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Financial Services Law Insights and Observations


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  • FTC Announces Settlement with Operators of Tech Support Scam

    Privacy, Cyber Risk & Data Security

    On June 7, the FTC announced two settlements in a pending action brought against defendants who allegedly used pop-up internet ads to deceive consumers into believing their computers were infected and then sold unnecessary technical support services to fix the issues. Under the terms of the settlements (available here and here), the defendants (i) will relinquish assets combined at nearly $6 million to provide restitution to victims, and (ii) are banned from marketing, promoting, or misrepresenting technical support products or services in the future. The settlement is part of the FTC’s ongoing efforts to pursue tech support scams through its Operation Tech Trap initiative. (See previous InfoBytes coverage here.)

    Privacy/Cyber Risk & Data Security FTC Enforcement Settlement Securities Litigation

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  • Attorney General Sessions Issues Memorandum Ending Payments to Third-Party Organizations as Part of Future Settlement Agreements


    On June 7, Attorney General Jeff Sessions issued a memorandum entitled “Prohibition on Settlement Payments to Third Parties” instructing the Department of Justice (DOJ) to cease entering into settlement agreements that include payments to third-party organizations. Attorney General Sessions stated in a press release released by the DOJ, “[w]hen the federal government settles a case against a corporate wrongdoer, any settlement funds should go first to the victims and then to the American people—not to bankroll third-party special interest groups or the political friends of whoever is in power.”

    Summary of Memorandum. The memorandum, which became effective immediately and applies to future settlements, notes that previous settlement agreements involving the DOJ required “payments to various non-governmental, third-party organizations . . . [that] were neither victims nor parties to the lawsuits.” The memorandum now states that DOJ “attorneys may not enter into any agreement on behalf of the United States in settlement of federal claims or charges . . . that directs or provides for a payment or loan to any non-governmental person or entity that is not a party to the dispute.” The following are “limited” exceptions:

    • “the policy does not apply to an otherwise lawful payment or loan that provides restitution to a victim or that otherwise directly remedies the harm that is sought to be redressed, including, for example, harm to the environment or from official corruption”;
    • “the policy does not apply to payments for legal or other professional services rendered in connection with the case”; and
    • “the policy does not apply to payments expressly authorized by statute, including restitution and forfeiture.”

    The memorandum states that it applies to “all civil and criminal cases litigated under the direction of the Attorney General and includes civil settlement agreements, cy pres agreements or provisions, plea agreements, non-prosecution agreements, and deferred prosecution agreements.”

    Courts DOJ Securities SEC Disgorgement Appellate Litigation Settlement

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  • Senators Reintroduce Truth in Settlements Act to Increase Transparency of Agency Settlements

    Federal Issues

    On May 17, Senators Elizabeth Warren (D-Mass.) and James Lankford (R-Okla.) reintroduced a bipartisan bill entitled the Truth in Settlements Act of 2017 (S. 1145) to increase the transparency of major settlements reached by federal enforcement agencies. The bill—which was referred to the Committee on Homeland Security and Governmental Affairs—seeks to inform the public and hold federal regulators accountable for the true value of these settlements by requiring more accessible, detailed disclosures and “adequate information regarding the tax treatment of payments” made by companies and individuals under settlements with federal agencies. As previously covered in InfoBytes, the bill was first introduced in 2014. Sen. Warren commented that “more transparency means Congress, citizens and watchdog groups can better hold regulatory agencies accountable for enforcing laws so that everyone—even corporate CEOs—are equal under the law.” Similarly, Sen. Lankford remarked, “Taxpayers deserve an open and transparent government that is accountable to the American people.”

    Notably, the proposed bill would demand more specificity and transparency by requiring federal agencies to post online, in a searchable format, a list of each covered settlement agreement, criminal or civil, with payments totaling $1 million or more. Furthermore, agencies will be required, among other things, to justify confidentiality provisions and explain whether any portion of the settlement amount is potentially tax deductible. The Senators also released a fact sheet detailing past settlements by federal agencies that have allowed tax deductions, offset credits, or designated agreements as confidential.

    Federal Issues U.S. Senate Enforcement Federal Legislation Settlement

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  • Massachusetts AG Announces Settlement with Student Loan Debt Relief Company


    On April 28, Massachusetts Attorney General Maura Healey announced a settlement with a student loan debt relief company to resolve allegations that the company charged consumers illegal upfront fees to receive debt relief assistance and falsely led customers to believe it was affiliated with the federal government. According to the Attorney General’s office, this is the fourth in a series of enforcement actions brought against student loan debt relief companies in the state. Under the terms of the April settlement, the company is required to refund $6,500 to 18 affected borrowers, must agree to discontinue providing student loan services, and is prohibited from selling or disseminating Massachusetts customer information collected. Previously in 2015 and 2016, Healey announced settlements with three debt relief companies, bringing the overall recovery total to-date to more than $260,000. In November 2015, the state launched the Student Loan Assistance Unit to assist borrowers unable to repay their loans (see previous InfoBytes summary).

    Lending Debt Relief Student Lending State Attorney General Enforcement Settlement

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  • North Carolina AG Announces Settlement with Student Loan Debt Relief Company

    State Issues

    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.

    State Issues Student Lending State Attorney General Enforcement Settlement

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  • CFPB Imposes $8 Million Civil Penalty on For-Profit Company over Allegedly Deceptive Student Lending Practices

    Consumer Finance

    On September 12, the CFPB entered into a consent order with a San Diego-based for-profit education company to resolve allegations that its student lending practices were deceptive in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Starting in 2009, the company, which owns two for-profit colleges, has operated an in-house institutional-lending program (Program). The CFPB alleged that under the Program thousands of students borrowed in the aggregate approximately $23,544,184, of which the company collected more than $4,900,000 in principle and interest, with more than $18,000,000 in debt remaining outstanding. The company claimed that, through the Program, students could repay their loans with a minimum monthly payment of $25; the CFPB contends, however, that the company’s marketing practices were deceptive because the typical loan payments under the Program exceeded $25. Pursuant to the consent order, the company must (i) provide cancellation of $18.5 million in existing student debt and pay $5 million in redress directly to affected students; (ii) ensure that students utilize the CFPB’s newly released Electronic Financial Impact Platform, which ultimately generates a customized disclosure for students regarding, among other things, finance offerings available and estimated post-graduate expenses; (iii) stop making allegedly misleading statements regarding students’ monthly payment obligations; (iv) remove any negative information that was reported to consumer-reporting agencies; and (v) pay an $8 million civil penalty.

    CFPB Dodd-Frank Student Lending Enforcement Settlement

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  • FDIC and Federal Reserve Announce Settlement with Connecticut-Based Financial Aid Company Over Deceptive Practices

    Consumer Finance

    On December 23, the FDIC announced separate settlements with a Connecticut-based financial aid company and an affiliated Utah-based bank for alleged deceptive practices in violation of the FTC Act. Separately, the Federal Reserve announced a settlement solely with the Connecticut-based company for allegedly violating the FTC Act by employing deceptive practices. The company provides financial aid disbursements to higher education institutions for its students. According to the agencies, the company omitted material facts about its financial aid disbursement business, such as: (i) details about alternative disbursement methods available to students; (ii) a full and complete fee schedule; and (iii) information regarding the locations of fee-free ATMs. In addition, the agencies alleged that the company prominently displayed school logos, suggesting to students that schools had endorsed its refund product.

    The FDIC’s orders against the company and the bank require each to pay a civil money penalty of $2.23 million and $1.75 million, respectively. In addition, the company and the bank together will pay approximately $31 million in restitution to roughly 900,000 consumers. Under the terms of the Federal Reserve’s order, the company will: (i) pay approximately $24 million in restitution to an estimated 570,000 consumers; (ii) pay a civil money penalty of more than $2 million; (iii) adopt a consumer compliance risk-management program; and (iv) refrain from future violations of section 5 of the FTC Act.

    FDIC Federal Reserve Student Lending UDAAP Enforcement Settlement

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