The State AG Report Weekly Update July 16, 2015

Consumer Financial Protection Bureau

CFPB and DOJ Settle with Auto Lender Over Allegations of Discriminatory Lending

  • The Consumer Financial Protection Bureau (CFPB) and Department of Justice (DOJ) reached a settlement with American Honda Finance Corp., the financing unit for American Honda Motor Co., Inc., (“Honda”), over allegations that it charged African-American, Hispanic, and Asian and Pacific Islander borrowers higher interest rates than non-Hispanic white borrowers for their auto loans in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • The complaint alleges that Honda’s practice of allowing dealers the discretion to charge higher interest rates, known as “dealer markup,” to consumers regardless of their creditworthiness resulted in minority borrowers paying higher interest rates than non-Hispanic white borrowers.
  • The settlement requires Honda to change its pricing and compensation system and to pay $24 million in restitution to affected borrowers.

Consumer Protection

FCC Enacts TCPA Changes to Clear Path for Robocall Blocking Technologies

  • The Federal Communications Commission (“FCC”) finalized several declaratory rulings, along party lines, to “provide much needed clarity” over the application of the Telephone Consumer Protection Act (“TCPA”) to prerecorded telemarketing calls or “robocalls”.
  • The FCC rulings allow consumers to revoke consent and use robocall blocking technologies to stop unwanted robocalls or texts, and the rulings also broaden the definition of “autodialer” to include “any technology with the capacity to dial random or sequential numbers.”
  • Last year, a bipartisan letter from the National Association of Attorneys General, including 39 AG signatories, urged the FCC to clarify and remove legal barriers for telephone carriers to provide call-blocking technology to address unwanted telemarketing.

New Jersey Acting Attorney General Settles with Company for Automated Ordering System

  • New Jersey Acting AG John Hoffman reached a settlement with Telebrands Corp., a New Jersey company selling “As Seen on TV” products, for violating state consumer protection laws.
  • According to the AG’s office, the company “aggressively” upsold products, subjected consumers to lengthy ordering processes, and charged consumers for products they declined, through its interactive voice response system.
  • Under the settlement, the company will make changes to its ordering system and business practices, as well as pay the state $550,000 in penalties. In addition, the settlement requires the company to hire a Consumer Affairs Liaison, subject to the AG Office’s approval.

New York Attorney General Closes Down Debt Collector for Allegedly Continuing Activities Prohibited Under Previous Settlement

  • New York AG Eric Schneiderman reached a settlement with Med-Rev Recoveries, Inc., a debt collection company, over allegations that the company violated state and federal debt collection laws, violated state consumer protection laws, and violated the terms of a previous settlement it entered into in 2009 with the AGs office over its debt collection practices.
  • According to AG Schneiderman, the company allegedly overcharged and harassed consumers, failed to provide documentation for amounts owed and paid, and delayed payments received from consumers to creditors.
  • The consent order prohibits Med-Rev from operating as a debt collector in New York and requires them to pay $550,000 in restitution, penalties, and costs.

New York Attorney General Settles with Auto Dealerships for Allegedly Misleading Consumers in Advertisements

  • New York AG Eric Schneiderman reached a settlement with Atlantic Automotive Group affiliate dealerships over allegations that their use of games in advertisements misleads consumers in violation of state consumer protection laws.
  • According to the AG’s office, among other things, “scratch-off,” “pull tab,” and other games used by the auto dealerships allegedly were deceptive and had the capacity to mislead consumers to believe that they were guaranteed winners of valuable prizes when virtually all of the consumers did not win a prize at all.  The intent of the games was to induce customers to visit dealerships to claim their “prize,” which did not exist.
  • The dealerships, under the settlement, have agreed to pay $310,000 in restitution and penalties.

Energy

Connecticut Attorney General Settles with Third-Party Energy Supplier Over Allegedly Improper Rate Offers

  • Connecticut AG George Jepsen and the Consumer Counsel for Connecticut’s utilities regulator settled with North American Power LLC, a third-party energy supplier, over allegations that the company violated state consumer protection laws by offering a low introductory rate to customers that was quickly replaced by a variable rate that was substantially higher than market or standard service rates.
  • As part of the settlement, the supplier will pay $2.6 million in charitable donations to the State’s fuel assistance fund.
  • Earlier this month, New York AG Eric Schneiderman similarly settled with another third-party energy supplier for allegedly violating state consumer protection laws by purportedly making false promises that consumers would save 10 to 15 percent on energy bills, among other things.

False Claims Act

New York Attorney General Settles with Pharmacy for Alleged False Claims Act Violations. 

  • New York AG Eric Schneiderman reached a $22.4 million settlement with Trinity Homecare LLC, a pharmacy that dispenses and delivers prescription drugs directly to patient’s homes, over allegations that the company violated federal and state false claims acts.
  • AG Schneiderman alleges that the company improperly sought Medicaid reimbursement for a drug used to treat premature infants vulnerable to lung disease when the drug was not authorized by the infant’s doctor or the reimbursement lacked necessary signature or patient information
  • This settlement follows a $2.5 million settlement against Trinity Homecare earlier this month, which resolved allegations the company improperly sought Medicaid reimbursement for infusion drugs provided to hemophilia patients that were unnecessary, in excess, or could not be verified.

For-Profit Colleges

Colorado Court Holds That DOE Rate Methodology Trumps Methodology in Consent Judgment

  • A Colorado appeals court held that Westwood College, Inc., a for-profit college institution, can comply with the Accrediting Council for Independent Colleges and Schools’ (“ACICS”) graduate placement methodology required by the U.S. Department of Education (“DOE”) when reporting to the accrediting agency, ACICS, in lieu of the stricter methodology the company agreed to in a 2012 consent judgment with former Colorado AG John Suthers.
  •  The Colorado appeals court’s decision reverses the trial court’s ruling that the consent judgment methodology must be used in all reporting by the College, including to the accrediting agency.
  • Westwood College had entered into a settlement with the Colorado AG’s office in 2012 to resolve allegations that it violated state consumer protection laws by overstating its graduation job-placement rates. The settlement included, in part, an agreement on the methodology the school must use to support advertising of its graduation placement success. 

Mortgages/Foreclosures

Vermont Attorney General Settles with Bank for Allegedly Failing to Abide by Foreclosure Agreements

  • Vermont AG William H. Sorrell settled with Bank of America, N.A. over allegations the bank violated Vermont foreclosure mediation law and consumer protection laws by not upholding the terms of settlement agreements it reached with homeowners through foreclosure mediations.
  • According to the complaint, Bank of America allegedly billed homeowners for more money than was agreed upon in the settlements, and sent statements, loan modification offers, and letters to homeowners with terms and amounts owed that were inconsistent with the settlements.
  • The settlement requires Bank of America to pay $1.25 million to Vermont, $250,000 of which will go toward restitution for affected homeowners.

State v. Federal

Wisconsin Attorney General Sues Federal Government to Allow Drug Screening of Welfare Recipients

  • Wisconsin AG Brad Schimel filed a complaint against the federal government to allow the state to enforce a new state budget provision that requires certain individuals be tested for controlled substances and undergo state-sponsored treatment as a condition of eligibility for the state-administered, federally-funded food stamp program.
  • The complaint seeks clarification of federal law, which AG Schimel believes allows states to condition welfare benefits on drug testing.
  • Federal officials previously warned Wisconsin, while the budget provision was pending before the state legislature, that “longstanding Federal policy . . . prohibits States from mandating drug testing” for food stamp applicants.
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