Digest 12.10.2020: Razors Raise Antitrust Worries | $86 Million Mortgage Servicing Settlement | Creative Alleged Tax Avoidance

2020 AG Elections

AGs in the News

‘Tis the Season for National Attorneys General Association Elections and Awards

  • District of Columbia AG Karl Racine was elected President of the National Association of Attorneys General (“NAAG”) for 2021, replacing outgoing NAAG President Montana AG Tim Fox. AG Racine selected “The People v. Hate: Standing Up for Humanity” as his presidential initiative.
  • Montana AG and 2020 NAAG President Tim Fox received the annual Kelley-Wyman Award, NAAG’s highest honor, which is awarded for doing the most to achieve NAAG objectives.
  • Both the NAAG presidential election and the award ceremony were part of NAAG’s annual Capital Forum, held virtually this year on December 2.


FTC Puts the Brakes on P&G’s Acquisition of DTC Razor Startup, Billie

  • The Federal Trade Commission (“FTC”) filed an administrative complaint and authorized a lawsuit in federal court to block The Procter & Gamble Company’s (“P&G”) proposed acquisition of direct-to-consumer (“DTC”) razor and body care products company, Billie, Inc. (“Billie”). According to the FTC’s press release, the complaint is based on allegations that the proposed acquisition would eliminate growing competition in the wet-shave razors market.
  • The FTC claims that Billie, which sells mid-tier women’s razors, competes head-to-head with market-leading P&G, and has seen its online sales grow significantly in the two years since it was formed. The FTC states that the proposed acquisition would eliminate competition between the two companies, and that the announced deal had already derailed Billie’s planned expansion into brick-and-mortar stores, which the FTC believes would have benefitted consumers through stronger competition at retail locations.
  • The FTC stated that it intends to file a complaint in federal court seeking a temporary restraining order and a preliminary injunction to stop the deal pending an administrative trial.

 Consumer Financial Protection Bureau

Mortgage Servicer Agrees to Pay over $86 Million to Settle Suits by CFPB, Attorneys General

  • The Consumer Financial Protection Bureau (“CFPB”), a multistate group of 51 AGs, and 53 state bank regulators reached a settlement with Nationstar Mortgage, LLC, d/b/a Mr. Cooper (“Nationstar”) to resolve allegations that it improperly serviced thousands of mortgage loans in violation of the Dodd–Frank Wall Street Reform and Consumer Protection Act, Homeowners Protection Act, the Real Estate Settlement Procedures Act and its implementing regulations, Regulation X, and the respective states’ consumer protection laws.
  • The CFPB complaint alleged that, among other things, Nationstar failed to identify and honor borrowers’ loan modification agreements, foreclosed on borrowers to whom it had promised foreclosure holds, improperly increased borrowers’ monthly loan payments despite modifications to their accounts, and failed to properly manage borrowers’ escrow accounts.
  • Under the terms of the CFPB stipulated judgment and the concurrently filed proposed consent judgment with the states, Nationstar will pay approximately $86 million in consumer recoveries, fees, and penalties, including a $1.5 million civil money penalty to the CFPB. The CFPB settlement also requires Nationstar to create a comprehensive mortgage servicing compliance plan, including revised policies and procedures regarding error resolution, management of escrow accounts, and service transfers.

Consumer Protection

Massachusetts Attorney General Sues Health Insurance Company over Allegations It Deceptively Marketed Supplemental Insurance Plans

  • Massachusetts AG Maura Healey sued healthcare insurance company HealthMarkets, Inc. and its subsidiaries (collectively “HealthMarkets”) over allegations that HealthMarkets misled consumers into purchasing supplemental health insurance products in violation of the Massachusetts Consumer Protection Act and a 2009 consent judgment enjoining the parent company and two other subsidiaries from similar conduct.
  • The complaint alleges that HealthMarkets deceived consumers seeking traditional health insurance into instead buying unnecessary supplemental health insurance. In addition, the complaint alleges that HealthMarkets’s advertising was misleading because, among other reasons, it claimed that its sales agents were objective, that their services were free, and that they represented all insurance carriers, but in reality they were incentivized with higher commission rates to sell HealthMarkets’s supplemental insurance, consumers were sometimes charged fees for services, and they did not represent all carriers.
  • The complaint seeks forfeiture or suspension of HealthMarkets’s rights to do business in Massachusetts, declaratory and injunctive relief, restitution, civil money penalties, and attorneys’ fees and costs.

False Claims

New York Supermarket Chain Settles Allegations of Tax Avoidance

  • New York AG Letitia James reached a settlement with supermarket chain owner Hi Jong Lee and his chain of supermarkets (collectively “Food World”) to resolve allegations of fraudulent tax avoidance in violation of the New York False Claims Act, New York Tax Act, and Executive Law.
  • According to the stipulation and settlement agreement, which stems from a whistleblower lawsuit, Food World allegedly avoided paying taxes by using lottery cash registers that were not connected to the store’s sales system to process purchases of supermarket items that were not declared for income tax or sales tax purposes at the time. In addition, Food World allegedly avoided taxes by generating fake merchandise returns receipts and by paying the majority of Food World employees in cash and off the books in order to avoid tax deductions.
  • Under the terms of the settlement, Food World will pay $4.7 million, of which approximately $3.7 million will be paid to the state and $1 million to the whistleblower. In addition, Food World will pay $110,000 for the whistleblower’s attorneys’ fees and costs.