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FTC seeks permanent injunction to stop alleged student loan debt relief scam
On February 7, the FTC announced it was charging a student loan debt relief operation with violations of the FTC Act and the Telemarketing Sales Rule (TSR) for allegedly engaging in deceptive practices when marketing and selling their debt relief services. According to the complaint, defendants contacted consumers through personalized mailers that falsely claimed borrowers had pre-qualified for federal loan assistance programs that would reduce their monthly debt payments to a fixed payment or result in total loan forgiveness. However, the FTC asserted that monthly payments under federal income-driven repayment programs vary from year to year due to fluctuations in income, and that most consumers do not meet the programs’ strict eligibility requirements. Among other things, defendants allegedly charged illegal up-front fees to purportedly enroll consumers in programs, accepted monthly payments that were not applied towards student loans, and collected monthly fees that consumers believed were being applied to their loans but instead were going towards unrelated “financial education” programs. According to the FTC, defendants have collected over $28 million since 2014. In connection with the telemarketing of student loan debt relief services, the FTC also charged defendants with TSR violations for allegedly collecting illegal upfront fees and misrepresenting “material aspects of their debt relief services.” The FTC is seeking a permanent injunction against defendants to prevent future violations, as well as redress for injured consumers through “rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.”
This action is part of the FTC’s enforcement initiative, Operation Game of Loans, which targets companies that engage in practices that harm student loan borrowers. (See previous InfoBytes coverage here.)
FTC releases report on military consumer finance
On February 2, the FTC released a new Staff Perspective (perspective) which highlights takeaways from a July 2017 FTC workshop focused on examining the array of financial issues that may affect military consumers (defined as servicemembers, veterans, and their families). The perspective notes, among other things, that servicemembers may struggle during auto financing transactions because of a lack of time to shop and lack of credit history, which may result in disadvantageous credit terms. Additionally, the perspective highlights that debt collection problems may result in a servicemember not qualifying for a security clearance and that debt collectors may threaten to contact servicemembers’ commanding officers. The perspective also summarized the additional legal rights that may apply to military consumers, such as the Military Lending Act (MLA) and the Servicemembers Civil Relief Act (SCRA), and emphasized the FTC’s focus on financial education for servicemembers throughout the various stages of their military career.
FTC issues comments on FCC’s robocall blocking rules
On January 31, the FTC submitted a comment letter in response to the FCC’s request for input on its November adoption of rules allowing phone companies to proactively block illegal robocalls originating from certain types of phone numbers. (See previous InfoBytes coverage here.) Calling the development of a call-blocking, call-filtering solution to protect consumers from illegal and unwanted calls long overdue, the FTC offered support for efforts to encourage providers who block calls to “identify and quickly rectify any erroneous blocking.” However, FTC staff claimed that, based on the current record, it is unclear whether there exists “a need to require a formal challenge mechanism for errors resulting from provider-based call blocking authorized by this Report and Order.” The FTC noted that a formal challenge process is not necessary because, among other things, the FCC already cautions providers about wrongfully blocking unallocated or unassigned numbers and “warns providers that erroneous blocking may lead to liability for violating call completion rules.” Additionally, the FTC agreed with concerns raised by a telecom association that “white lists,” which contain numbers that should not be blocked, pose “substantial security risks” if the lists “fall into the hands of even a single robocaller” because they might serve as the “‘de facto master key’ that would provide robocallers with the ability to override all of the efforts painstakingly developed to thwart them.”
CSBS announces FTC access to non-confidential NMLS licensing information
On January 18, the Conference of State Bank Supervisors (CSBS) announced it will start sharing non-confidential licensing information obtained through the Nationwide Multistate Licensing System (NMLS) with the FTC. Once implemented, the FTC will have access to regulated companies’ ownership information, and public FTC enforcement actions will be added to the NMLS database and made available to state regulators and to the public. According to the FTC, access to this type of information will improve consumer protection investigation efficiency and coordination with state law enforcement partners. Currently, select NMLS data is shared with the Office of Financial Research, CFPB, Financial Crimes Enforcement Network, and FHA.
FTC announces charges against mortgage loan modification operation
On January 19, the FTC issued a press release announcing charges against a mortgage loan modification operation for allegedly violating the FTC Act and the Mortgage Assistance Relief Services Rule by making false promises to consumers for services designed to prevent foreclosures or reduce interest rates or monthly mortgage payments. According to the charges, the defendants contacted consumers using doctored government logos on correspondence, which misrepresented an affiliation with the government’s Making Home Affordable loan modification program. Additionally, the defendants allegedly made unlawful claims that they had “special relationships with particular lenders” and instructed consumers to stop paying their mortgages without actually obtaining the promised loan modifications. As alleged by the FTC, this resulted in many consumers paying substantial interest charges, incurring penalties for paying the defendants rather than making mortgage payments, and in some instances, losing their homes to foreclosure. On January 10, a federal judge in the U.S. District Court for the District of Nevada temporarily restrained and enjoined the defendants’ alleged illegal practices and froze their assets at the request of the FTC.
State AGs file protective petition to stop rollback of net neutrality rules; Senate Democrats announce plans to reverse FCC rule
On January 16, a coalition of 22 state attorneys general filed a protective petition for review in the D.C. Circuit Court of Appeals against the Federal Communications Commission (FCC) and the United States to block the FCC’s Declaratory Ruling, Report and Order released last December to rollback the 2015 Open Internet Order rules (known as “Net Neutrality” rules). As previously covered in InfoBytes, the rollback removes the restrictions barring providers from slowing down or speeding up web traffic based on business relationships, and places the enforcement authority of the new regulatory framework with the Federal Trade Commission (FTC).
In the petition, the states allege violations of the Administrative Procedure Act’s notice-and-comment rulemaking requirements, and claim that the FCC's actions with respect to Net Neutrality were “arbitrary, capricious, and an abuse of discretion.” According to a press release issued by New York Attorney General Eric T. Schneiderman:
The FCC’s new rule fails to justify the Commission’s departure from its long-standing policy and practice of defending net neutrality, while misinterpreting and disregarding critical record evidence on industry practices and harm to consumers and businesses. . . Moreover, the rule wrongly reclassifies broadband internet as a Title I information service, rather than a Title II telecommunications service, based on an erroneous and unreasonable interpretation of the Telecommunications Act. Finally, the rule improperly and unlawfully includes sweeping preemption of state and local laws.
Separately that same day, Senate Democrats announced plans to formally introduce a resolution of disapproval under the Congressional Review Act to reverse the FCC’s vote and restore the Net Neutrality rules. Once the rule is submitted to both houses of Congress, the resolution will be formally introduced, published in the Federal Register, and voted upon within 60 legislative days.
FTC report highlights 2017 privacy and data security enforcement work
On January 18, the FTC released its annual report on the agency’s privacy and data security work performed in 2017. Among other items, the report highlights consumer-related enforcement activities in 2017, including:
- a settlement with a ride-sharing company over allegations that it violated the FTC Act by making deceptive claims about its privacy and data practices (previously covered by InfoBytes here);
- the first EU-U.S. Privacy Shield action resulting in settlements with three companies over allegations that they falsely claimed they were certified to take part in the framework (previously covered by InfoBytes here); and
- a joint settlement with the New Jersey Attorney General against a “smart” television manufacturer for claims that it secretly gathered users’ viewing data and sold it to third parties who used the data for targeted advertising (previously covered by InfoBytes here).
The report also covers the FTC’s approval of TRUSTe’s proposed modifications to its safe harbor program under the Children’s Online Privacy Protection Act of 1998 (COPPA), previously covered by Infobytes here; and the agency’s actions related to the national “Do Not Call” Registry.
FCC Votes to Overturn Net Neutrality Rules
On December 14, the FCC voted 3-2 to overturn the 2015 Open Internet Order rules (known as, “Net Neutrality” rules) which mandate that internet service providers (ISPs) treat all web content equally. The FCC released a draft order in November, which outlined the new framework for ISPs, including removing the restrictions barring the providers from slowing down or speeding up web traffic based on business relationships. ISPs are now required to publicly disclose information about their practices including any paid or affiliated prioritization of web content. The FCC places the enforcement authority of the new regulatory framework with the FTC. The order is effective upon OMB approval of the new requirements for ISP public disclosures.
FTC Announces Settlement With Debt Collection Operation
This week, the FTC obtained a court order banning a Florida-based debt collection operation and its managing member from the debt collection business. The defendants were accused of violations of the FTC Act and the Fair Debt Collections Practices Act for, among other things, allegedly posing as lawyers and threating individuals with lawsuits or prison time if they failed to pay debt they did not actually owe. The order resolves a complaint filed by the FTC in July against defendants. (See previous InfoBytes coverage here.) Under the terms of the settlement, the defendants are prohibited from, among other things, (i) engaging in debt collection activities; (ii) misrepresenting material facts regarding financial-related products or services; (iii) disclosing, using, or benefiting from consumers’ personal information; and (iv) improperly disposing such information when appropriate. Finally, the order assessed a $702,059 judgment for equitable monetary relief.
FTC Settles With Dallas Auto Dealer for Alleged Deceptive Advertisements
On December 1, the FTC announced a proposed order to settle with a Dallas, Texas auto dealership for alleged deceptive advertisements containing loan and lease terms in Spanish-language newspapers. According to the FTC, the dealership violated the FTC Act by prominently displaying advantageous loan and lease terms in Spanish and qualifying those terms in smaller-print English at the bottom of the page. The FTC alleges the dealership misrepresented (i) the total cost of purchasing or leasing; (ii) the underwriting restrictions for the advertised loan or lease; and (iii) the availability of the inventory advertised. Additionally, the FTC alleged that the dealership violated Truth in Lending Act and the Consumer Leasing Act by failing to “clearly and conspicuously” disclose credit and lease terms. The proposal requires the dealership to cease the allegedly deceptive conduct and comply with all applicable advertisement regulations in the future. The proposal is published in the Federal Register and is open for public comment until January 2, 2018.