Digest 09.03.2020: COVID-19 Fees Challenged | DC AG Sues Instacart | $10 Million Penalty for Robocalls & False Ads


Senior Living Facilities Warned Against Charging Potentially Illegal COVID-19 Fees

  • Michigan AG Dana Nessel sent cease and desist letters to senior living facilities owner CSIG Holding Co. LLC, management company Senior Village Management LLC, and 11 facilities under their ownership and management (collectively, “CSIG”) alleging that COVID-19 fees charged to residents violated Michigan’s Consumer Protection Act (“MCPA”).
  • The letters allege that charging residents a mandatory $900 “supplemental COVID-19 fee” to purportedly cover expenses for meal services, personal protective equipment, and cleaning services during the coronavirus pandemic contradicts applicable lease terms and prior representations to residents, in violation of the MCPA.
  • The letters warn the recipients that they may face a lawsuit or a formal investigation, and offer to enter into an assurance of voluntary compliance requiring the cancellation and refund of the fees to residents, among other things.

 Consumer Financial Protection Bureau

Remittance Transfer Providers Settle with CFPB over Alleged Transfer Rule Violations

  • The Consumer Financial Protection Bureau (“CFPB”) reached a settlement with remittance transfer providers Trans-Fast Remittance LLC (“Trans-Fast”) and international money-transfer services Sigue Corporation and its subsidiaries (collectively, “Sigue”) to resolve allegations that they violated the Electronic Fund Transfer Act and the Remittance Transfer Rule, and that Trans-Fast violated the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • The consent order against Trans-Fast alleges that Trans-Fast failed to adhere to error resolution requirements, did not properly respond to cancellation requests, failed to issue refunds, provided about 40 million consumer disclosures that violated the Remittance Transfer Rule, and made misleading statements about the speed of its remittance transfers in its advertising, among other things.
  • The consent order against Sigue alleges that Sigue failed to appropriately refund transaction fees and failed to inform consumers of the remedies available for remittance errors, and failed to develop and maintain adequate written policies and procedures to ensure compliance with error-resolution requirements, among other things.
  • Under the terms of the consent orders, Trans-Fast must pay $1.6 million in civil penalties; Sigue must reserve approximately $100,000 for consumer redress and pay $300,000 in civil penalties; and both entities must implement compliance measures, among other things.

Consumer Protection

Instacart Sued for Allegedly Deceptive Fees, Not Collecting Sales Tax

  • District of Columbia AG Karl Racine sued grocery delivery service Maplebear, Inc. d/b/a Instacart (“Instacart”) for allegedly charging consumers deceptive service fees and for failing to collect District sales tax on its services in violation of the Consumer Protection Procedures Act and the Sales Tax Law, respectively.
  • The complaint alleges that Instacart charged consumers millions of dollars through a default 10% service fee for its delivery services, which deceptively appeared to be a tip but which Instacart did not share with its workers and kept as revenue. In addition, Instacart allegedly failed to collect and pay hundreds of thousands of dollars in sales tax owed to the District during the entire time it has been operating there.
  • The complaint seeks injunctive and declaratory relief, disgorgement and restitution, recovery of owed taxes with interest, civil penalties, and costs.

Court Orders Air Duct Cleaners to Pay $10 Million Penalty for Robocalls and Deceptive Advertising

  • Washington AG Bob Ferguson obtained a court order against air duct cleaning companies US Air Ducts & Sky Builders Inc. and DLM Services Inc. and their owner (collectively, “US Air Ducts”) over robocalls and deceptive advertisements in violation of Washington’s Consumer Protection Act (“CPA”).
  • The court found that US Air Ducts made more than 11 million separate robocalls and circulated more than 17 million deceptive print advertisements, and held that each robocall and deceptive print advertisement supported a per-violation penalty of $5 and $1, respectively.
  • In addition to requiring the corporate defendants to collectively pay $5 million and the owner to pay an additional $5 million in penalties to the state, the court awarded the state attorneys’ fees and costs.

Financial Industry

Auto Subprime Lender Accused of Misleading Consumers and Investors

  • Massachusetts AG Maura Healey sued subprime auto lender Credit Acceptance Corporation (“CAC”) over allegations that it made unfair and deceptive auto loans to consumers, engaged in unfair debt collection practices, misled investors regarding auto securities offerings, and violated state usury limits.
  • According to the AG’s office, the complaint alleges that CAC violated Massachusetts law by making subprime loans it knew the borrowers could not repay, charged hidden finance fees which resulted in CAC loans exceeding the state law usury ceiling of 21%, and failed to inform investors that its packaged pools of loans included higher-risk loans than its disclosures claimed, among other things.
  • The complaint seeks injunctive relief, restitution, and civil penalties.
  • According to the AG’s office, the lawsuit against CAC is part of the AG’s industry-wide review and investigation of securitization practices in the subprime auto market, including the previously reported multistate $550 million settlement with Santander Consumer USA Inc. over its role in financing subprime auto loans.