Digest 09.10.2020: Debt Collectors Sued | States Object to Proposed Fed Banking Rule | States Move to Stop USPS Changes

2021 AG Elections

Virginia Incumbent Attorney General Seeks Reelection, Skips Governor’s Race

Consumer Financial Protection Bureau

CFPB and New York Attorney General Partner in Suit Against Debt-Collectors

  • New York AG Letitia James and the Consumer Financial Protection Bureau (“CFPB”) sued debt collection companies JPL Recovery Solutions, LLC, Regency One Capital LLC, ROC Asset Solutions LLC, Check Security Associates LLC and Keystone Recovery Group, LLC along with their owners and two of their managers (collectively the “Debt Collectors”) for allegedly using deceptive, harassing and improper methods of collecting payments from consumers in violation of the Fair Debt Collection Practices Act, the Consumer Financial Protection Act, and New York state law.
  • The complaint alleges that, among other things, the Debt Collectors threatened consumers with arrest or legal action that the Debt Collectors did not intend to take or could not legally take, claimed consumers owed more than they did, threatened to disclose debt to employers, family, and friends, harassed consumers with demeaning and threatening language, and failed to provide legally required notices about consumers’ rights for information about their debt and the process by which they can dispute the debt.
  • The complaint seeks injunctive relief, consumer redress including restitution and contract rescission or reformation, disgorgement, civil penalties, and attorneys’ costs.

Consumer Protection

Online Children’s Education Company Pays $10 Million to Settle Allegations of Illegal Marketing and Billing Practices

  • The Federal Trade Commission (“FTC”) reached a settlement with online children’s education company Age of Learning, Inc. to resolve allegations that it failed to disclose key membership terms, resulting in thousands of renewal charges without consent, in violation of the FTC Act and the Restore Online Shoppers’ Confidence Act.
  • The complaint alleges that, among other things, Age of Learning advertised several membership and trial membership offers but failed to clearly tell consumers that their memberships would be renewed automatically until canceled, and failed to provide a simple way for consumers to cancel their memberships.
  • Under the terms of the stipulated order, Age of Learning will pay a $10 million judgment to the FTC and will be permanently enjoined from misrepresenting its negative-option renewals, including using terms like “no obligation” in conjunction with its trial memberships. Age of Learning will also be required to disclose and clearly explain key terms and information about its memberships, obtain consumers’ informed consent prior to enrolling them in automatic billing programs, and provide a simple cancellation process.

State vs. Federal

Court Partially Strikes Down Trump Administration’s Rule Narrowing Joint Employer Liability

  • A coalition of 18 Democratic AGs, led by New York AG Letitia James and Pennsylvania AG Josh Shapiro, obtained a court order partially invalidating the U.S. Department of Labor’s (“DoL”) Joint Employer Rule, which narrowed the standard for which entities may be held jointly liable for wage and hour violations under the Fair Labor Standards Act (“FLSA”).
  • The complaint alleged that the Joint Employer Rule undermines Congressional intent in enacting FLSA and was arbitrary and capricious under the Administrative Procedure Act.
  • The court’s order struck down the Joint Employer Rule as it pertains to vertical joint employer liability, finding that it conflicts with FLSA and is arbitrary and capricious. The court’s order, however, let the Rule stand as it pertains to horizontal joint employer liability, finding that this provision is severable and that the revisions it promulgated are non-substantive.

Democratic Attorneys General Open Second Front in Battle to Roll Back Changes to U.S. Postal Service

  • A group of 7 Democratic AGs, led by Pennsylvania AG Josh Shapiro filed a motion for a preliminary injunction against the U.S. Postal Service (“USPS”) seeking an immediate halt to the recent changes in USPS procedures and requiring USPS to adhere to its longstanding practices for the treatment of election mail.
  • The motion alleges that the changes implemented by the USPS have led to significant delays in mail delivery, thereby harming individuals and threatening the delivery of election mail-in ballots. The motion argues that the changes were unlawfully implemented without first seeking an opinion by the Postal Regulatory Commission, as required by federal law. The motion also alleges that the changes unlawfully interfere with States’ constitutional authority to manage their own elections.
  • As previously reported, a group of 14 Democratic AGs, led by Washington AG Bob Ferguson, sued the Trump administration and the USPS over similar allegations, arguing that the recent changes to the USPS procedures are unlawful and unconstitutional.

 24 Democratic Attorneys General Object to Proposed Banking Rule, Alleging It Will Allow “Rent-a-Bank” Schemes

  • A group of 24 Democratic AGs, led by Minnesota AG Keith Ellison, New York AG Letitia James, and North Carolina AG Josh Stein, sent a comment letter to the Comptroller of the Currency objecting to a proposed federal rule titled “National Banks and Federal Savings Associations as Lenders,” arguing that it would undermine States’ usury laws, which deter predatory lending.
  • The letter notes that the proposed rule will replace state true-lender standards, currently employed by courts to determine whether state interest rate caps should be applied to a particular loan, with a bright-line federal standard that will accept a national bank’s name on a loan as conclusive evidence that the bank is the true lender, and that therefore the loan is not subject to a state’s interest rate caps. The letter argues that the proposed rule will allow predatory lenders to enter into “rent-a-bank” schemes enabling them to circumvent state usury laws and interest rate caps.
  • As previously reported, California AG Xavier BecerraIllinois AG Kwame Raoul, and New York AG Letitia James recently sued the Office of the Comptroller of the Currency to strike down a new rule titled “Permissible Interest on Loans That Are Sold, Assigned, or Otherwise Transferred,” which went into effect on August 3, 2020 and provides that when a bank sells, assigns, or otherwise transfers a loan, the interest permissible prior to the transfer remains in effect following the transfer.