Attorneys General and Federal Agencies Battle a Flood of COVID-19-Related Fraud, Fake Medicines, and Price Gouging
- State and federal law enforcement agencies are stepping up their efforts to protect the public from bad actors capitalizing on the COVID-19 pandemic. Included here are just some notable examples.
- Membership Fees: New York AG Letitia James, along with District of Columbia AG Karl Racine and Pennsylvania AG Josh Shapiro, sent a letter to Town Sports International Holdings, Inc., the parent company of Washington Sports Club, Philadelphia Sports Club and New York Sports Club (collectively “the Clubs”), demanding that the Clubs follow consumer protection laws and implement immediate freeze on memberships at no cost to members and honor cancellation requests without imposing additional fees or conditions.
- Fake Treatments:
- Arizona AG Mark Brnovich sent a cease-and-desist letter to YiLoLife, LLC ordering it to stop marketing and selling a tincture that YiLoLife implied could boost the immune system’s ability to resist and combat COVID-19.
- Michigan AG Dana Nessel sent a letter to VitaStick, Inc. and related company $tronghold, Inc. demanding they stop selling fake COVID-19 at-home test kits and provide refunds to consumers who purchased the kits.
- New York AG James also sent a letter to cannabidiol (“CBD”) retailer Finest Herbalist ordering it to cease and desist from falsely marketing its CBD product as a means to cure or treat COVID-19.
- Price Gouging: Washington AG Bob Ferguson launched a new initiative called “See It, Snap It, Send It” to make it easier for consumers to report price gouging by uploading phone photos filing complaints with the AG’s office.
- Robocalls: The Federal Trade Commission (“FTC”) and the Federal Communications Commission (“FCC”) sent joint letters voice-over-Internet-protocol (“VoIP”) providers SIPJoin Holdings Corp., Connexum, and VoIP Terminator Inc. d/b/a BLMarketing asking them to cease routing and transmitting illegal COVID-19-related robocalls and warning them of potential law enforcement action should they fail to do so. The FTC and the FCC also sent a joint letter to USTelecom – The Broadband Association thanking the Association for identifying the originators of unlawful robocalls and notifying its members that, if any of the identified gateway or originating providers continues to route or transmit the originators’ robocalls on its network, thereby continuing to facilitate the transmission of robocalls on American networks, the FCC will authorize other U.S. providers to block all calls coming from that gateway or originating provider, among other things.
AGs Are Enforcing COVID-19-Related Social Distancing Orders
- AGs are taking action against businesses that flout executive orders designed to enforce social distancing as a means of reducing the spread of COVID-19, including the following actions.
- Colorado AG Phil Weiser sent a letter to arts and crafts retailer Hobby Lobby ordering it to close its Colorado locations in compliance with Governor Jared Polis’s mandate that all non-critical businesses shut down. Ohio AG Dave Yost also ordered Hobby Lobby to close its stores in the state to comply with Governor Mike DeWine’s shelter-in-place order. Hobby Lobby has temporarily closed all its stores, nationwide.
- Michigan AG Dana Nessel sent a letter to the hardware retailer Menards ordering it to stop all activities that run contrary to Governor Gretchen Whitmer’s Stay Home, Stay Safe executive order. Even though the Menards hardware stores are allowed to remain open, they are only allowed to supply goods necessary for improvement or maintenance of safety, sanitation, or essential operations of a residence.
- Michigan AG Nessel also denied craft and hobby retailer JoAnn Fabrics’s request to allow its stores to remain open because it is supplying materials that customers use to craft face masks and other personal protective equipment. In her letter, AG Nessel noted that the same supplies are available from JoAnn Fabrics’s online store and, therefore, keeping the physical storefronts open is unnecessary. JoAnn Fabrics is complying and has closed its physical stores in Michigan.
- New York AG Letitia James ordered 78 companies that provide medical transportation services to Medicaid recipients to immediately stop group rides, which are explicitly prohibited under New York State Department of Health guidance that was issued in response to the COVID-19 pandemic.
Consumer Financial Protection Bureau
Short-Term Lender Pays Steep Price for Allegedly Engaging in Deceptive Marketing and Abusive Collection Practices
- The Consumer Financial Protection Bureau (“CFPB”) reached a settlement with short-term lender Cottonwood Financial Ltd., d/b/a Cash Store (“Cash Store”) to resolve allegations that Cash Store engaged in deceptive advertising and marketing practices and predatory collection practices in violation of the Consumer Financial Protection Act, Fair Credit Reporting Act, and the Truth in Lending Act.
- According to the CFPB, among other things, Cash Store, which offers high-interest payday, auto-title, and unsecured consumer-installment loans, allegedly promoted discounted fees that it did not offer in reality, made excessive calls to consumers, including to their work places, improperly disclosed debt delinquencies to third parties, and failed to ensure the accuracy and integrity of the information it furnished to credit reporting agencies.
- Under the terms of the consent order, Cash Store is enjoined from engaging in deceptive marketing practices and harassing collection practices. Cash Store is also required to provide nearly $287,000 in redress to borrowers who were promised discounted fees and to pay a civil money penalty of $1.1 million to the CFPB’s Civil Penalty Fund.
Bipartisan Coalition of 40 Attorneys General Urges Supreme Court to Permit Plaintiffs to Sue in the State Where They Were Injured
- A bipartisan coalition of 40 AGs, led by Texas AG Ken Paxton and Minnesota AG Keith Ellison, filed an amicus brief in the U.S. Supreme Court in the consolidated cases of Ford v. Bandemer and Ford v. Montana Eighth Judicial District Court, Nos. 19-368 and 19-369, respectively, in support of the challenged decisions of the lower courts that held that residents of a state had the right to bring personal injury suits in the same states where they were injured regardless of where the defendants were located.
- The cases arose from lawsuits that residents of Montana and Minnesota brought against Ford Motor Company alleging that its defective vehicles caused serious crashes in the residents’ home states. Ford sought to have each case dismissed, arguing that the state courts lacked jurisdiction because the vehicles were purchased in other states. The Supreme Courts of Montana and Minnesota both affirmed that courts in the plaintiffs’ home states have jurisdiction in these types of cases, and Ford appealed.
- In their brief, the AGs argue that plaintiffs should be able to seek relief in the state in which they were harmed, regardless of where the instrument of the harm was purchased. The AGs also point out that Ford’s proposed personal jurisdiction test would curtail the ability of state AGs to hold corporations accountable for harms cause within their states’ borders.
Data Privacy & Security
FTC Finds a Smart Lock That Is Allegedly Not as Clever as It Claims
- The FTC reached a settlement with Canadian manufacturer of smart locks Tapplock, Inc. to resolve allegations that it used misleading marketing practices to sell its Internet-connected locks in violation of the FTC Act.
- The FTC’s complaint alleged that Tapplock promised its smart locks to be unbreakable and secure while, in reality, the company failed to test whether its claims were true, and that security researchers identified both physical and electronic vulnerabilities that allowed the locks to be unlocked. In addition, Tapplock allegedly claimed to take reasonable precautions to safeguard its customers’ personal information, but failed to follow industry best practices for data protection.
- Under the terms of the proposed consent order, among other things, Tapplock is required to create a Device Security and Information Security Program setting forth its policies and procedures in writing, and obtain periodic third-party assessments of its program. Tapplock is also prohibited from misrepresenting its privacy and security practices.
Democratic Attorneys General Call on Federal Government to Open Special Enrollment Period for Health Insurance on HealthCare.Gov
- A coalition of 22 Democratic AGs, led by California AG Xavier Becerra and North Carolina AG Josh Stein, wrote a letter to Health and Human Services Secretary Alex Azar and Centers for Medicare and Medicaid Services Administrator Seema Verma urging them to reconsider their decision to deny a special enrollment period on HealthCare.Gov during the COVID-19 pandemic.
- The letter argues that the special enrollment period is necessary to make it possible for millions of Americans who have lost their jobs as a consequence of the COVID-19-related stay-at-home orders to obtain health care coverage.
- The letter also points out that the current crisis requires federal action because, while some states run independent exchanges and can institute their own special enrollment periods, 38 states do not, relying instead on HealthCare.Gov to run their exchanges.