InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Top "Smart TV" Manufacturer Agrees to Pay $2.2M to Settle FTC Smart TV Tracking Investigation
On February 6, the Federal Trade Commission (FTC) and the New Jersey Attorney General (NJAG) announced that they had entered into a $2.2 million settlement to resolve claims that a “smart” television manufacturer secretly gathered users’ viewing data and sold it to third parties who used the data for targeted advertising purposes. The settlement, which was approved by the FTC by a unanimous 3-0 vote, includes a payment of $1.5 million to the FTC and $700,000 to the New Jersey Division of Consumer Affairs, with an additional $300,000 in penalties to New Jersey suspended. The settlement also requires that the TV maker not misrepresent its data collection and sharing practices, prominently disclose its data collection and sharing practices and obtain permission from each consumer prior to collecting viewing data, delete most of the viewing data it already collected, implement a comprehensive privacy program, and undergo biennial third-party privacy assessments.
Notably, in a concurring statement, acting FTC Chairman Maureen K. Ohlhausen emphasized that this settlement marks “the first time the FTC has alleged in a complaint that individualized television viewing activity falls within the definition of sensitive information.” Previously, the FTC had limited the definition of sensitive information to “financial information, health information, Social Security Numbers, information about children, and precise geolocation information.” Chairman Ohlausen noted “the need for the FTC to examine more rigorously what constitutes ‘substantial injury’ in the context of information about consumers” and indicated her intention to “launch an effort to examine this important issue further.”
Global Money Services Business Reaches Settlements with 49 States and the District of Columbia
On January 31, state attorneys general from 49 states and the District of Columbia announced a $5 million settlement with a global money services business that resolves investigations into allegations that scammers used the company’s wire transfer services to defraud consumers over a period of 9 years. The company agreed to implement an anti-fraud program as part of the settlement, with the settlement funds paying for the states’ costs and fees. As discussed previously on InfoBytes, the company recently entered a $586 million settlement with the DOJ in connection with similar AML-related claims, which will be used for refunds to the victims of fraud-induced wire transfers.
NY Attorney General Announces Data Breach Settlement with Computer Manufacturer
On January 29, New York Attorney General Eric T. Schneiderman announced a settlement with a foreign computer manufacturer over allegations of a data breach of customer data. The AG’s office claims the security vulnerabilities allowing for the breach lasted almost a full calendar year. In addition to a $115,000 penalty, the manufacturer is required to “maintain [both] reasonable security policies designed to protect consumer personal information. . .[and] data security standards required by the credit card industry.”
State Attorneys General Seek to Intervene in PHH v. CFPB Case
On January 23, the Attorneys General of 16 states and the District of Columbia (the State Attorneys General) filed a motion requesting the permission of the D.C. Circuit to intervene in the CFPB’s petition for en banc reconsideration in PHH Corp. v. CFPB. In the motion, the State Attorneys General argue that they have a vital interest in the matter because the October 2016 panel decision subjecting the CFPB Director to “at will” removal by the President “threatens to undermine the ability of the State Attorneys General [to work with the CFPB] to bring effective civil enforcement and coordinated regulatory actions free from political influence and interference.”
Noting the possibility that President Trump may seek to remove CFPB Director Cordray before the petition for rehearing is resolved or refuse to pursue an appeal to the Supreme Court if the panel decision stands, the State Attorneys General raise the concern that “[t]he incoming administration … may not continue an effective defense of the statutory for-cause protection of the CFPB director.” Therefore, because “[a] significant probability exists that the pending petition for rehearing will be withdrawn, or the case otherwise rendered moot,” the State Attorneys General argue that the D.C. Circuit should allow them to intervene to protect their interests.
In addition to the District of Columbia, the motion was filed on behalf of the Attorneys General for the following states: Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, and Washington. The filing of the motion was announced by Connecticut Attorney General George Jepsen, whose office prepared the initial draft.
N.Y. Attorney General's Office, SEC and FINRA Assess Penalties, Fines Against Securities Firm Over Dark Pool Access Disclosures
On December 16, N.Y. Attorney General Eric Schneiderman announced a $37 million settlement against a major securities firm following its joint investigation with the Securities and Exchange Commission (SEC) into allegedly false statements and omissions made by the firm in connection with the marketing of its electronic order routing services, known as its “Dark Pool Ranking Model.” As explained by Attorney General Schneiderman, “Electronic order routing systems that route investor orders to various markets, including dark pools, are a part of modern equities trading, and companies that promote their routing capabilities must do so truthfully.” As part of the agreement, the firm admitted that it misled investors and violated New York State and federal securities laws; its conduct was also censured by both regulators.
That same day, FINRA announced its decision to fine the same firm $3.25 million for failing to disclose accurate information to all clients about services and features of its alternative trading system (ATS). In Form ATS filings with the SEC, the firm represented that all ATS users would have “identical access” to the system’s services and features. However, FINRA found that some ATS users, including high-frequency traders, were provided with more information than others and received services not available to others. The firm settled without admitting or denying the charges.
CFPB and New York Attorney General File Lawsuit Against Network of Collections Companies
On November 2, the CFPB, in partnership with the New York Attorney General, filed a lawsuit in a federal district court against the leaders of a debt collection operation based out of Buffalo. The lawsuit alleges that defendants operate a network of companies that harass and/or deceive consumers into paying inflated debts or amounts they may not owe. The Bureau is seeking to shut down the operation and to obtain compensation for victims and a civil penalty against the companies and partners.
CFPB Takes Action Against B&B Pawnbrokers For Misleadingly Low Annual Percentage Rate
On November 3, the CFPB filed a lawsuit in federal district court against a Virginia pawnbroker for deceiving consumers about the actual annual cost of its loans. In its Complaint, the CFPB alleges both TILA violations and unfair, deceptive, or abusive acts or practices under Dodd-Frank and the CPA. The complaint seeks monetary relief, injunctive relief, and penalties. The CFPB coordinated its investigation with the Virginia Attorney General’s office – which filed its own lawsuit against the same pawnbrokers back in July 2015 for violations of the Virginia Consumer Protection Act.
State AGs Urge the CFPB to Ensure that States Maintain the Right to Set Usury Caps on High Cost Loans
In October, New York AG Eric T. Schneiderman, along with seven other state AGs (Connecticut, Maryland, Massachusetts, New Hampshire, Pennsylvania, Vermont and the District of Columbia), submitted a letter to the CFPB in response to the agency’s proposed rule addressing payday loans, vehicle title loans, and certain high-cost installment loans. While commending the CFPB for introducing additional consumer protections, the letter urges the CFPB to integrate the following language from the preamble of the proposed rule into the body of the final rule: “The protections imposed by this proposal would operate as a floor across the country, while leaving State and local jurisdictions to adopt additional regulatory requirements (whether a usury limit or another form of protection) above that floor as they judge appropriate to protect consumers in their respective jurisdictions.” The letter explains that because the CFPB does not have the authority to set interest rates – or usury caps – for loans, it is “crucial” that states maintain their right to do so.
California AG Harris Launches New Consumer Privacy Tool
On October 14, California AG Harris released an online complaint form designed to help consumers report potential violations of the California Online Privacy Protection Act (CalOPPA). Pursuant to the CalOPPA, commercial websites and online services collecting consumer information are required to post privacy policies that include “the categories of information collected, the types of the third parties with whom the operator may share that information, instructions regarding how the consumer can review and request changes to his or her information, and the [policy’s] effective date.” As part of AG Harris’s “multi-pronged” effort to improve online privacy for consumers, the form will allow consumers to “crowdsource” privacy policy violations, thus “exponentially increasing the California Department of Justice’s ability to identify and notify those in violation of CalOPPA.”
Connecticut AG Jepsen and Banking Commissioner Perez Resolve RMBS Investigation
On October 3, Connecticut AG Jepsen, alongside Banking Commissioner Jorge Perez, resolved a four-year investigation into a Connecticut-based investment bank’s residential mortgage-back securities (RMBS) practices. According to the consent order, from January 2005 to December 2008, the investment bank was the lead securities underwriter of about 250 RMBS deals with a value of more than $250 billion. The state alleged, among other things, that the bank’s due diligence process on the 250 RMBS deals was “inadequate and resulted in omissions and misstatements in the representations made to the public and investors about the securities.” The $120 million settlement is Connecticut’s largest single settlement in history.