Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • Coalition of state Attorneys General announce settlement to resolve allegations concerning debt buyers’ collection and litigation practices

    State Issues

    On December 4, the North Carolina Attorney General, along with 41 other state Attorneys General and the District of Columbia, announced a $6 million settlement with a national group of debt buyers to resolve allegations concerning the debt buyers’ collection and litigation practices. According to the press release, the debt buyers allegedly engaged in robo-signing practices by signing and filing large quantities of affidavits in state courts without first verifying the provided information. Under the terms of the settlement, the debt buyers have agreed to (i) completely eliminate or reduce the judgment balances for affected consumers in the participating states; (ii) reform their business practices by carefully verifying the information in affidavits for the courts and present accurate documents in court proceedings; (iii) review original account documents and provide substantiating documentation to consumers free of charge when a consumer disputes a debt; (iv) “maintain proper oversight and training over its employees and the law firms that it uses”; and (v) refrain from reselling debt for two years.

    State Issues State Attorney General Debt Collection Settlement Robo-signing

    Share page with AddThis
  • New York Attorney General reaches largest ever COPPA settlement to resolve violations of children’s privacy

    State Issues

    On December 4, the New York Attorney General announced the largest Children’s Online Privacy Protection Act (COPPA) settlement in U.S. history—totaling approximately $6 million —to resolve allegations with a subsidiary of a telecommunications company that allegedly conducted billions of auctions for ad space on hundreds of websites it knew were directed to children under the age of 13. According to the Attorney General’s office, the subsidiary collected and disclosed personal data on children through auctions for ad space, allowing advertisers to track and serve targeted ads to children without parental consent. Under COPPA, operators of websites and other online services are prohibited from collecting or sharing the information of children under the age of 13 unless they give notice and have express parental consent. Among other things, the subsidiary also allegedly placed ads on other exchanges that possessed the capability to auction ad space on child-directed websites, but that when it won ad space on COPPA-covered websites, the subsidiary treated the space as it would any other and collected user information to serve targeted ads.

    Under the terms of the settlement, the subsidiary must (i) create a comprehensive COPPA compliance program, which requires annual COPPA training for staff, regular compliance monitoring, and the retention of service providers that can comply with COPPA, as well as a third party who will assess the privacy controls; (ii) enable website operators that sell ad inventory to indicate what portion of a website is subject to COPPA; and (iii) destroy the personal data it collected on children.

    State Issues COPPA Privacy/Cyber Risk & Data Security State Attorney General Settlement Enforcement

    Share page with AddThis
  • Pension advance company settles with Virginia Attorney General over high-interest loans targeting veterans and retirees

    State Issues

    On November 15, the Virginia Attorney General announced a $51.7 million settlement with a pension advance company, its owner, and related entities (defendants) to resolve allegations concerning allegedly illegal, high-interest loans made to more than 1,000 Virginia veterans and retirees in violation of the Virginia Consumer Protection Act (VCPA). According to the Attorney General’s complaint, the defendants allegedly “disguised [the] illegal, high interest loans as ‘pension sales’ that could provide Virginia pension holders with a quick lump sum of cash,” and seemingly concentrated the sales in two Virginia areas where a large number of retired veterans and civil servants reside. Following the lawsuit, the defendants shut down lending operations in Virginia and around the country. Under a permanent injunction and final judgment, the court—which declared the defendants’ agreements to be “usurious and illegal”—ordered the defendants to: (i) provide over $20 million in borrower debt forgiveness; (ii) pay a $31.7 million civil money penalty; (iii) pay $414,473 in restitution; (iv) pay $198,000 for costs and attorneys’ fees; and (v) agree to injunctive relief to prevent further violations of the VCPA.

    State Issues State Attorney General Predatory Lending Debt Relief

    Share page with AddThis
  • Arizona approves two more participants in fintech sandbox program

    State Issues

    On November 1, the Arizona Attorney General announced the approval of two more participants in the state’s fintech sandbox program. The first company, which is based in New York, will test a savings and credit product, enabling Arizona consumers to obtain a small line of credit aimed at providing overdraft protection. If a consumer agrees to a repayment plan recommended by the company’s proprietary technology, the APR may be as low at 12 percent; if a consumer adopts a different repayment plan, the line of credit will have a standard APR of 15.99 percent. The company intends to report transactions under the payment plan to national credit bureaus to enable the building of credit histories. The second company, an Arizona-based non-profit, will test a lending product using proprietary blockchain technology, which has an APR cap of 20 percent.

    As previously covered by InfoBytes, the Arizona governor signed legislation in March creating the first state sandbox program for companies to test innovative financial products or services without certain regulatory requirements. In October, the Attorney General announced the first sandbox participant, a mobile platform company (InfoBytes coverage available here).

    State Issues Regulatory Sandbox Fintech Blockchain Overdraft State Attorney General

    Share page with AddThis
  • 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

    Share page with AddThis
  • FTC to hold public hearings on consumer privacy and data security; focus will address data security enforcement program

    Privacy, Cyber Risk & Data Security

    On October 26, the FTC announced it will hold four days of public hearings in December 2018 and February 2019 to examine the Commission’s authority to deter unfair and deceptive conduct in data security and privacy matters as part of its broader series of hearings on “Competition and Consumer Protection in the 21st Century.” According to the FTC, these hearings (i) “will provide the first comprehensive re-examination of the FTC’s approach to consumer privacy since 2012,” and (ii) “will provide an opportunity to reexamine the Commission’s work in light of changing technologies, legal regimes, and business models.”

    The FTC will continue to accept public comments through March 13, 2019, regarding items to be discussed at the February 2019 hearing. As previously covered by InfoBytes, a coalition of bipartisan state Attorneys General submitted a comment letter to the FTC last August requesting that they be included in the discussions regarding consumer protection during the Commission’s hearing process. Specifically, the letter emphasized the states’ “long history of protecting consumers from unfair and deceptive practices” under each state’s consumer protection authority, and noted consumers’ concerns over personal information and data security.

    Privacy/Cyber Risk & Data Security FTC Consumer Protection State Attorney General

    Share page with AddThis
  • NY AG sues jeweler for practices targeting servicemembers

    State Issues

    On October 29, the New York Attorney General announced the filing of a complaint against a national jewelry store, headquartered in New York, for allegedly engaging in fraudulent and deceptive conduct, deceptive credit repair services, and illegal lending in the financing of jewelry sales to active duty servicemembers. Specifically, the complaint alleges the company targets active duty servicemembers through a purported charitable program in which military-themed teddy bears are sold with a promise of a charitable donation by the company. The company also sells patriotic and military-themed jewelry and offers financing through a program exclusively available to servicemembers. The financing program is marketed as a credit repair or credit-establishing opportunity through a different entity, but according to the complaint, the separate entity is merely an “alter-ego” of the jewelry company, a relationship which is not disclosed to servicemembers. The company markets the financing program to active duty servicemembers as a way to build credit scores to purchase other consumer goods, such as a motor vehicle; however, once a servicemember agrees to the program, the Attorney General alleges the company’s employees are instructed to “’sell’ enough product to maximize the amount of credit [the company] is willing to advance.” The amount of credit is allegedly based on the amount of time the servicemember has left in active service, not on traditional underwriting standards such as credit history. Additionally, the complaint alleges the company marks up poor-quality jewelry between 600 and 1,000 percent over the wholesale price and advertises a “per payday” price on the merchandise, which bears “little resemblance to the total amount paid by a consumer at the end of the financing contract.” Of special interest to all creditors doing business in New York, the complaint appears to include in its civil and criminal usury claims the concept that the effective interest rate was higher because the good being purchased had “inflated retail prices.” The complaint seeks civil money penalties, restitution, and injunctive relief.

    State Issues Military Lending Deceptive Unfair Advertisement Servicemembers State Attorney General

    Share page with AddThis
  • Bank settles with New York for $65 million over incentive compensation sales program

    State Issues

    On October 22, the New York Attorney General announced a $65 million settlement with a national bank to resolve allegations regarding its retail sales business model in violation of the Martin Act and New York common law. The Attorney General had alleged the bank failed to disclose to investors that the success of the bank’s incentive compensation program may encourage certain misconduct.

    As previously covered by InfoBytes, in May, the bank announced it reached an agreement in principle to pay $480 million to investors to resolve a consolidated action related to the same issues.

    State Issues Incentive Compensation Securities Settlement State Attorney General

    Share page with AddThis
  • Illinois Attorney General announces $1.2 million settlement to resolve mortgage fraud allegations

    State Issues

    On October 24, the Illinois Attorney General, along with the Illinois Department of Financial and Professional Regulation, announced a settlement with a residential mortgage company for allegations of mortgage fraud by one of the branch managers. According to the press release, the branch manager allegedly (i) placed borrowers who believed they were obtaining a traditional mortgage into a “contract for deed,” which can carry greater financial risks; (ii) failed to provide some borrowers signed copies of their agreements; and (iii) participated in fraudulent loan origination activities. The company agreed to pay $1.2 million in restitution to the Attorney General’s office, which will distribute the proceeds to defrauded consumers.

    State Issues State Attorney General Settlement Mortgages

    Share page with AddThis
  • Pennsylvania Attorney General requests redlining victims file complaints to further investigation

    State Issues

    On October 22, the Pennsylvania Attorney General announced a request for mortgage borrowers and home-loan applicants who believe they may be victims of redlining to file complaints with that office. The announcement states that the Attorney General is investigating evidence of redlining by financial institutions in Philadelphia neighborhoods where lenders either refused to make loans due to the applicant’s race or dissuaded minorities from applying for mortgage loans. The investigation is in response to an investigative article identifying a pattern of racial discrimination in mortgage lending in the Philadelphia area.

    State Issues State Attorney General Consumer Finance Fair Lending Redlining Mortgages

    Share page with AddThis

Pages

Upcoming Events