Consumer Financial Protection Bureau

CFPB Sues Debt-Relief Operators for Alleged False Promises and Illegal Fees

The Consumer Financial Protection Bureau (“CFPB”) filed a complaint and obtained a preliminary injunction against World Law Group, its officers, and multiple interrelated companies (“World Law”) for allegedly running a debt-relief program that violated the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act.

According to the complaint, the alleged debt-relief program charged illegal upfront fees, including “attorney monthly service fee[s],” falsely promised consumers a team of attorneys to help negotiate debt settlements with creditors, failed to provide legal representation, and rarely settled consumers’ debts.

The complaint seeks, among other things, restitution for harmed consumers, penalties, and to permanently shut-down the operation. The CFPB also obtained preliminary injunctions that halt World Law’s operations and freezes its assets while the case is pending.

Consumer Protection

Arizona Attorney General Settles with Credit Card Processing Firm Over Deceptive Practices Allegations

Arizona AG Mark Brnovich reached a settlement with Merchant Processing Solutions, LLC d/b/a Payment Systems Corp (“Payment Systems”), a California company that markets and sells credit card processing services, over alleged state consumer protection law violations.

According to the AG, Payment Systems allegedly promised a flat 1% transaction surcharge rate that was subject to terms that were nearly impossible to meet, failed to adequately disclose other processing and equipment fees, and misrepresented that their services would provide lower processing rates and start-up costs than competitors.

Under the terms of the Assurance of Discontinuance (“AOD”), the company must allow customers to renegotiate or terminate their contracts without fees or penalties within the next 6 months, pay $46,684 in restitution, and pay an additional $10,000 to eligible customers.

New York Attorney General Seeks to Halt Supplement Manufacturers from Allegedly Misbranding Products

New York AG Eric Schneiderman sent cease-and-desist letters to 13 dietary supplement manufacturers to stop them from advertising certain products as a remedy for arthritis and chronic pain due to DNA testing results conducted by the New York Botanical Garden.

According to the letters, the DNA testing allegedly revealed that the dietary supplements contained either completely or mostly a different species of Harpagophytum procumbens, commonly referred to as Devil’s Claw, which is marketed as a remedy for arthritis and chronic pain. The manufacturers’ labels and advertisements allegedly did not disclose the presence of what the office deemed to be a substitute plant.  Some in the industry have questioned the AG’s distinction of both species of the herb as “less desirable” or not equally effective. The letters seek information and documents related to the testing and ingredients for the manufacturers Devil’s Claw products, as well as proposals, where appropriate, for recalling and compensating consumers who purchased the products.

E – Cigarettes

Massachusetts Attorney General Finalizes E-Cigarette Regulations

Massachusetts AG Maura Healey finalized regulations that amend existing tobacco regulations to include electronic smoking devices (“e-cigarettes”).  The amended regulations will go into effect on September 25, 2015.

The amendments seek to prevent the sale of e-cigarettes and component parts of the products (i.e. nicotine liquids and gels) to minors by, among other things, establishing a minimum sales age of at least 18, prohibiting sampling and promotional giveaways, and requiring that retailers place the products in a location only accessible to store employees.

AG Healey’s predecessor, AG Martha Coakley, was a signatory to an October 23, 2013 National Association of Attorneys General letter to the Food and Drug Administration, signed by 40 other AGs, urging the agency to propose rules and regulate e-cigarettes as they do traditional tobacco products.

Environment

Illinois Attorney General Settles with Petcoke Storage Operator Over Alleged Water Pollution

Illinois AG Lisa Madigan reached a settlement with KCBX Terminals Company (“KCBX”), a petroleum coke (“petcoke”) storage operator, to resolve alleged water pollution and open dumping violations at one of its terminals in the city of Chicago.

According to the complaint, filed by AG Madigan last year, KCBX allegedly failed to properly protect petcoke and coal from leaching into the Calumet River by insufficiently maintaining a narrow concrete walkway and using sandbags as a barrier to separate mounds of pet coke and coal from the river.

Under the terms of the settlement, KCBX, among other things, has ceased operations at the terminal, removed the petcoke and coal piles at issue, will pay a $35,000 fine, and will submit a plan to close an onsite retention pond at the now-closed terminal.

For-Profit Colleges

Kentucky Attorney General Settles with For-Profit College for Alleged Deceptive Practices

Kentucky AG Jack Conway, who leads a working group of 37 states investigating certain for-profit schools, reached a settlement with Daymar College, a Kentucky for-profit college, to resolve a three-year litigation related to the school’s business practices.

In the complaint, filed in July 2011, AG Conway alleged that Daymar denied students access to financial aid to buy textbooks from vendors other than school’s bookstore, misrepresented the transferability of credits earned at non-Daymar institutions, admitted students in violation of its own admissions policy, and hired faculty who lacked required credentials.

Under the terms of the settlement, Daymar will  pay $1.2 million to be distributed to eligible students, forgive an additional $11 million in debt owed to it by former students, allow a 21-day, risk free refund period for most new students, and provide prospective students with the U.S. Department of Education and Consumer Financial Protection Bureau’s “Know Before You Owe” financial aid shopping sheet disclosure, with additional information on the transferability of credits and median earnings for degree completers.

Mortgages/Foreclosures

New York Attorney General Reaches Settlement with Lender for Discriminatory Mortgage Practices

New York AG Eric Schneiderman reached a settlement with Evans Bank, N.A. and Evans Bancorp, Inc. (“Evans”) to resolve allegations that the companies engaged in discriminatory mortgage practices in violation of federal and state fair lending laws.

According to the AG, Evans allegedly “redlined” the city of Buffalo’s predominantly African-American East Side neighborhoods by intentionally excluding these neighborhoods from its lending area, developing mortgage products that were unavailable to these neighborhoods notwithstanding the creditworthiness of the applicants, and refusing to solicit customers, market mortgages, or provide banking facilities in those neighborhoods.

Under the terms of the settlement agreement, Evans must revise its lending area to include neighborhoods previously excluded and establish an $825,000 settlement fund to promote homeownership, affordable housing, and lending in Buffalo.