The State AG Report Weekly Update June 11, 2015

Breaking News

Connecticut and New York Attorneys General Investigate Apple for Potential Antitrust Violations

  • Connecticut AG George Jepsen and New York AG Eric Schneiderman are investigating whether Apple, Inc., violated antitrust laws in its negotiations with music companies for its new music service.
  • The AGs’ investigation stems from allegations that Apple pressured or conspired with music labels to withdraw support for popular “freemium” services.  A “freemium” service is one in which a consumer generally can access music or videos for no fee, but also has the option to pay for additional services, access, and content or to remove paid advertisements that otherwise support the free access.
  • Universal Music Group recently acknowledged the AGs’ investigation in a letter to AG Schneiderman’s office in which it denied any involvement in any alleged conspiracy.

Consumer Financial Protection Bureau

CFPB Settles with Mortgage Lenders for Alleged Loan Originator Compensation Violations

  • The Consumer Financial Protection Bureau (“CFPB”) settled claims against Guarantee Mortgage Corporation and RPM Mortgage, Inc. and its CEO for allegedly violating consumer financial protection laws by basing loan originator compensation, in part, on the interest rates of the loans they closed.
  • Guarantee Mortgage and RPM Mortgage allegedly violated loan originator compensation rules, which prohibit lenders from incentivizing loan originators to steer consumers to costlier mortgages, in two ways: (1) paying marketing-services entities, which included loan originators, based on the profitability of a particular branch; and (2) using expense accounts to pay bonuses and higher commissions to loan originators based on the profits derived from interest rates on loans they closed.
  • The consent order against Guarantee Mortgage requires the company and its officers to pay a $228,000 civil penalty. The proposed consent order against RPM Mortgage would require, among other things, the company to pay $18 million to affected consumers and the company and CEO to each pay a $1 million civil penalty.

Consumer Protection

New York Attorney General Sues Company, Credit Union, and Collection Agency for Alleged Study Guide Scam

  • New York AG Eric Schneiderman filed a complaint against The College Network, Inc., American Credit Exchange, Inc., and Southeast Financial Credit Union (“Southeast”) for allegedly violating state consumer protection laws when the companies marketed, financed, and collected debt for a study guide program offered by The College Network.
  • According to the complaint, The College Network allegedly created the false impression that the company was affiliated with an accredited college and that it offered associate degrees in nursing that consumers could earn “in just 18 months.” As part of the “program” The College Network allegedly induced, among other things, prospective students into paying thousands of dollars for expensive, “ineffective study guides.”  The complaint further alleges that Southeast and American Credit Exchange are liable by financing and collecting on debts owed by these students.
  • The complaint seeks a permanent injunction against The College Network from advertising or selling its nursing “programs” in New York and against Southeast and American Credit Exchange from attempting to collect on the associated debts.

Pennsylvania Attorney General Sues Medical Debt Collector for Allegedly Violating State Consumer Protection and Debt Collection Laws

  • Pennsylvania AG Kathleen Kane filed a lawsuit against James Havassy and his company, Hamilton Law Group, P.C., for allegedly violating the Unfair Trade Practices and Consumer Protection Law and the Fair Credit Extension Uniformity Act by coercing payments from relatives of debtors who were not responsible for the debt.
  • AG Kane alleges that the company sent letters to Pennsylvania residents stating that family members of individuals with medical debts were liable for those debts.
  • The complaint seeks an injunction, full restitution, and civil penalties.

Intellectual Property

Federal Judge Allows Alleged Patent Troll’s Suit to Continue Against Vermont Attorney General

  • U.S. District Judge William K. Sessions III partly denied a motion by Vermont AG Bill Sorrell seeking to dismiss a lawsuit brought by MPHJ Technology Investments LLC (“MPHJ”), thus allowing MPHJ’s constitutional claims related to the recently-enacted Bad Faith Assertions of Patent Infringement Act (“BFAPIA”) to continue.
  • The lawsuit alleges that the BFAPIA, which bars entities from sending patent demand letters that contain deceptive statements, lack factual information supporting the claim, or that make unreasonable demands for payment or threats of litigation violates the First Amendment and other aspects of the U.S. Constitution.
  • A related lawsuit brought in 2013 against MPHJ by AG Sorrell alleges that MPHJ violated Vermont’s consumer protection laws is ongoing in state court.

Medicaid Fraud

Georgia Attorney General Settles with Hospital and Hospital Operator Resolving Alleged Medicaid Fraud Violations

  • Georgia AG Sam Olens reached a settlement with Health Management Associates, Inc. and Clearview Regional Medical Center to resolve allegations that they submitted false claims to Georgia Medicaid program.
  • AG Olens alleges that the companies provided kickbacks to Clinica de la Mama, an obstetric clinic serving primarily undocumented Hispanic women, and related entities to induce the referral of those patients to its hospital for labor and delivery.
  • The companies will pay $991,925 to resolve the allegations, of which Georgia will receive $396,770.