The State AG Report Weekly Update June 18, 2015

 Breaking News

FCC Proposes $100 Million Forfeiture Against AT&T for Allegedly Misleading Customers About Data Plans

  • In a 3-2 party-line vote, the Federal Communications Commission (FCC) issued a Notice of Apparent Liability to AT&T Mobility, LLC, asserting that the company violated the Open Internet Transparency Rule (“Transparency Rule”) by failing to notify customers that the company could reduce (“throttle”) the network speed of mobile data plans that the company had called “unlimited.”  In a dissenting opinion, Commissioner Ajit Pai called the decision a “regulatory bait and switch” in which the FCC retroactively applied the Transparency Rule to a once-approved network management practice.
  • AT&T, which will dispute the charges, responded that “The FCC has specifically identified this practice as a legitimate and reasonable way to manage network resources for the benefit of all customers, and has known for years that all of the major carriers use it.”
  • AT&T has 30 days to respond to the FCC’s Notice, which alleges that the company failed to adequately notify customers with “unlimited” data plans that they were subject to AT&T’s Maximum Bit Rate (“MBR”) policy, under which customers’ network speeds for their data service would be reduced below the advertised network speeds if they used more than 3 to 5 gigabytes of data during a billing cycle.
  • The FCC has proposed to levy an unprecedented $100 million forfeiture, the largest forfeiture proposed by the agency and first under the Transparency Rule, against the company and require it to take corrective actions to ensure compliance with the Transparency Rule.

Antitrust

Connecticut Attorney General Urges State Utilities Regulator to Stop Merger After FERC Approval

  • Connecticut AG George Jepsen has requested that the state Public Utilities Regulatory Authority (“PURA”) reject the proposed merger between two energy companies UIL Holding Corporation and Iberdrola.
  • According to reports, AG Jepsen is urging PURA to either reject the merger because it is not in the public interest or, if approved, place conditions on the merger, which include requiring the companies to set aside $30 million for the clean-up of an old power plant in New Haven formerly owned by United Illuminating Company, a subsidiary of UIL Holding.
  • AG Jepsen filed his objection with PURA shortly after the merger was approved by the Federal Energy Regulatory Commission.

Consumer Financial Protection Bureau

CFPB Sues Auto Lender for Debt Collection Practices Against Servicemembers

  • The Consumer Financial Protection Bureau (“CFPB”) filed a lawsuit against Security National Automotive Acceptance Company, LLC (“SNAAC”), an auto finance company specializing in lending to servicemembers, for violating federal consumer protection laws by allegedly using illegal threats and deceptive claims to collect debts.
  • According to the complaint, the company harassed servicemembers who defaulted on their debts by, among other things, exaggerating the consequences of not paying, such as telling them it could result in demotion or discharge from the military, and contacting or repeatedly threatening to contact commanding officers in an effort to force payment.
  • The CFPB is seeking restitution, civil penalties, and to prohibit the company from committing future violations.

Consumer Protection

New York Attorney General, FCC, and U.S. Senators Warn Companies That Autodialing Policies May Violate Federal Consumer Laws

  • New York AG Eric Schneiderman sent identical letters to eBay Inc. and PayPal Inc. requesting more information on modifications the companies made to their user agreements for possible violations of the Fair Debt Collection Act and the Telephone Consumer Protection Act.
  • In the letter, AG Schneiderman alleges that the user agreement modifications fail “to respect consumer choice and privacy preferences” and allow eBay and PayPal to use autodialed, prerecorded calls or text messages to contact users and to collect debts, solicit opinions, and offer promotions.
  • Similar letters have been sent to PayPal by the Federal Communications Commission and a group of four Democratic U.S. Senators

Iowa Attorney General Settles With Sweepstakes Company for Alleged Deceptive Advertising

  • Iowa AG Tom Miller entered an Assurance of Voluntary Compliance (“AVC”) with Tactical Marketing, Inc., a Florida company, and its owner over allegations that the company violated state consumer protection laws when it mailed deceptive sweepstake solicitations to Iowa residents.
  • AG Miller alleges that the mailings deceptively used legalistic terms to suggest to recipients that they won a cash prize that could be collected with a fee, when the fee was instead for a list of publicly available contests that consumers could enter.
  • The AVC prohibits the company from sending the allegedly deceptive marketing materials to Iowa residents and requires it to pay $600,000 in restitution.

State v. Federal

Maine and Indiana Attorneys General Urge FDA to Finalize E-Cigarette Regulations

  • Indiana AG Greg Zoeller and Maine AG Janet Mills sent a letter to the Food and Drug Administration (“FDA”) urging the agency to finalize proposed regulations that would add e-cigarettes to the Tobacco Control Act.
  • In the letter, the AGs expressed frustration that the FDA has failed to finalize regulations, which would, in part, regulate e-cigarettes similar to tobacco products, after the comment period for the FDA’s proposed rule on e-cigarettes ended in August 2014, and reiterated their prior recommendations that the FDA regulations should subject e-cigarettes to the same advertising and marketing restrictions, flavor limitations, health warning label requirements, and internet sales as other tobacco products.
  • Generals Zoeller and Mills, who serve as chair and vice-chair, respectively, of the National Association of Attorneys General (“NAAG”) Tobacco Committee, were signatories to an October 23, 2013 NAAG letter to the FDA, which was signed by 39 other AGs urging the agency to propose rules and regulate the products.

Unclaimed Property

West Virginia Supreme Court Finds Life Insurance Companies Statutorily Obligated to Determine if Life Insurance Proceeds are Due and Payable

  • The West Virginia Supreme Court of Appeals, West Virginia’s highest court, ruled in favor of West Virginia’s Treasurer in finding that the 63 life insurance company defendants have a statutory obligation to “account for and turn over” unclaimed life insurance proceeds three years after the insured has died, under the state’s unclaimed property laws.  The court rejected the state’s claim that the insurers must use the Death Master File to track customer deaths.
  • The court overturned a Circuit Court of Putnam County’s dismissal of the state’s complaint, which had found, in relevant part, that insurers had no affirmative obligation to determine whether the insured had died, but rather the insurers’ obligations were triggered upon receipt of proof of death or where the insured reached the limiting age, and remanded the case for further proceedings.  Many of the defendants have settled this issue in 49 states and with the West Virginia Insurance Commission.
  • The case is Purdue v. Nationwide Life Insurance Company, et al., No. 14-0100 (W.Va.).
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