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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.
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.
State-Chartered Bank Settles with New York DFS for Alleged Violations of Banking Law
On October 28, the New York DFS resolved an enforcement action with a New York State-charted bank for alleged violations of state banking law. The DFS alleged that the bank hired a former New York Federal Reserve Bank examiner and permitted him to work on matters for an entity that the employee had examined while at the New York Fed, in violation of a notice of post-employment restrictions from the New York Fed. The DFS also alleged that the employee obtained confidential regulatory or supervisory information from a now former New York Fed employee and distributed the information to a Managing Director at the bank for the purpose of advising the entity. In addition to the bank’s alleged failure to screen the employee from working on matters related to the entity he had examined, the DFS’s order alleges that the bank failed to “provide training to personnel regarding what constituted confidential supervisory information and how it should be safeguarded.” Under the settlement terms, the bank will (i) pay a civil money penalty of $50 million to the DFS; (ii) reform its policies and procedures to ensure the proper handling of confidential supervisory information and the monitoring of assignments of former government employees; and (iii) not re-hire the bank employee and Managing Director, who had been terminated as result of the matter.
CFPB Enforcement Action Targets Background Check Company's Screening Practices
On October 29, the CFPB announced a consent order with a national employment background screening provider and its affiliate for alleged violations of the FCRA. According to the CFPB, the company and its affiliate failed to (i) use reasonable procedures to assure maximum possible accuracy of the information in reports that they provided to employers; (ii) take appropriate measures to ensure that non-reportable information, such as civil suits and civil judgments older than seven years, was not included in reports; and (iii) comply with the requirement to maintain “strict procedures” to ensure complete and up to date information in reports or notify consumers when the reported information was likely to have an adverse effect on their ability to obtain employment. Under the terms of the consent order, the company and its affiliate are required to provide $10.5 million in relief to consumers and pay a $2.5 million civil money penalty. In addition, the company and its affiliate must revise their compliance procedures and hire an independent consultant to assess their policies, procedures, staffing levels, and systems.
CFPB Orders Auto Finance Company to Pay Over Three Million for Alleged Unfair Debt Collection Practices
On October 28, the CFPB filed an administrative order against an Ohio-based auto lender specializing in extending credit to servicemembers. The CFPB alleged that the company violated the CFPA by engaging in unfair, abusive, and deceptive debt collection practices, including: (i) contacting and threatening to contact servicemembers’ commanding officers to inform them of delinquencies and alleged military violations requiring discipline; (ii) exaggerating the potential disciplinary actions, such as demotion, loss of promotion, and discharge, that servicemembers may face if they failed to make payments; (iii) representing that the company could commence an involuntary allotment or wage garnishment without obtaining a court judgment; and (iv) threatening legal action when the company did not intend to take legal action at the time. Among other things, the consent order requires that the company: (i) refund or credit over $2 million to consumers; and (ii) pay a $1 million civil money penalty.
Multiple Agencies Take Action Against Paris-Based Investment Bank for Sanctions Violations
On October 20, the DOJ, OFAC, the NYDFS, the Manhattan District Attorney’s Office, and the Federal Reserve simultaneously announced that a Paris-based investment bank would pay a total of more than $787 million to settle multiple alleged violations of U.S. sanctions regulations. The OFAC settlement resolves allegations that the investment bank and certain predecessor banks, between August 6, 2003 and September 16, 2008, processed 4,055 transactions – for a total of approximately $337,043,846 – to or through U.S. financial institutions that involved countries and/or persons subject to the sanctions regulations administered by OFAC. The investment bank settled with OFAC for more than $329,500,000, an amount that reflects the agency’s consideration of the following aggravating factors: (i) the investment bank had indications that its actions had the potential to constitute violations of the U.S. law before the earliest date of the apparent violations; (ii) several managers of the investment bank were aware of the conduct that led to the violations; (iii) the investment bank’s conduct resulted in significant harm to various sanctions programs OFAC oversees and their associated policy objectives; (iv) the investment bank’s size and sophistication, along with its global presence; and (v) the investment bank’s failure to maintain proper controls to prevent the violations from occurring and otherwise maintain an adequate compliance program.
In addition to OFAC’s settlement, parallel actions against the bank resulted in the investment bank agreeing to pay (i) $385 million to the NYDFS; (ii) $90.3 million to the Federal Reserve; (iii) $156 million to the Manhattan District Attorney’s Office; and (iv) $156 million to the U.S. Attorney’s Office for the District of Columbia.
FTC Announces Final Consent Orders Against Auto Dealers for Alleged Deceptive Advertising
On October 20, the FTC announced that, following a public comment period, it approved final consent orders against two Las Vegas auto dealers for allegedly engaging in deceptive advertising practices. In June, the FTC filed two administrative complaints against the auto dealers for (i) misrepresenting the purchase price or leasing offers of vehicles; and (ii) failing to disclose key information in its advertisements, including if a down payment was required at the time of purchase. The final consent orders were unanimously approved in a 5-0 vote by the Commission and prohibit the dealers from (i) engaging in further action that results in violations of the Consumer Leasing Act and the Truth in Lending Act; (ii) misrepresenting the cost of financing or leasing a vehicle; and (iii) stating the down payment amount or percentage without also disclosing repayment terms and the annual percentage rate.
DOJ Disables Malware Designed for Bank-Theft; Unseals Indictment Against Botnet Administrator
On October 13, the DOJ unsealed an indictment against a Moldovan citizen for his alleged involvement in a criminal conspiracy to steal confidential financial information by distributing malware software through phishing emails. According to the indictment, the Defendant and his co-conspirators infected computers with malware designed to circumvent anti-virus protections and steal confidential personal and financial information from victims. The confidential information, such as online banking credentials, was used to “falsely represent to banks that the defendant and co-conspirators were the victims or employees of the victims with authority to access the victims’ bank accounts.” The investigation found that an estimated $10 million loss in the U.S. alone can be attributed to the Defendant’s scheme.
Georgia Resident Pleads Guilty to Charges of Operating Unlicensed Money Transmitting Business
On October 13, the DOJ announced that a Columbus, Georgia resident pleaded guilty to one count of operating an unlicensed money transmitting business. According to the DOJ, between February 2013 and March 2014, the individual unlawfully owned, operated, and managed multiple money transmitting companies throughout the Columbus area, offering check-cashing services. The individual allegedly knew that he was required to register his company with FinCEN and with the state of Georgia, but failed to do so. Scheduled to face sentencing in January 2016, the individual faces a statutory maximum sentencing of five years and has agreed to a forfeiture order of more than $1,300,000.
Bristol-Myers Squibb Pays $14 Million to SEC to Resolve China FCPA Offenses
On October 5, the SEC announced a settlement with Bristol-Myers Squibb to resolve allegations that the pharmaceutical company’s Chinese joint venture, BMS China, gave cash, jewelry, and other benefits to health care providers in order to boost prescription sales at state-owned or controlled hospitals. The SEC proceeded via an administrative cease and desist order. The SEC’s order found that the company violated the internal controls and books and records provisions of the FCPA. Bristol-Myers consented to the SEC’s order without admitting or denying the findings, and agreed to disgorge profits of $11.4 million plus $500,000 in pre-judgment interest and pay a civil penalty of $2.75 million. Bristol-Myers also agreed to report to the SEC for two years regarding the status of its efforts to implement anti-corruption compliance controls.
The SEC’s order states that Bristol-Myers failed to investigate red flags and claims by terminated BMS China employees that raised the possibility that sales personnel were making improper payments. The order also states that Bristol-Myers was too slow to fill gaps in its internal controls regarding interactions with health care providers.