The State AG Report Weekly Update May 21, 2015

Breaking News

FTC, All Fifty States, and DC Sue Four Cancer Charities for Deceptive Practices

  • The Federal Trade Commission and Attorneys General and other law enforcement personnel from all fifty states and the District of Columbia filed a lawsuit against Cancer Fund of America, Inc., Cancer Support Services, Inc., Children’s Cancer Fund of America, Inc., The Breast Cancer Society, Inc., and officers and directors of the four charities for allegedly defrauding consumers out of more than $187 million.
  • According to the complaint, the charities allegedly used false and deceptive claims to obtain donations, including, inter alia, that donations would be used to provide direct support to cancer patients, children with cancer, and breast cancer patients in the United States, when allegedly the vast majority of donors’ contributions have not directly assisted cancer patients in the United States or otherwise benefited any charitable purpose.
  • The complaint, which seeks, among other things, a permanent injunction, restitution, rescission or reformation of contracts, attorneys’ fees, and civil penalties, alleges that the charities violated federal and state statutes by (1) engaging in false and deceptive practices, (2) filing false and misleading financial statements with state charities regulators, and (3) using telemarketers to misrepresent the nature, purpose, or mission of a charitable entity in violation of the Telemarketing Act, which authorizes AG enforcement.

Antitrust

Washington Attorney General Announces $63 Million Settlement With LCD Manufacturers

  • Washington AG Bob Ferguson settled with the remaining nine LCD manufacturers named in a 2010 complaint that alleged that the LCD manufacturers participated in a price-fixing conspiracy from 1998 through 2006 that increased prices by as much as 20 percent.
  • The companies involved in the settlements (and the amounts) are:  Samsung ($12.94 million); AU Optronics ($12.5 million); Chi Mei Optoelectronics ($8.75 million); Sharp ($7.75 million); Epson ($2.7 million); Toshiba ($950,000); and Chunghwa Picture Tubes ($350,502).  LG and Hitachi previously settled for $13 million and $5.2 million, respectively.

Consumer Financial Protection Bureau

CFPB Seeks Information on Student Loan Servicing Practices

  • The Consumer Financial Protection Bureau (“CFPB”) has solicited public comments on student loan servicing practices with respect to student loan repayment, the applicability of consumer protections from other financial products (i.e. credit card and mortgage servicing) to the student loan servicing market, and the availability of data on borrowers and repayment.
  • The CFPB’s inquiry follows President Obama’s “Student Aid Bill of Rights,” a Presidential Memorandum directing the Department of Education, Department of the Treasury, and CFPB to provide recommendations for statutory or regulatory changes to improve consumer protections in the student loan market by October 1, 2015.
  • Public comments are due by July 13, 2015.

Consumer Protection

Thirty-One Attorneys General Settle With “Big 3” Credit Reporting Agencies

  • 31 AGs announced a settlement with Equifax Information Services LLC, Experian Information Solutions Inc., and TransUnion LLC to resolve an investigation regarding the credit reporting industry that was initiated by Ohio AG Mike DeWine in 2012.
  • Under the terms of the settlement, the credit reporting agencies have agreed, among other things, to monitor providers of credit reporting information, stop direct-to-consumer marketing during dispute phone calls, implement escalated processes for handling complicated disputes, and prohibit certain information from appearing on a credit report.
  • The settlement also requires the credit reporting agencies to pay the participating states $6 million.

Michigan Attorney General Reaches $2.2 Million Settlement With Payday Lenders

  • Michigan AG Bill Schuette reached a $2.2 million settlement with South Dakota-based Western Sky Financial, LLC and California-based CashCall, Inc. for allegedly making and servicing unlicensed loans with illegally high interest rates.
  • The agreement, in part, automatically reduces the interest rates on all loans owned by the companies to Michigan’s legal rate of 7% and establishes a $2.2 million settlement fund to be distributed to Michigan consumers who have overpaid on their loans.
  • This is the latest in a string of actions taken against Western Sky and CashCall, after failed attempts by Western Sky to assert that its loans were immune from state laws under tribal sovereign immunity because it was based on an Indian reservation and owned by a member of the Cheyenne River Sioux Tribe.  Other actions against these companies include New York AG Eric Schneiderman’s January 2014 settlement with both companies; Missouri AG Chris Koster’s settlement with Western Sky and other companies in March 2015; and the CFPB’s complaint against CashCall in December 2013.

Data Privacy

Thirty-Eight Attorneys General Reach Agreement on RadioShack Bankruptcy Sale of Personally Identifiable Information

  • A coalition of thirty-eight AGs, led by Texas AG Ken Paxton, partnered to reach a settlement with General Wireless Operations Inc. (“General Wireless”) after the company sought approval from the bankruptcy court to purchase RadioShack’s customers’ personally identifiable information, as well as its e-commerce business, trademark, and intellectual property.
  • Under the terms of the settlement, General Wireless only can retain the customer email addresses of those who specifically requested product information in the last two years.  The settlement further prevents the company from selling or sharing its customer information with any other entity.
  • In March, the bankruptcy court approved General Wireless’s purchase of 1,750 stores out of the bankruptcy.

For-Profit Colleges

Twelve Attorneys General Send Letter Expressing Concerns to the U.S. Department of Education Regarding For-Profit College Students

  • Twelve AGs, led by Kentucky AG Jack Conway, have sent a letter to the U.S. Department of Education (“DoE”) expressing concerns about DoE’s guidance to former students of Corinthian Colleges, Inc., which recently announced the closure of its schools.
  • In the letter to DoE, the AGs expressed concerns about DoE’s list of transfer opportunities for affected students, which include other for-profit schools that are currently under investigation, and DoE’s failure to warn students that, if they transfer their Corinthian credits to another school, they will not be eligible for certain loan forgiveness programs.  The letter also requests that DoE provide guidance for students to raise Corinthian’s alleged fraud as a defense to repayment of their federal student loans.
  • This letter follows a similar request from a group of nine AGs last month that DoE step in to relieve student debt for loans incurred to attend Corinthian schools and establish a “clear system” for student borrowers to seek relief from loans when a school is deemed to have violated the law.
  • AG Conway leads a 37-state working group, which is reviewing the practices of some for-profit colleges.

State v. Federal Government

North Carolina Attorney General Petitions Fourth Circuit to Overturn FCC Order

  • North Carolina AG Roy Cooper filed a petition with the U.S. Court of Appeals for the Fourth Circuit, asking the court to overturn an order issued by the Federal Communications Commission (“FCC”) preempting certain state laws that regulate the manner in which municipalities can offer broadband services.
  • North Carolina state law limits publicly-owned broadband Internet service providers from offering services to customers outside of municipal boundaries. The FCC found the law to be in conflict with Section 706 of the Telecommunications Act of 1996, which requires the FCC to remove barriers to broadband investment and competition.
  • AG Cooper’s petition alleges that the FCC Order violates the United States Constitution, exceeds the FCC’s authority, and is arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act.  A similar petition was filed with the U.S. Court of Appeals for the Sixth Circuit by Tennessee AG Herbert Slatery earlier this year.
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