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  • Additional defendants settle credit card laundering lawsuit

    Federal Issues

    On December 11, the FTC entered into a proposed settlement with an Arizona-based company and its officer (defendants) relating to an allegedly deceptive credit card telemarketing operation. As previously covered by InfoBytes, the FTC alleged that the defendants—as part of a larger group of 12 defendants comprised of an independent sales organization, sales agents, payment processors, and identified principals—violated the FTC Act and the Telemarketing Sales Rule by assisting a telemarketing company in masking its identity by processing the company’s credit card payments and laundering credit card transactions on behalf of multiple fictitious companies. The proposed settlement, among other things, prohibits the defendants from engaging in credit card laundering and bans them from telemarketing, processing payments, or acting as an independent sales organization or sales agent. The order also stipulates a judgment of $5.7 million, which will be suspended unless it is determined that the financial statements submitted by the defendants contain any inaccuracies.

    In March 2018, the FTC reached settlements with two of the other defendants (see InfoBytes coverage here). Litigation continues against the remaining defendants.

    Federal Issues FTC Settlement Anti-Money Laundering Credit Cards FTC Act Telemarketing Sales Rule Payment Processors

  • FTC reaches settlements with two student loan debt relief operators

    Lending

    On December 7, as part of Operation Game of Loans—a coordinated effort between the FTC and state law enforcement—the FTC announced settlements with operators of two student loan debt relief operations to resolve allegations that the defendants violated the FTC Act and the Telemarketing Sales Rule by, among others (i) charging consumers who purchased the debt relief services illegal upfront fees; and (ii) falsely promising to assist consumers in enrolling in government programs that would reduce or forgive their student loan debt.

    Under the terms of the settlement, the defendants are permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief product or service—or from assisting others in doing the same. Combined, the settlements total more than $36 million, though judgments have been partially suspended due to the defendants’ inability to pay.

    Lending FTC Student Lending Debt Relief Settlement FTC Act Telemarketing Sales Rule

  • 9th Circuit upholds $1.3 billion judgment for payday scheme

    Courts

    On December 3, the U.S. Court of Appeals for the 9th Circuit upheld a $1.3 billion judgment against defendants-appellants responsible for operating an allegedly deceptive payday lending scheme. As previously covered by InfoBytes, in October 2016, the FTC announced that the U.S. District Court for the District of Nevada ordered a Kansas-based operation and its owner to pay nearly $1.3 billion for allegedly violating Section 5(a) of the FTC Act by making false and misleading representations about loan costs and payment. The owner appealed to the 9th Circuit, arguing that the loan notes were “technically correct” because the fine print located under the TILA disclosure box contained all the legally required information. The appeals court disagreed. In affirming the district court’s judgment, the appeals court determined the loan note was still deceptive even though the fine print contained the relevant information about the loan’s automatic renewal terms, stating “[appellants’] argument wrongly assumes that non-deceptive business practices can somehow cure the deceptive nature of the Loan Note.” Moreover, the appeals court rejected the argument about technical correctness, citing the FTC Act’s “consumer-friendly standard” (which does not require technical accuracy) and noting that “consumers acting reasonably under the circumstances—here, by looking to the terms of the Loan Note to understand their obligations—likely could be deceived by the representations made there.” Among other things, the appeals court also rejected the appellant owner’s challenge to the $1.3 billion judgment (based on an argument that the lower court overestimated his “wrongful gain” and that the FTC Act only allows the court to issue injunctions), concluding that the owner failed to provide evidence contradicting the wrongful gain calculation and that a district court may grant any ancillary relief under the FTC Act, including restitution.

    Courts Ninth Circuit Appellate FTC Act Payday Lending TILA Disclosures FTC

  • FTC emphasizes need for privacy and data security legislation

    Privacy, Cyber Risk & Data Security

    On November 13, the FTC submitted comments in response to the Department of Commerce’s National Telecommunications and Information Administration (NTIA) request for input on developing the Administration’s approach to consumer data privacy protections. In its comment letter, the FTC noted that it supported a balanced approach to privacy, weighing the risks of data misuse with the benefits of data to innovation and competition, and reiterated its support for data privacy legislation. Specifically, the FTC renewed its call for Congressional action that clarifies the FTC’s authority and the rules relating to data security and breach notification. According to the FTC, any such legislation should balance “consumers’ legitimate concerns about the protections afforded to the collection, use, and sharing of their data with business’ need for clear rules of the road, consumers’ demand for data-driven products and services, and the importance of flexible frameworks that foster innovation.”

    The FTC emphasized it is “uniquely situated” to balance consumers’ interest in privacy, innovation, and competition and argued it should continue to be the primary enforcer of the laws related to “information flows in the marketplace,” whether it’s under the existing or new privacy framework. The FTC noted, however, that the existing framework places a number of limitations on its powers, including (i) its lack of authority over non-profits and common carriers; (ii) its inability to levy civil money penalties; and (iii) its lack of broad rulemaking authority under the APA for consumer protection issues such as privacy and data security.   

    Privacy/Cyber Risk & Data Security FTC Federal Legislation FTC Act

  • At FTC request, court halts alleged overseas real estate investment scheme

    Consumer Finance

    On November 8, the FTC announced that the U.S. District Court for the District of Maryland has granted a temporary restraining order against the operators of an international real estate investment development, which the FTC claims is the “largest overseas real estate investment scam [it] has ever targeted.” According to the FTC’s complaint, the defendants violated the FTC Act and the Telemarketing Sales Rule by advertising and selling parcels of land that were part of a luxury development in Belize through the use of deceptive tactics and claims.  The FTC contends that consumers who purchased lots in the development purchased the lots outright or made large down payments and sizeable monthly payments, and paid monthly homeowners association fees, and that defendants used the money received from these payments to fund their “high-end lifestyles,” rather than to invest in the development. In addition, the FTC asserts that, while the defendants falsely promised consumers that their lots would include luxury amenities, be completed soon, and result in property values that would “rapidly appreciate,” “consumers either have lost, or will lose, some or all of their investments.” The FTC’s press release also announces the filing of charges against a Belizean bank for allegedly assisting and facilitating the investment scam, as well as contempt motions against several of the individual defendants. The FTC is seeking information from affected consumers.

    Consumer Finance FTC FTC Act Telemarketing Sales Rule Courts

  • FTC, New York Attorney General sue New York debt collection operation

    Federal Issues

    On November 1, the FTC announced a joint action with the New York Attorney General against a New York-based debt collection company for allegedly violating the FTC Act, the FDCPA, and New York state law by using false or deceptive tactics to collect money from consumers, sometimes resulting in the consumer paying more than what they allegedly owed. According to the complaint, the company’s employees threatened consumers with arrest or lawsuits while falsely posing as law enforcement officials or attorneys. Additionally, the employees allegedly added “more pressure” to consumers by telling them they owed more than the company’s records indicated they did, using forms to show a higher balance than the actual client balance—a practice known as “overbiffing.” On October 25, the U.S. District Court for the Western District of New York granted a temporary restraining order, halting the company’s allegedly illegal activity and freezing the company’s assets. The complaint seeks a (i) permanent injunction; (ii) consumer redress; and (iii) civil money penalties under New York law.

    Interestingly, as covered by InfoBytes here, FTC Commissioner Rohit Chopra issued a concurring statement in another recent FTC action, suggesting the FTC should seek to partner with other enforcement agencies that have the authority to obtain monetary settlements from FTC targets. In this complaint, the New York Attorney General is seeking civil money penalties against the debt collectors under New York General Business Law § 350-d.

    Federal Issues State Issues Debt Collection FTC Act FDCPA Civil Money Penalties FTC State Attorney General

  • FTC settles with online student loan refinance lender for allegedly deceptive marketing

    Lending

    On October 29, the FTC announced a settlement with an online student loan refinance lender resolving allegations the lender violated the FTC Act by misrepresenting in television, print, and internet advertisements how much money student loan borrowers can save from refinancing their loans with the company. The complaint alleges that the lender inflated the average savings consumers have achieved refinancing through the lender, in some instances doubling the average savings by selectively excluding certain groups of consumers from the data. The complaint also alleges that in some instances, the lender’s webpage misrepresented instances where a loan option would result in the consumer paying more on a monthly basis or over the lifetime of the loan, simply stating the savings would be “0.00.” Although the lender did not admit or deny any of the allegations, it agreed to a consent order that requires it to cease the alleged misrepresentations and agree to certain compliance monitoring and recordkeeping requirements.

    Notably, Commissioner Rohit Chopra issued a concurring statement in this matter suggesting that in instances where the FTC is unable to obtain monetary remedies, it should seek to partner with other enforcement agencies that have the additional legal authority to obtain monetary settlements from the targets of the FTC enforcement action.

    Lending Student Lending FTC Enforcement FTC Act Settlement Consent Order

  • FTC approves final expanded settlement with global ride-sharing company over data breaches

    Privacy, Cyber Risk & Data Security

    On October 26, the FTC announced its final approval of an expanded settlement with a global ride-sharing company over allegations that the company violated the FTC Act by deceiving consumers regarding the company’s privacy and data practices. Specifically, the company allegedly failed to closely monitor and audit its employees’ internal access to consumer and driver data. Furthermore, the company represented to consumers and drivers that personal information stored in its databases were secure, but, according to the FTC, the company failed to implement reasonable measures to prevent unauthorized access to consumers and driver data maintained by the ride-sharing company’s third-party cloud service provider. In April, the FTC announced it would be expanding the original settlement from August 2017 (previously covered by InfoBytes here), which covered a 2014 data breach, because it was discovered the company failed to disclose a subsequent data breach that occurred in 2016 for more than a year, despite the on-going FTC investigation of the 2014 data breach.

    The expanded final settlement subjects the company to civil penalties if it fails to notify the FTC of future incidents involving unauthorized access to data. The settlement also, among other things, requires the company to implement a comprehensive privacy program, including biennial third-party privacy assessments for 20 years.

    Privacy/Cyber Risk & Data Security FTC Settlement Data Breach FTC Act Third-Party

  • FTC reaches settlements with student debt relief operators

    Consumer Finance

    On September 28, as part of Operation Game of Loans, a coordinated effort between the FTC and state law enforcement, the FTC announced settlements with several individuals and their associated companies (defendants), accused of violating the FTC Act and the Telemarketing Sales Rule when marketing and selling student debt relief services. According to the FTC, the defendants, among other claims: allegedly (i) misrepresented to consumers that they were affiliated with the Department of Education or a borrower’s loan servicer; (ii) claimed that consumers who paid an up-front fee—as much as $1,000 according to the FTC’s complaint—would qualify for or be approved to receive permanently reduced monthly payments or have their student loans forgiven or discharged; and (iii) engaged in deceptive advertising practices through social media, falsely claiming they could qualify, establish eligibility for, approve, or enroll consumers in loan forgiveness programs.

    Under the terms of the settlements, the defendants are permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief products or services—or from assisting others to do the same. The defendants also are prohibited from making misrepresentations related to financial products and services. Combined, the settlements total more than $19 million in monetary judgments, all of which have been partially suspended due to the defendants’ inability to pay the entire amount of their respective judgments. The more than $5 million in unsuspended amounts may be used for equitable relief, including consumer redress.

    Consumer Finance Student Lending Debt Relief FTC FTC Act Telemarketing Sales Rule

  • FTC announces settlements with website operators over the sale of fake documents allegedly used for fraud and identity theft

    Consumer Finance

    On September 18, the FTC announced three proposed settlements with the operators of websites who allegedly violated the FTC Act’s prohibition against unfair practices by selling fake financial documents used to facilitate identity theft and other frauds, including loan and tax fraud. As previously covered in InfoBytes, identity theft was the second largest category of consumer complaints reported in 2017 according to the FTC. The FTC brought charges against the first defendant, alleging the defendant engaged in the sale of fake pay stubs, bank statements, and profit-and-loss statements, as well as providing a product that allowed customers to edit existing (and authentic) bank statements. The second defendant’s charges include the alleged sale of fake pay stubs, auto insurance cards, and utility and cable bills, while the allegations against the third defendant also include the sale of fake tax forms, bank statements, and verifications of employment. While the defendants’ websites claimed that the fake documents were sold for “‘novelty’ and ‘entertainment’ purposes,” the FTC asserts that the defendants “failed to clearly and prominently mark such documents as being for such purposes and did not state on the documents themselves that they were fake.”

    Under the terms of the proposed settlement agreements (see here, here, and here), monetary judgments are imposed against the defendants, who also are permanently prohibited from advertising, marketing, or selling similar fake documents.

    Consumer Finance FTC Identity Theft Fraud Consumer Complaints Settlement FTC Act

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