The State AG Report Weekly Update January 31, 2019

2019 AG Elections

Republican Wil Schroder Announces Bid for Kentucky AG, Republican Whitney Westerfield Withdraws Bid

  • State Senator Wil Schroeder, a Republican, has announced his candidacy for Kentucky AG in 2019 after Republican state Senator Whitney Westerfield withdrew his candidacy.
  • Senator Schroder is serving his second term in the state Senate and previously served as a prosecutor in Campbell County.
  • Schroder joins Daniel Cameron in seeking the Republican nomination, while former Kentucky AG Greg Stumbo is the only Democrat to announce his candidacy to date.
  • As previously reported, incumbent AG Andy Beshear is seeking the Democratic nomination for Governor in 2019.

Charities

California Attorney General Settles with International Assistance Charity for Allegedly Misleading Reporting Scheme

  • California AG Xavier Becerra reached a settlement with international assistance charity Giving Children Hope and its directors and officers (collectively, “GCH”) to resolve allegations that it filed misleading public reports in violation of state laws governing reporting by charities.
  • According to the AG’s office, GCH—which provides food, clothing, and medical supplies internationally—allegedly over-reported the value of wholesale pharmaceutical products that were purchased by two of its subsidiaries and donated back to GCH as part of its Gift-in-Kind program, and inaccurately claimed in its public financial reporting and on its website the percentage of contributions that provided direct aid in order to generate more donations.
  • According to the AG’s office, GCH will pay $410,000, cease filing misleading financial reports, and terminate its pharmaceutical Gift-in-Kind program.

Consumer Financial Protection Bureau

CFPB Settles with Online Lender Over Alleged Unauthorized Debits and Failure to Process Loan Extensions

  • The Consumer Financial Protection Bureau (“CFPB”) reached a settlement with online lender Enova International, Inc. (“Enova”) to resolve allegations that it made unauthorized debits and failed to honor loan extensions promised to consumers in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • According to the consent order, Enova allegedly debited consumer bank accounts for loan payments without authorization and erroneously processed loan extension requests and approvals, causing some consumers not to receive the extensions for which they were approved and to incur overdraft and insufficient funds fees.
  • Under the terms of the consent order, Enova must pay a $3.2 million civil money penalty to the CFPB, cease making unauthorized debits, honor loan extensions previously granted to consumers, and increase oversight by its board of directors, among other things.

Consumer Protection

District of Columbia Attorney General Settles with Funeral Home for Allegedly Misleading Consumers About Its Services, Introduces Funeral Services Consumer Protection Act

  • District of Columbia AG Karl Racine reached a settlement with Austin Royster Funeral Home, Inc. and one of its officers (collectively, “Austin Royster”) to resolve a lawsuit alleging that it misled consumers about its funeral services in violation of the District’s Consumer Protection Procedures Act.
  • According to the complaint, Austin Royster allegedly misrepresented to consumers that it was able to obtain death certificates on consumers’ behalf but did not actually possess the business and occupational licenses required to do so, charged consumers for services that it did not provide, conducted business without required licenses, and accepted payments from life insurance companies in excess of appropriate amounts for the services it provided.
  • Under the terms of the consent order, Austin Royster must pay $280,000 in restitution to consumers and $20,000 in penalties to the District and cease operations, among other things.
  • AG Racine also introduced the Funeral Services Consumer Protection Amendment Act of 2019 (“Act”) to the D.C. Council, which is currently pending before the Council’s Committee on Business and Economic Development and would create a “Funeral Bill of Rights” for consumers.

Massachusetts Attorney General Settles with Debt Buyer for Financing Allegedly Misleading Education Services

  • Massachusetts AG Maura Healey reached a settlement with debt buyer MSW Capital, LLC to resolve allegations that it purchased loans provided to students of for-profit education company The College Network, Inc. to finance purchases for allegedly overpriced and ineffective study materials.
  • According to the AG’s office, MSW Capital allegedly purchased loans from The College Network that were made to students subject to misrepresentations that The College Network’s educational materials would help them pass exams and earn college credit in fields like nursing and health care administration.
  • According to the AG’s office, under the terms of the assurance of discontinuance, MSW Capital will discharge $39,000 in loan debt, pay $1,400 in refunds to affected students, and request the removal of negative loan information from students’ credit reports.
  • As previously reported, AG Healey reached a settlement with credit union We Florida Financial over financing allegedly misleading educational services sold by The College Network.

Washington Attorney General Sues Multi-Level Marketing Business Over Alleged Pyramid Scheme

  • Washington AG Bob Ferguson filed a lawsuit against multi-level marketing business LLR LuLaRoe, Inc. and related entities and individuals (collectively, “LuLaRoe”) over allegations that it established, promoted, and operated a pyramid scheme in violation of the state’s Antipyramid Promotional Scheme Act and Consumer Protection Act.
  • According to the complaint, LuLaRoe allegedly made inflated claims of business profitability and sustainability to potential consultants, gave bonuses to consumers who worked as consultants for the company based on how much inventory they and their recruits bought, required consultants to “inventory load”—purchase large quantities of potentially unprofitable clothing to receive one profitable style—and failed to honor its refund policy for unsold merchandise.
  • The complaint seeks restitution, injunctive relief, penalties, and costs and fees, among other things.

Financial Industry

14 Attorneys General Pen Letter to Federal Deposit Insurance Corporation Requesting Guidance to Banks Regarding Small-Dollar Lending

  • A coalition of 14 Democratic AGs, led by District of Columbia AG Karl Racine and Massachusetts AG Maura Healey, submitted a comment to the Federal Deposit Insurance Corporation (“FDIC”) in response to the FDIC’s Request for Information on Small-Dollar Lending, which sought input on how the FDIC can encourage banks to responsibly underwrite small-dollar loans to consumers.
  • In the comment, the AGs urge the FDIC to issue guidance to state-chartered banks that would discourage the banks from partnering with payday and other non-bank lenders—as these partnerships can, in some circumstances, enable non-bank lenders to avoid the interest rate limitation laws of their own states and offer predatory, high-interest loans—and encourage those banks to avoid abusive lending practices by considering consumers’ ability to repay when issuing unsecured loans.

Marijuana

South Carolina Attorney General Opposes Bill Legalizing Medical Marijuana

  • South Carolina AG Alan Wilson and the State Law Enforcement Division Chief held a news conference to publicly oppose a bill that would legalize medical marijuana in the state.
  • The bill—the South Carolina Compassionate Care Act—would allow the use of marijuana for medicinal purposes for qualifying conditions, allow possession up to two ounces of medical cannabis or the equivalent in medical cannabis products, and create a Medical Cannabis Review Board which would be authorized to add additional medical conditions to the list of qualifying conditions, among other things.
  • The bill is currently pending in committees in the state Senate and House.

Pharmaceuticals

Alaska Attorney General Sues Opioid Manufacturer Over Allegedly Deceptive Marketing and Misrepresenting Risks of Prescription Opioids

  • Alaska AG Kevin Clarkson filed a lawsuit against opioid manufacturer Mallinckrodt PLC, Mallinckrodt LLC, and SpecGX LLC, (collectively, “Mallinckrodt”) for allegedly deceiving consumers about the risks of its prescription opioid products in violation of the state’s Unfair Trade Practices and Consumer Protection Act and the common law.
  • According to the complaint, Mallinckrodt allegedly deceptively marketed its prescription opioid products to doctors by understating risks of addiction and overstating benefits of use of its products in order to encourage doctors to prescribe its products at higher doses and for longer periods of time than medically necessary, and failed to implement anti-diversion controls, such as detection and reporting programs.
  • The complaint seeks declaratory and injunctive relief, abatement, civil penalties, compensatory and punitive damages, disgorgement, and costs and attorneys’ fees, among other things.

State AGs in the News

California Attorney General to Give Spanish-Language State of the Union Democratic Response

  • California AG Xavier Becerra will deliver the Spanish-language Democratic response to President Trump’s State of the Union speech on February 5, 2019.
  • AG Becerra previously served in Congress for 24 years and was the chairman of the House Democratic Caucus, at the time being the highest-ever ranking Latino member of the House.

New York Attorney General Hires Former CFPB Official as Chief Deputy Attorney General for Economic Justice

  • New York AG Letitia James announced the hiring of Christopher D’Angelo as Chief Deputy AG for Economic Justice.
  • D’Angelo previously served as an Associate Director of the Consumer Financial Protection Bureau’s Supervision, Enforcement, and Fair Lending Division.
  • In his new role, D’Angelo will lead the New York AG office’s oversight of banks and financial institutions and investor protection, antitrust, and securities fraud cases.
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