consumers, and a prohibition against future violations.