The State AG Report Weekly Update January 10, 2019

Breaking News

Hawaii Governor Appoints Clare Connors as Attorney General

  • Clare Connors, a Democrat, has been appointed to serve as Hawaii AG by recently re-elected Governor David Ige, replacing AG Russell Suzuki. The appointment is subject to confirmation by the state Senate.
  • Prior to her appointment, Connors was a partner at the Honolulu firm Davis Levin Livingston, and previously served as an Assistant United States Attorney in the District of Hawaii and as a trial attorney for the U.S. Department of Justice Tax Division.

Consumer Financial Protection Bureau

CFPB Settles with Federally Chartered Savings Association Over Alleged Electronic Fund Transfer Act and Consumer Protection Violations

  • The Consumer Financial Protection Bureau (“CFPB”) reached a settlement with federally charted savings association USAA Federal Savings Bank (“USAA”) to resolve allegations that violated the federal Electronic Fund Transfer Act (“EFTA”) and Regulation E promulgated thereunder, as well as the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • According to the consent order, USAA allegedly failed to implement consumers’ requests to stop Preauthorized Electronic Fund Transfers (“Preauthorized EFTs”)—which allow consumers to debit money from or credit money to their depository accounts—or resolve errors in its failure to stop Preauthorized EFTs, failed to initiate and complete reasonable error resolution investigations, and reopened deposit accounts consumers had previously closed without seeking prior authorization or providing adequate notice.
  • Under the terms of the consent order, USAA must pay over $12 million in redress to certain consumers, $3.5 million in civil penalties to the CFPB, and abide by injunctive provisions against further violations.

Consumer Protection

Arizona Attorney General Sues Vehicle Manufacturer Over Alleged False Advertising and Emissions Test Manipulation

  • Arizona AG Mark Brnovich filed a lawsuit against Mercedes-Benz USA, LLC and Daimler Aktiengesellschaft, (collectively, “Mercedes-Benz”) over allegations that it falsely advertised certain vehicles as “clean diesel” in violation of the state’s Consumer Fraud Act.
  • According to the complaint, Mercedes-Benz allegedly falsely marketed its BlueTEC vehicles as low-emission and “the world’s cleanest diesel vehicles,” among other claims, when the vehicles emitted significant pollutants and contained a shut-off device to mask their true emissions characteristics during testing.
  • The complaint seeks restitution, injunctive relief, disgorgement, civil penalties, and costs and attorneys’ fees, among other things.
  • As previously reported, AG Brnovich and other AGs have previously reached settlements with vehicle manufacturers Volkswagen AG, Audi AG, Porsche AG, and related affiliates to resolve similar claims arising from the sale of diesel vehicles equipped with software intended to circumvent applicable emissions standards.

Former Connecticut Attorney General Reaches Agreements with Insurance Companies to Provide Assistance to Homeowners

  • Former Connecticut AG George Jepsen and Connecticut Governor Dannel Malloy reached agreements with The Hartford Financial Services Group, Inc. (“Hartford”) and Liberty Mutual Insurance Company (“Liberty Mutual”) to provide supplemental financial assistance to home insurance policyholders to remediate crumbling concrete foundations.
  • According to the AG’s office, homeowners who are experiencing deterioration of their foundation due to pyrrhotite in the concrete aggregate and who have opted to participate in the assistance program launching through the Connecticut Foundations Solutions Indemnity Company (“CFSIC”), among other requirements, will be eligible for supplemental financial assistance to bridge the gap between their CFSIC benefit and the cost of replacing their foundations.
  • According to the AG’s office, The Hartford will commit $3.5 million to The Hartford Benefit Program and Liberty Mutual will commit $7 million to the Liberty Benefit Program, programs in place to provide financial assistance to policyholders with failing foundations.

District of Columbia Attorney General Sues Fitness Company Over Allegedly Misleading Gym Membership Policies and Deceptive Billing Practices

  • District of Columbia AG Karl Racine filed a lawsuit against national fitness center operator Town Sports International, LLC d/b/a Washington Sports Clubs (“WSC”) over allegations that it misled consumers about gym membership policies in violation of the District’s Consumer Protection Procedure Act and the terms of a prior settlement agreement with the AG’s office.
  • According to the complaint, WSC employees allegedly made misrepresentations to consumers regarding fees and auto-renewal terms; failed to provide written membership contracts to consumers; continued to charge consumers after membership cancellation; and misled consumers about membership cancellation policies which, as previously reported, is also prohibited under WSC’s 2016 settlement agreement with the AG’s office.
  • The complaint seeks injunctive relief, restitution, civil penalties, and costs and attorneys’ fees.

Data Privacy

43 AGs Settle with National Retailer Over Alleged Breach of Customer Payment Card Data

  • 43 AGs, led by Illinois AG Lisa Madigan and Former Connecticut AG George Jepsen, reached a settlement with national retailer The Neiman Marcus Group, LLC (“Neiman Marcus”) to resolve alleged violations of state consumer protection laws stemming from the 2013 breach of its customers’ payment card data.
  • According to the AGs, Neiman Marcus allegedly failed to protect sensitive consumer data and failed to accurately represent its data security and privacy policies when data from 370,000 payment cards was compromised, leading to the fraudulent use of 9,200 payment cards.
  • Under the terms of the assurance of voluntary compliance, Neiman Marcus will pay $1.5 million to the states, comply with payment card industry data security standards, conduct an information security assessment, and implement specific enhanced data security measures, among other things.

Mississippi Attorney General Discusses Increased State Interest in Tech Enforcement

  • In an article titled “Mississippi AG Defends Increased State Interest in Tech Enforcement,” Communications Daily (paywall) published an interview with Mississippi AG Jim Hood in which AG Hood emphasized AGs’ “obligation to protect consumers against deception” by online platforms and discussed the “growing trend of tech-related enforcement from state entities.”
  • According to AG Hood, the immunity protections provided to online platforms under Section 230 of the federal Communications Decency Act shroud such companies in “mystery,” and it seems unlikely that Congress will pass any federal privacy legislation in the next few years.
  • AG Hood “urged industry to formulate a set of best business practices to improve data collection.”

Environment

9 Democratic AGs Oppose EPA’s Proposed Rule to Delay Implementation of Landfill Emissions Rulemaking

  • Nine Democratic AGs, led by California AG Xavier Becerra and the California Air Resources Board, submitted comments in opposition to the U.S. Environmental Protection Agency’s (“EPA”) proposed rule to further delay implementation of its Emission Guidelines and Compliance Times for Municipal Solid Waste Landfills (“Landfill Emission Guidelines”) by another four years.
  • According to the AGs’ comments, the EPA’s delay is an unlawful attempt to stay the Landfill Emission Guidelines while the agency reconsiders them, violates the EPA’s statutory responsibilities to reduce emissions under the Clean Air Act, and fails to follow required administrative rulemaking procedures, among other things.
  • The AGs request that the EPA withdraw the proposed rule and implement the Landfill Emission Guidelines immediately.

Financial Industry

New York Attorney General Settles with Federal Student Loan Servicer Over Allegedly Steering Distressed Borrowers Towards More Expensive Repayment Options

  • New York AG Letitia James and the New York Department of Financial Services reached a settlement with federal student loan servicer Conduent Education Services, LLC f/k/a ACS Education Services, Inc. (“ACS”) to resolve allegations that it steered distressed borrowers towards more expensive repayment options and deceived borrowers about cheaper repayment options in violation of the state’s financial services law and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • According to the consent order, ACS steered struggling borrowers into forbearance—a temporary pause in payments which usually increases the cost of a loan—instead of directing borrowers to apply for Income-Based Repayment (“IBR”)—which pegs payments to income and family size—and other more beneficial programs that ACS did not service, failed to process applications for borrowers seeking to consolidate loans or enroll in IBR in a timely and accurate way, misallocated borrowers’ payments causing some to incur late fees or interest, gave inaccurate information to credit reporting agencies, and failed to notify borrowers of eligibility to release co-signers, among other things.
  • Under the terms of the consent order, ACS has agreed to pay $8 million in consumer restitution, pay $1 million in penalties to the state, and not service loans for the major federal programs or private loans for the next five years.

For-Profit Colleges

49 AGs Settle with For-Profit Education Companies Over Allegedly Misleading Prospective Students

  • 49 AGs, led by Former Connecticut AG George Jepsen and Iowa AG Tom Miller, reached a settlement with for-profit education companies Career Education Corporation, American InterContinental University, Inc. and Colorado Technical University, Inc. (collectively, “CEC”) to resolve alleged state consumer protection law violations over disclosures to prospective students.
  • According to the assurance of voluntary compliance (“AVC”), CEC allegedly misled students about the cost of enrollment at its institutions, the transferability of credits, course offerings, and its job placement rates, and also allegedly did not adequately disclose that certain programs were not accredited.
  • Under the terms of the AVC, CEC must pay $5 million to the states, forgo collecting approximately $493.7 million in debts owed by students, and abide by injunctive provisions relating to representations to prospective students, among other things.

Health Care

Massachusetts Attorney General Settles with Insurance Company Over Allegedly Denying Policies to Consumers Using HIV Prevention Medication

  • Massachusetts AG Maura Healey reached a settlement with Mutual of Omaha Insurance Company (“Mutual of Omaha”) to resolve allegations that it denied insurance coverage to individuals using HIV prevention medication in violation of state antidiscrimination laws.
  • According to the AG’s office, Mutual of Omaha allegedly denied life insurance and long-term care insurance policies to consumers taking HIV prevention medication Truvada.
  • According to the AG’s office, under the terms of the assurance of discontinuance, Mutual of Omaha will pay $25,000 to the state, cease denying coverage to individuals using Truvada, and offer affected consumers an opportunity to reapply for insurance.

Labor and Employment

Massachusetts Attorney General Settles with National Payday Lender Over Allegedly Unlawful Use of Non-Compete Agreements

  • Massachusetts AG Maura Healey reached a settlement with national payday lender Check Into Cash of Illinois LLC (“Check Into Cash”) to resolve allegations that it required employees to sign non-compete agreements in violation of the state’s Freedom to Work Act.
  • According to the AG’s office, Check Into Cash allegedly required low-wage customer service employees to sign unlawful non-compete agreements that prohibited them from working for any other business that provides consumer lending services or products within 15 miles of any of its or its parent company’s, affiliates’, or subsidiaries’ offices or retail locations across 33 states for one year after they left the company.
  • According to the AG’s office, under the terms of the settlement, Check Into Cash will pay $75,000 to the AG’s office, stop using non-compete agreements, train managers and personnel on the change, and notify impacted employees.
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