The State AG Report Weekly Update April 1, 2016

Breaking News

FTC, 50 States, and DC Settle with Two Cancer Charities for Deceptive Practices

  • The Federal Trade Commission and Attorneys General, as well as other law enforcement personnel from 50 states and the District of Columbia, reached a settlement with two cancer charities, Cancer Fund of America, Inc., and Cancer Support Services, Inc., and their president after filing a lawsuit last year against the charities, along with two other charities that settled previously, for allegedly defrauding consumers out of more than $187 million.
  • According to the complaint, the charities allegedly used false and deceptive claims to solicit donations, including, among other things, representing that donations would be used to provide direct support to cancer patients, when the vast majority of donors’ contributions allegedly did not directly assist cancer patients or otherwise benefit any charitable purpose.
  • Under the terms of the settlement, the charities must be permanently dissolved, and, along with their president, they must jointly pay over $75 million, which is the amount consumers donated between 2008 and 2012. The monetary judgment will be partially satisfied by the charities’ liquidation of assets and the president’s surrender of certain personal assets. The settlement funds will go to cancer charities and be used to cover the costs of the investigation.

18 Attorneys General Form Coalition to Address Climate Change

  • 16 State AGs and the AGs from the District of Columbia and the U.S. Virgin Islands announced their intent to form a coalition to protect and build upon the recent progress the United States has made in combating climate change.
  • The coalition was announced at a press conference during a one-day AG climate change conference in New York attended by 7 AGs.  The conference was hosted by New York AG Eric Schneiderman and Vermont AG William Sorrell.  According to the AGs, the coalition will work together on various climate-change related “initiatives,” including some AGs pushing for and defending federal limits on pollution and others engaging in investigations into whether fossil fuel companies misled investors and the public of the risks of climate change on their businesses.
  • This announcement comes after AG Schneiderman settled with Peabody Energy Corporation late last year alleging that the company misled the public and investors about the negative impact climate change and regulations addressing climate change may have on their business.  AG Schneiderman is also investigating Exxon Mobil Corp. over similar alleged conduct.

Consumer Protection

FTC Sues Car Manufacturer for Deceiving Consumers with “Clean Diesel” Advertising After Admitting Vehicle Emissions Test Manipulation

  • The Federal Trade Commission (“FTC”) filed a complaint against Volkswagen Group of America, Inc. d/b/a Volkswagen of America, Inc., and Audi of America, Inc., for allegedly violating the FTC Act’s prohibition on deceptive advertising practices, stemming from revelations last year that the company had designed certain cars to give inaccurate results during emissions testing.
  • According to the complaint, Volkswagen allegedly deceived consumers by advertising its “clean diesel” vehicles as having low-emissions, meeting stringent emission requirements, and being environmentally friendly when the vehicles actually had high emissions that were masked during government tests.
  • The FTC’s complaint seeks restitution for consumers who bought or leased these vehicles and a permanent injunction to stop the company from engaging in the alleged conduct again. Five AGs have also filed suit against Volkswagen on allegations similar to the FTC’s, including most recently Kentucky.

Massachusetts Attorney General Finalizes Regulations for Daily Fantasy Sports Operations

  • Massachusetts AG Maura Healey filed final consumer protection regulations for daily fantasy sports operators in Massachusetts with the secretary of state’s office.
  • The final regulations, which according to AG Healey go into effect in two weeks, require daily fantasy sports operators to comply with the regulations by July 1, 2016 that, among other things, prohibit play by persons under the age of 21, impose requirements for fair and truthful advertising, and implement protections for problem gamers and to ensure game fairness.
  • The release of AG Healey’s regulations follow legislation in Virginia and Indiana that provides a statutory framework for continued operation by daily fantasy sports operators, and New York AG Eric Schneiderman’s agreement with daily fantasy sports sites, FanDuel, Inc. and DraftKings, Inc., to require the companies to, among other things, not operate paid daily fantasy sports contests in New York, unless the state expressly legalizes these contests by June 30, 2016 or the New York appellate court finds in favor of DraftKings and FanDuel in their appeal of the trial court’s order in favor of AG Schneiderman.

Massachusetts Attorney General Settles with Lender for Allegedly Charging Excessive Interest Rates

  • Massachusetts AG Maura Healey reached an agreement with Future Income Payments LLC (“FIP”), formerly known as Pensions, Annuities and Settlements LLC, to resolve allegations that FIP charged interest rates above the statutory limit on pension advances.
  • According to the AG’s Office, FIP’s loans were allegedly above the interest rates allowable under state usury laws, which cap interest rates on loans of $6,000 or less at 12 percent, with larger loans capped at 20 percent.
  • Under the terms of the settlement, FIP will provide at least $2 million in relief to consumers. The settlement also prohibits FIP from entering into any transactions with or advertising services to Massachusetts residents in the future.

New York Attorney General Settles with Taxicab Company for Overcharging Taxi Drivers

  • New York AG Eric Schneiderman reached a settlement with Style Management Corp. (“Style”), a taxicab management company, and its owner Andrew Rosenberg, for allegedly overcharging taxi drivers on cab leasing fees in violation of city regulations.
  • According to the AG’s Office, Style allegedly charged taxi drivers in excess of amounts allowed under regulations imposed by the New York City Taxi and Limousine Commission (“TLC”) by charging drivers leasing fees above the limit and unfairly rounding drivers’ credit care fare earnings to even dollar amounts.
  • Under the settlement, Style and Andrew Rosenberg will pay $750,000 in restitution to drivers, as well as $47,500 in penalties. Under a separate agreement with the TLC, Style will also pay an additional $47,500 in penalties.

West Virginia Attorney General Settles with Company for Allegedly Unlawful Debt Collection Practices

  • West Virginia AG Patrick Morrisey reached a settlement with a debt collection company known, among other names, as Cavalry Investments and Cavalry Portfolio Systems (collectively “Cavalry”), resolving allegations that Cavalry violated state debt collection and consumer financial protection laws.
  • According to AG Morrisey, Cavalry allegedly engaged in debt collection practices without a West Virginia license and surety bond, made abusive and harassing phone calls to consumers, and failed to identify the account owner in collection letters and in reporting alleged debts to consumer reporting agencies.
  • Under the terms of the settlement, Cavalry will cease efforts to collect $19.7 million in debt and pay the state of West Virginia $350,000. The settlement also states that Cavalry will delete all account information from the affected consumers’ credit reports and release all liens against the consumers’ property.

Data Privacy

California Attorney General Settles with Wells Fargo Bank Over Alleged Privacy Violations

  • California AG Kamala Harris and five district attorneys settled claims against Wells Fargo Bank (“Wells Fargo”) for allegedly violating state consumer protection and privacy laws by failing to timely and adequately disclose its automatic recording of phone calls with members of the public.
  • According to the AG’s Office, Wells Fargo allegedly violated consumer protection and privacy laws by recording consumers’ phone calls without timely telling consumers they were being recorded, as required by California law.
  • Under the terms of the Stipulated Final Judgment, Wells Fargo will pay $7,616,000 in civil penalties and will reimburse prosecutors’ investigative costs of $384,000. In addition, Wells Fargo will contribute $500,000 to two statewide organizations dedicated to advancing consumer protection and privacy rights.

E-Cigarettes & Vaping

Washington Attorney General’s Requested Regulations of e-Cigarettes Pass Legislature

  • The Washington State Legislature overwhelmingly passed legislation that would regulate e-cigarettes and vapor products, combining multiple proposals including ones submitted by Washington AG Bob Ferguson and Governor Jay Inslee.  The bill is now pending signature by the Governor.
  • According to AG Ferguson, the legislation would establish a set of statewide rules for the sale of e-cigarettes and vapor products similar to the state’s youth access laws for tobacco. Specifically, the new law will require retail, among other things, distribution, and delivery licenses, child-resistant packaging, warning labels, and verification of the age of the prospective buyer.

False Claims Act

New York Attorney General Settles with State Government Contractor for Allegedly Outsourcing Work Overseas

  • New York AG Eric Schneiderman and New York State Inspector General Catherine Leahy Scott reach a settlement with Focused Technologies Imaging Services, LLC, its owner, and former co-owner (collectively “FTIS”) for violating the New York False Claims Act.
  • According to the Assurance of Discontinuance (“AOD”), FTIS outsourced to a business in Mumbai, India, approximately 37.5 percent of the work they were obligated to perform at their Albany, New York, facility as part of a contract between the New York State Industries for the Disabled (a non-profit) and the New York State Division of Criminal Justice Services to digitize and index fingerprint cards into a searchable database.  FTIS also allegedly failed to utilize over 50 percent of individuals with disabilities to complete the project, as required by companies that secure contracts through the state’s no-bid program to support businesses who employ such individuals.
  • Under the terms of the AOD, FTIS admits to the violations, will pay $3.1 million in penalties, fees, and costs, will perform 69 percent of the work of certain new preferred source contracts it obtains within two years with individuals with disabilities, and will pay for an independent monitor for five years to ensure compliance.