The State AG Report Weekly Update November 2, 2017

AG Elections

Democrat Renato Mariotti Declares Bid for Illinois Attorney General

Consumer Financial Protection Bureau

12 AGs File Amicus Brief Challenging the Constitutionality of the CFPB and Arbitration Rule

  • 12 Republican AGs, led by Texas AG Ken Paxton, filed an amicus brief in the U.S. District Court for the Northern District of Texas challenging the constitutionality of the Consumer Financial Protection Bureau (“CFPB”) and its Final Rule on arbitration agreements (“Arbitration Rule”).
  • The AGs’ brief argues that the CFPB’s structure violates constitutional separation of powers by concentrating “unchecked authority in a sole, unaccountable director of an administrative agency,” such that all rules promulgated by the agency, including the Arbitration Rule, are similarly unconstitutional.
  • President Donald Trump on Wednesday signed a Congressional Review Act resolution repealing the Arbitration Rule, which prohibited certain financial service providers from blocking consumer participation in class action lawsuits through arbitration agreements and required providers to disclose arbitral records to the CFPB.

Consumer Protection

Illinois Attorney General Sues Payday Lender for Allegedly Unlawful Use of Non-Compete Agreements

  • Illinois AG Madigan filed a lawsuit against payday lender Check Into Cash of Illinois, LLC (“Check Into Cash”) for allegedly violating the state’s Freedom to Work Act by imposing non-compete agreements on low-wage customer service employees.
  • According to the complaint, Check Into Cash allegedly used non-compete agreements to restrict low-wage employees—those earning less than $13 per hour—from working for any other business in a broad range of consumer lending services for one year after leaving Check Into Cash.
  • The lawsuit seeks, among other things, a judgment declaring the non-compete agreements unenforceable and void, enjoining Check Into Cash from using such agreements in the future, and requiring the company to notify impacted employees.

Financial Industry

45 AGs Settle with Global Financial Institution Over Alleged Interest Rate Manipulation

  • 45 AGs, led by New York AG Eric Schneiderman and California AG Xavier Becerra, reached a settlement with German banking and financial services company Deutsche Bank AG (“Deutsche Bank”) for allegedly violating state and federal statutes governing antitrust, unfair and deceptive acts and practices, false claims, securities, and fraud, as well as common law principles, by manipulating the London Interbank Offered Rate (“LIBOR”), a benchmark interest rate used in international financial markets.
  • According to the AGs, Deutsche Bank allegedly defrauded consumers by making false or misleading LIBOR submissions, attempting to influence other banks’ LIBOR submissions to benefit its own trading positions, and intentionally concealing its fraudulent actions from consumers.
  • Under the terms of the settlement, Deutsche Bank must pay $220 million to the AGs, $213 million of which will be distributed to entities that suffered losses from the bank’s alleged manipulation.

Virginia Attorney General Reaches Settlement with Internet Lender Over Alleged Consumer Protection Violations

  • Virginia AG Mark Herring settled with Internet lender Mr. Amazing Loans for allegedly violating the Virginia Consumer Protection Act (“VCPA”) by engaging in misleading advertising and charging an annual percentage rate (“APR”) that exceeded state limits.
  • According to the AG’s office, Mr. Amazing Loans allegedly advertised that it was licensed by the state’s Bureau of Financial Institutions (“BFI”) to offer installment loans over the Internet at 29.9% APR, yet was neither licensed by BFI nor granted an exception to the state’s general APR limit of 12%.
  • Under the terms of the settlement, Mr. Amazing Loans must stop misrepresenting its BFI licensing status and its ability to collect interest in excess of state usury limits. Additionally, Mr. Amazing Loans must refund $31,000 to consumers who paid off more than their principal plus 12% APR, refund $235,000 in interest forgiveness to consumers with open accounts, and pay $50,000 in civil penalties and court costs.

Medicaid Fraud

New Mexico Attorney General Settles with Healthcare Network Over Alleged Failure to Pay Medicaid Premium Taxes

  • New Mexico AG Hector Balderas reached a settlement with Presbyterian Health Plan, Inc., Presbyterian Network, Inc., and Presbyterian Insurance Company, Inc. (collectively “Presbyterian”) for allegedly violating the state’s Fraud Against Taxpayers Act by failing to pay owed Medicaid premium taxes.
  • According to the AG’s office, Presbyterian allegedly failed to pay $14.6 million in Medicaid premium taxes in 2003 and 2004.
  • Under the terms of the settlement, Presbyterian will pay $18.5 million, 20 percent of which will go to the plaintiffs who originally brought a qui tam action related to the conduct.

Pharmaceuticals

Alaska and New Jersey Attorneys General File Lawsuits Against Opioid Manufacturers, Distributors

  • New Jersey AG Christopher Porrino and Alaska AG Jahna Lindemuth filed separate lawsuits against prescription opioid manufacturer Purdue Pharma L.P., Purdue Pharma Inc., and the Purdue Frederick Company (collectively “Purdue Pharma”) for allegedly violating the states’ consumer protection laws and false claims acts, as well as creating a public nuisance by engaging in false, deceptive, and unfair marketing of prescription opioids.
  • According to the New Jersey and Alaska lawsuits, Purdue Pharma allegedly sought to increase profits by misrepresenting the addictive risks of opioids to doctors and the public through selectively disclosing research to exaggerate the benefits of its opioid products and conceal the risks of addiction.
  • The lawsuit seeks to enjoin Purdue Pharma from engaging in unfair or deceptive marketing practices, disgorge any profits the corporations made through such practices, impose maximum statutory civil penalties, and recover restitution on behalf of affected consumers, attorneys’ fees, and investigation costs.
  • As previously reported, Washington AG Bob Ferguson filed a similar lawsuit against Purdue Pharma in September.

State AGs in the News

Nevada Attorney General Announces Bid for Governor in 2018

  • Nevada AG Adam Laxalt has announced his intent to seek the Republican Party’s nomination for the Governor of Nevada in 2018.
  • AG Laxalt, first elected AG in 2014, previously served as a Lieutenant and Judge Advocate General in the U.S. Navy.
  • AG Laxalt joins state Treasurer Dan Schwartz in competing for the Republican nomination for Governor. Vying for the Democratic nomination are Clark County Commissioners Chris Giunchigliani and Stephen Sisolak. Republican incumbent Governor Brian Sandoval cannot run for re-election due to term limits.
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