The role of state attorneys general (AGs) as an investigative and enforcement powerhouse for consumer protection and antitrust matters presents challenges and opportunities for corporate entities in all industries. By successfully anticipating state AG enforcement trends, companies can position themselves to implement strategies that proactively engage AGs on their own terms. In recent years, state AGs have coordinated multistate enforcement actions across a variety of industries. We see no reason why this expansion won't continue.
In 2015, AGs flexed their regulatory muscle on a variety of new fronts, including taking on corporate deception regarding climate change and pursuing false labeling in the dietary supplement industry. Following are some of the current hot topics among state AGs.
High-profile data breaches in the second half of 2015 involving children's personal data (VTech), as well the exfiltration of embarrassing information in the Ashley Madison website hack, should reinforce our expectation that state AGs will reassert themselves in the data privacy regulatory field.
Still outstanding are resolutions to the reported AG investigations into some of the largest data breaches, including those at Target, eBay and JPMorgan. Looming over AGs' data privacy enforcement efforts is the question of whether Congress will enact legislation that could impact AGs' enforcement authority over data breaches.
State AGs were likely pleased with the outcome in the Federal Trade Commission's (FTC) litigation—and subsequent settlement—with Wyndham Worldwide Corp. The FTC's enforcement authority was upheld in court before a settlement resolved allegations that the company maintained lax data security practices that led to three separate data breaches. Under the settlement, Wyndham will establish a comprehensive information security program designed to protect cardholder data, and will undergo annual audits.
State AGs have been pursuing enforcement actions against certain companies operating in the for-profit college industry for several years. We expect the AGs to convene to develop regulatory solutions for what they consider to be serious consumer protection issues relating to how for-profit colleges recruit and retain their students. Among the issues that we expect the AGs to continue focusing upon include:
- The marketing efforts for-profit colleges use to attract students, with particular emphasis on job placement statistics and the calculation of such statistics
- The manner in which for-profits screen and admit students to ensure they can succeed in their desired course of study
- Whether for-profit colleges have “cooling off” periods during which a person may withdraw after initially enrolling in the program
- The use of “lead generators” to identify and attract potential students
- Assurance of sufficient disclosure and transparency of the costs for students
- Student loan forgiveness programs
Protecting consumers in the solar panel industry
Rooftop solar power installations have been spreading rapidly around the country. "Going green" by going solar is very much the rage. The 30 percent federal income tax credit and a variety of local tax incentives have played a large role in this expansion, as have favorable rate structures in most states. Especially helpful has been a rich solar subsidy called "net metering," which requires local utilities to pay well above wholesale rates for any excess power from home solar generators.
However, the largest stimulator of rooftop solar installations appears to be the introduction of zero-down leases for the equipment. These leases promise consumers solar power with greatly reduced overall electricity costs and no out-of-pocket expense. Yet these 20-year leases raise serious consumer welfare concerns, which are beginning to worry Wall Street investors as well as prospective solar customers and the nation’s attorneys general.
Leasing consumers sign up for 20 years of steadily increasing lease payments. They do not get the investment tax credit, and they are not protected against future changes in rate structure (for example, the reduction or elimination of net metering). Far from being guaranteed lower power bills, the leasing customer is likely to encounter the opposite.
Furthermore, if he or she tries to sell the home before the end of the lease, the solar unit must be either removed at the owner’s cost, or the homeowner must pay the leasing company the present value of the remaining lease term. Of course, the buyer could qualify for and assume the solar lease. However, due to advances in solar technology and the escalating lease payment terms, that option is not attractive. Assuming a solar lease is something like buying someone's cell phone five years into a 10-year purchase contract. Given any other options, who would undertake to continue paying for obsolete technology?
As a result, studies show that homes with leased solar units are less valuable on the market than those with no solar at all. State AGs are just beginning to raise the alarm about such predatory practices. Even with the five-year extension of the solar income tax credit, these consumer concerns are likely to have an impact on the rooftop solar market.