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Minnesota AG Swanson Takes Action Against Unlicensed Debt Collector
In August, Minnesota AG Lori Swanson filed a lawsuit against a debt collection company, alleging that it repeatedly attempted to collect on debts that consumers did not owe, and made unlicensed collection calls to individuals, their relatives, and their co-workers. According to AG Swanson, the company pursued “phantom” debts against consumers, threatening non-compliant individuals with lawsuits and arrests. AG Swanson further asserts that the company “failed to inform people of their legal right to dispute the ‘debt’ and refused to provide verification of the ‘debt’ when people asked questions.”
CFPB Issues Proposed Rule Seeking to Amend Procedures for Disclosing Certain Confidential Information
On August 24, the CFPB published a proposed rule seeking to amend procedures used by persons in the public domain to obtain information from the CFPB under the Freedom of Information Act, the Privacy Act of 1974 and legal proceedings. In part, the proposal also seeks to revise the 2013 final rule related to the “exchange of confidential supervisory information (CSI) with certain agencies.” Specifically, the CFPB proposes to remove the standard for sharing CSI, thereby utilizing the same standard for sharing information that is not considered CSI and giving the CFPB the discretion to disclose CSI to another agency “to the extent that the disclosure of the information is relevant to the exercise of the [agency’s] statutory or regulatory authority.” Among other things, if accepted, the proposal may allow the CFPB to establish a CSI sharing regime to include state attorneys general and other agencies without supervisory power. Comments are due by October 24, 2016.
FTC Bans New York Debt Collector; Resolves 2015 "Operation Collection Protection" Action
On August 24, the FTC, in coordination with New York AG Schneiderman, announced that it issued a final order banning a debt collector and his four companies from the debt collection business. According to the order, the defendants engaged in deceptive and abusive debt collection practices in violation of the FTC Act, the Fair Debt Collection Practices Act, and New York General Business Law. The final order resolves a 2015 Operation Collection Protection action alleging, among other things, that the defendants “regularly threatened, pressured, and harassed consumers into paying debts [they] did not owe,” continuing to “collect on these fake debts even after the supposed creditor notified them that the debts were bogus.” The final order imposes a judgment of more than $18.4 million, which will be partially suspended due to the defendants’ inability to pay. AG Schneiderman and the FTC issued a separate order to the owner’s ex-wife, imposing a $418,000 judgment, which also will be partially suspended.
Massachusetts AG and Division of Banks Seek Input on Debt Collection and Industry Regulation
On September 22, the Massachusetts Division of Banks (the Division) and AG Healey’s office will host an informational session to discuss the current state of debt collection and industry regulation in Massachusetts. The Division and AG Healey seek responses to questions regarding how the debt collection industry has changed in recent years; the industry’s organizational structure; licensing requirements for debt collectors and debt buyers; law firm involvement in debt collection activities; notification requirements regarding whether a debt has been sold; debt collection issues, including litigation-related problems, that consumers and industry members face; and how changes in federal laws and regulations governing debt collection practices should be reflected in Massachusetts’s regulations. Written responses and comments to the Division are due by October 21, 2016.
State Attorneys General Issue Letter in Support of CFPB's Proposed Arbitration Rule
On August 12, Massachusetts AG Healey, alongside 17 other state attorneys general, sent a letter to CFPB Director Cordray in support of the agency’s proposed rule seeking to impose restrictions on the use of mandatory pre-dispute arbitration clauses by covered providers of certain consumer financial products and services. Although the letter supports the CFPB’s proposed rule, it encourages the CFPB to consider regulations that would prohibit such clauses outright. According to the letter, class action litigation would provide consumers with “real and meaningful benefits,” such as monetary and injunctive relief through settlements, and may further spur industry-wide reforms as well as regulatory and legislative action. The letter further supports the CFPB’s “effort to increase transparency in the arbitration process by requiring covered entities to submit initial claim filings and written awards in arbitration proceedings to the Bureau,” and encourages the agency to (i) publish the information publicly on its website; (ii) enforce timing obligations for reporting the information; and (iii) establish strict penalties, including fines and loss of arbitration privileges, against entities that do not comply with the reporting requirements.
DOJ Files Suit Against Military Housing Provider for Alleged SCRA Violations
On August 10, the DOJ announced that a private military housing provider agreed to pay $200,000 to settle allegations that it violated the SCRA by obtaining default judgments against active-duty servicemembers and their families and subsequently evicting them. According to the DOJ, the company violated the SCRA when it requested default judgments against active-duty servicemembers without filing the appropriate affidavits “to alert the court of the tenants’ military status.” Under the terms of the proposed consent order, the company must (i) pay each servicemember affected by its actions $35,000 and vacate the judgment; (ii) forgive deficiency balances and request that the credit bureau remove evictions from effected credit reports; and (iii) pay a civil penalty of $60,000 to the United States. The consent order is pending approval by the U.S. District Court for the Southern District of California. The DOJ noted that this is the first case it has filed alleging illicit eviction of servicemembers from their homes.
California AG Harris filed a parallel suit against the defendants, arguing that the evictions violated the California Military and Veterans Code, the SCRA, state debt collection laws, and state privacy laws.
New York AG Schneiderman Announces $100,000 Settlement Over Data Security Practices
On August 5, New York AG Schneiderman announced that an online retailer will pay $100,000 in penalties to settle allegations that its weak security practices led to a data breach that potentially exposed more than 25,000 credit card numbers and cardholder data. According to AG Schneiderman, after a third party accessed the retailer’s website on August 7, 2014, a merchant bank notified the retailer on June 5, 2015 that customers’ credit card accounts were showing fraudulent charges. The retailer subsequently hired a company to conduct a forensic investigation, during which malware was found on and subsequently removed from the retailer’s website. AG Schneiderman contends that the retailer violated various sections of the New York State General Business Law by failing to notify its customers or law enforcement of the breach and by misrepresenting the safety and security of its website, also in breach of Executive Law § 63(12). In addition to the $100,000 penalty, the settlement requires that the retailer (i) conduct thorough and efficient investigations of future data security breaches; (ii) promptly notify New York law enforcement and affected customers of data security breaches; (iii) “maintain reasonable security policies and procedures designed to protect the personal information of consumers in accordance with New York State General Business laws”; (iv) remediate security vulnerabilities on its websites; and (v) train its employees with the most current data security practices.
State Attorneys General Settle with London-based Financial Institution over Alleged LIBOR Manipulation
On August 9, Massachusetts AG Healey announced, in coordination with more than 40 state attorneys general, a $100 million settlement with a London-based financial institution and related international investment bank (collectively, defendants) to resolve allegations that the defendants manipulated the U.S. Dollar London InterBank Offered Rate (LIBOR) and defrauded government and non-profit entities across the nation. According to AG Healey, from 2007-2009, defendants’ managers instructed its LIBOR submitters to lower their LIBOR rate setting. LIBOR submitters allegedly agreed to these instructions. State attorneys general further allege that, at various times beginning in 2005 and continuing at least into 2009, the defendants’ traders asked LIBOR submitters “to change their LIBOR submissions in order to benefit their trading positions.” LIBOR submitters allegedly often agreed to the traders’ requests. The defendants are the first of “several USD-LIBOR-setting panel banks under investigation by the state attorneys general to resolve the claims against it.”
Foreclosure Law Firms and Title Companies to Pay $1.8 for Violations of Colorado Consumer Protection Laws
On August 3, Colorado AG Cynthia H. Coffman announced that certain Colorado foreclosure law firms and title insurance companies must pay, pursuant to a court order, $1.8 million in penalties to resolve allegations that they participated in a scheme to defraud consumers. According to AG Coffman’s announcement, between 2008 and 2013, the law firms and title companies violated the Colorado Consumer Protection Act (CPA) and the Colorado Fair Debt Collection Practices Act (CFDCPA) by charging “false and misleading costs for title insurance policies” on more than 2,000 foreclosures. The court originally imposed penalties of $2,291,000 for violations of the CPA and $1,374,600 for violations of the CFDCPA, but the penalties were reduced to a combined $1.8 million because of a statutory maximum penalty cap.
D.C. AG Racine Announces Settlement with Debt Collection Company
Recently, D.C. AG Karl Racine announced a settlement with a Maryland-based debt collector that allegedly engaged in unlawful and deceptive practices in violation of D.C.’s Consumer Protection Procedures Act and Debt Collection Law. According to the press release, the debt collector, among other things, allegedly collected costs and legal fees from consumers without obtaining a supporting court order, left voicemails to consumers in violation of applicable law, and failed to sufficiently inform consumers about their right to make a debt validation request. Pursuant to the order, the debt collector must, among other things: (i) pay $45,000 (subject to adjustment) to D.C. for its investigative costs; (ii) pay restitution to affected consumers; (iii) “clearly and conspicuously” disclose to consumers that have orally requested the verification of a debt to do so in writing; and (iv) not collect or attempt to collect any amount for “court fees,” as defined in the order, unless a judgment or order has awarded such fees.