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New York AG settles with debt relief company for $3.6 million
On June 23, the New York attorney general announced a $3.6 million proposed settlement with a debt relief operation for allegedly making exaggerated advertisements in violation of a 2011 consent order with the state. According to the press release, the 2011 consent order was based on allegations that the company engaged in “illegal, fraudulent, and deceptive practices” related to advertising. The 2011 consent order permitted the company to advertise certain savings if those savings were achieved by a defined group of New York consumers and if the company “clearly disclosed which consumers were in that group and what approximate percentage of the whole group of New York consumers the defined group represented.” However, the attorney general alleges the company failed to follow this requirement and continued to advertise consumer savings without disclosing the details of the group who achieved the savings, noting that “the majority of New York consumers achieved less than half of the savings [the company] advertised.”
In addition to the $3.6 million in restitution for the New York consumers, the proposed settlement reinforces the 2011 consent order’s injunctive provisions and requires the company to (i) acknowledge that certain high savings numbers are not typical by “[e]xpressly stating the percentage of consumers who achieve the high end range of savings claims”; and (ii) ensure that future savings claims are based on consumers’ total debt with the company’s program.
Privacy initiative makes California ballot
On June 24, the California Privacy Rights Act of 2020 (CPRA) ballot initiative was submitted to the California Country Clerk’s office as an initiative qualified for the November 2020 General Election ballot after receiving more than the 623,212 valid signatures required to qualify. The initiative was drafted by Alastair Mactaggart, the Founder and Chair of the Californians for Consumer Privacy, and would amend the CCPA in several significant ways. Notably, Mactaggart also drafted the initiative that ultimately resulted in the California Consumer Privacy Act (CCPA). The ballot initiative would, among other things:
- Provide consumers with the right to require a business to correct inaccurate personal information;
- Revise the definition of “business” to: (i) clarify that the time period for calculating annual gross revenues is based on the prior calendar year; (ii) provide that an entity meets the definition of a “business” if the entity, in relevant part, alone or in combination, annually buys, sell, or shares the personal information of 100,000 or more consumers or households; (iii) include a joint venture or partnership composed of businesses in which each business has at least a 40 percent interest; and (iv) include a person who does not otherwise qualify as a “business” but voluntarily certifies to the California Privacy Protection Agency (described below) that it is in compliance with, and agrees to be bound by, the CPRA;
- Create the California Privacy Protection Agency, which would have the authority to implement and enforce the CCPA (powers that are currently vested in the attorney general). The agency would be governed by a five-member board, including a single Chair, with members being appointed by the governor, the attorney general, and the leaders of the senate and assembly; and
- Expand on the CCPA’s opt-out provisions and prohibit businesses from selling a consumers’ “sensitive personal information”—a new term introduced by the initiative— without affirmative authorization.
Additional details regarding the proposed changes are available in the September 2019 InfoBytes post announcing the initiative. Since originally filing the initiative in September 2019, Mactaggart has amended the initiative several times, without significant change.
State AGs emphasize the importance of robocall traceback work
On June 4, 52 state attorneys general, through the National Association of Attorneys General, submitted reply comments to the FCC in support of an April final rule, which amends and adopts its rules in accordance with Section 13(d) of the Pallone–Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act) to create a single registered consortium that serves as a neutral third party to manage the private-led efforts to trace back the origin of unlawful robocalls. In the letter, the attorneys general emphasized the importance of traceback efforts to assist law enforcement in identifying and investigating illegal robocallers more efficiently. Moreover, the attorneys general note that traceback investigations help “shed light” on other actors in the “telecommunication ecosystem” that may support robocall scammers. Similarly, in May, the attorneys general, also through the National Association of Attorneys General, published a letter to industry groups asserting their intention to intensify enforcement efforts against illegal robocallers, and urged the US Telecom and the Industry Traceback Group to expand capabilities related to tracebacks in anticipation of growth in the need for data analysis and the number of civil investigative demands and subpoenas that will be issued directly to the Industry Traceback Group (covered by InfoBytes here).
District of Columbia AG claims online lender violated usury statutes
On June 5, the District of Columbia attorney general filed a complaint against an online lender for alleged violations of the District of Columbia Consumer Protection Procedures Act (CPPA) by marketing high-costs loans carrying interest rates exceeding D.C.’s interest rate caps. The complaint alleges that the lender offers two loan products to D.C. residents: (i) an installment loan with an annual percentage rate (APR) range of 99-149 percent; and (ii) a second loan product with an undisclosed APR that ranges between 129-251 percent. However, interest rates in D.C. are capped at 24 percent for loans with the rate expressed in the contract (loans that do not state an express interest rate in the contract are capped at six percent), and licensed money lenders that exceed these limits are in violation of the CPPA. According to the AG, the lender—who has allegedly never possessed a money lending license in D.C.—violated the CPPA by (i) unlawfully misrepresenting it is allowed to offer loans in D.C. and failing to disclose or adequately disclose that its loans contain APRs in excess of D.C. usury limits; (ii) engaging in unfair and unconscionable practices through misleading marketing efforts; and (iii) violating D.C. usury laws. In addition, the lender allegedly violated District of Columbia Municipal Regulations Title 16 by lending money in D.C. without being licensed. The complaint seeks a permanent injunction, restitution, and civil penalties. In addition, the complaint asks the court to order the lender’s loans unenforceable and void.
California AG finalizes proposed CCPA regulations, requests expedited review
On June 1, the California attorney general submitted final proposed regulations implementing the California Consumer Privacy Act (CCPA) to the California Office of Administrative Law (OAL). The CCPA—enacted in June 2018 (covered by a Buckley Special Alert) and amended several times—became effective January 1. The proposed regulations, if approved, will set forth guidance regarding complying with the CCPA, including requirements related to the various required notices under the CCPA (e.g., Notice at Collection, privacy policy, etc.), business practices for handling consumer requests (e.g., methods for submitting and responding to requests to know and requests to delete), service providers, training and recordkeeping, verification of requests, special rules for minors, and nondiscrimination requirements.
The final version of the proposed regulations, which are substantively unchanged from the March draft modifications (covered by InfoBytes here), include an updated statement of reasons summarizing the modifications and reiterating that the “stated bases for the necessity of the proposed regulations continue to apply to the regulations as adopted.”
The AG also submitted an expedited review request, asking that the regulations take effect upon filing with the Secretary of State. The CCPA imposes a July 1 statutory deadline for the AG to adopt initial regulations. However, due to challenges imposed by the Covid-19 pandemic, California Executive Order N-40-20 allows the OAL 30 working days, plus an additional 60 calendar days to finalize proposed regulations. Because of this, the AG respectfully requested that the OAL complete its review within 30 days, given the July 1 deadline.
North Carolina Attorney General announces joint relief effort for North Carolinians facing Covid-19 financial hardship
On June 4, the North Carolina attorney general announced the Carolina Relief Plan, a voluntary agreement whereby participating financial institutions will offer certain financial relief to customers facing Covid-19 financial hardships. Relief includes, among other things, allowing eligible customers to request a forbearance on residential mortgage payments not otherwise covered by the CARES Act, assistance for payment extensions of auto loan accounts, and relief from monthly maintenance fees, overdraft fees, and CD early withdrawal penalties. Under the agreement, any participating financial institution also must: (1) offer to place a moratorium on residential mortgage foreclosures and consumer auto repossessions through at least June 30, 2020; (2) refrain from reporting loans subject to Covid-19 accommodations; and (3) inform customers about the assistance they are being offered and of the heightened risk of scams. One financial institution has signed onto the relief plan as of the time of the announcement.
New York AG announced proposed settlement with student debt relief companies
On May 22, the New York attorney general (NYAG) announced a proposed settlement with three student loan debt relief companies and two of the companies’ executive officers (collectively, “defendants”), resolving allegations that the defendants participated in a broader scheme that fraudulently, deceptively, and illegally marketed, sold, and financed student debt relief services to consumers nationwide. As previously covered by InfoBytes, the September 2018 complaint alleged that a total of nine student loan debt relief companies, along with their financing company, and the two individuals violated several federal and state consumer protection statutes, including the Telemarketing Sales Rule, New York General Business Law, the state’s usury cap on interest rates, disclosure requirements under TILA, and the Federal Credit Repair Organization Act. Specifically, the NYAG asserted, among other things, that the defendants (i) sent direct mail solicitations to consumers that deceptively appeared to be from a governmental agency or an entity affiliated with a government agency; (ii) charged consumers over $1,000 for services that were available for free; (iii) requested upfront payments in violation of federal and state credit repair and debt relief laws; and (iv) charged usurious interest rates.
If approved by the court, the proposed consent judgment would require the five defendants to pay $250,000 of a $5.5 million total judgment, due to their inability to pay. Additionally, the defendants are also 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. Additionally, the defendants must request that any credit reporting agency to which the defendants reported consumer information in connection with the student loan debt relief services remove the information from those consumers’ credit files. The defendants also agreed not to sell, transfer, or benefit from the personal information collected from borrowers.
The NYAG previously settled with two other defendants in February, covered by InfoBytes here.
CFPB and Massachusetts AG sue credit-repair telemarketers
On May 22, the CFPB and the Massachusetts attorney general announced a joint lawsuit against a credit repair organization and the company’s president and owner (collectively, “defendants”) for allegedly committing deceptive acts and practices in violation of the Consumer Financial Protection Act (CFPA) and the Massachusetts Consumer Protection Law. The complaint also alleges the defendants engaged in deceptive and abusive telemarketing acts or practices in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts or practices and the FTC’s Telemarketing Sales Rule (TSR). According to the complaint filed in the U.S. District Court for the District of Massachusetts, the defendants allegedly enrolled tens of thousands of consumers by deceptively claiming that their credit-repair services could help consumers substantially improve their credit scores. The services also allegedly promised to fix “unlimited” amounts of negative items from consumers’ credit reports. However, the complaint asserts that in “numerous instances,” the defendants failed to achieve these results. The defendants also allegedly engaged in abusive acts and practices in violation of the TSR by requesting and collecting fees before achieving any results related to repairing a consumer’s credit. Among other things, the complaint further alleges that the defendants claimed to have more than 60 credit repair experts but actually only employed a handful of Boston-based employees, only some of whom interacted with consumers. The majority of the interactions, the complaint alleges, were conducted by telemarketers located in Central America who were paid “almost entirely by commission” based on the number of consumers they enrolled.
The complaint seeks injunctive relief; “damages and other monetary relief against [the defendants] as the Court finds necessary to redress injury to consumers resulting from [the defendants’] violations, which may include, among other things, rescission or reformation of contracts, refund of monies paid, and restitution; and civil money penalties.”
Auto financing company settles multistate subprime lending action for $550 million
On May 19, the California attorney general, along with 33 other attorneys general, announced a multistate $550 million settlement with an auto sales financing company for allegedly placing subprime borrowers in auto loans that carried a high risk of default, in violation of state consumer protection laws. Specifically, California’s complaint alleges that the company violated the state’s Unfair Competition Law by, among other things, (i) extending auto loan credit to borrowers the company knew or should have known were likely to result in default and repossession; (ii) failing to disclose to borrowers the high risk of failure associated with the loans; (iii) requiring borrowers to make payments through methods that resulted in third-party fees; and (iv) misrepresenting borrowers’ ability to acquire repossessed vehicles already sent to auction. Additionally, the attorney general alleges that the company “turned a blind eye” to dealer abuse, resulting in higher origination prices for borrowers.
According to the press release, the company will pay approximately $433 million in forgiveness of loans still owned by the company across the U.S. and will waive deficiency balances for borrower loans that the company no longer owns. Notably, certain borrowers who had defaulted as of December 31, 2019 but were still in possession of their vehicle will be allowed to keep the vehicle and have the deficiency balance on the loan waived. California’s settlement also requires injunctive measures such as (i) requiring the company to consider the borrower’s ability to repay the loan; (ii) barring the company from purchasing loans where the borrower’s residual income is zero or negative; (iii) setting reasonable debt to income ratios; and (iv) no longer requiring dealers to sell ancillary products.
In addition to California, the multistate settlement includes: Illinois, Maryland, New Jersey, Oregon and Washington, who together with Attorney General Becerra comprise the executive committee; as well as the attorneys general of Arizona, Arkansas, Connecticut, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, West Virginia, Wyoming, and the District of Columbia.
State attorneys general send letter to auto manufacturers regarding Covid-19 practices
On May 20, a coalition of state attorneys general sent a letter to ten major auto manufacturers relating to reports that dealerships have been engaging in predatory and harmful practices in connection with the return of leased vehicles during the Covid-19 pandemic. The coalition calls upon auto manufacturers to ensure that their financing arms and affiliated dealerships have appropriate controls to timely accept the return of leased vehicles during the pandemic. Further, car dealerships are urged to take certain steps, such as reviewing their lease-return policies for compliance with applicable law, assisting consumers with convenient lease returns, and refunding harmed consumers for certain costs arising from refused lease returns.