The State AG Report Weekly Update June 2, 2016

Consumer Financial Protection Bureau

CFPB Files Enforcement Action Against Individual Loan Officer for Alleged Mortgage Fee Shifting Scheme

  • The Consumer Financial Protection Bureau (“CFPB”) filed an administrative consent order against David Eghbali, a former Wells Fargo loan officer, for alleged violations of the Real Estate Settlement Procedures Act (“RESPA”), which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real estate settlement service.
  • According to the CFPB, while Eghbali was employed at a Wells Fargo branch in California, he allegedly had an arrangement with an escrow company which, at Eghbali’s direction, shifted mortgage fees from some customers to others, allowing Eghbali to increase his commissions by manipulating loan costs to close more loans.
  • Under the terms of the consent order, Eghbali has been ordered to pay an $85,000 penalty to the CFPB’s Civil Penalty Fund and is prohibited, for one year, from working in the mortgage industry.

CFPB Proposes Rule That Would Impose Strict Regulations on Payday, Auto-Title and Other High-Cost Lenders

  • The CFPB issued a proposed rule that would bring payday, auto title, and certain other high-cost loans under federal regulation, and would require lenders, among other things, to carry out strict borrower reviews.
  • The proposed rule would, among other things: (a) require lenders to conduct a comprehensive review of a customer’s ability to repay a loan to determine whether a borrower could afford each loan payment and still meet basic living expenses; (b) cap the number of short-term loans a borrower could take out in succession at three, and then subject borrowers to a mandatory 30-day cooling-off period before taking out another loan; and (c) limit the number of times that a lender could attempt to access a consumer’s bank account at two before being required to get written permission to withdraw funds.
  • The proposed rule would apply to certain short term loans, including typical payday loans and short-term vehicle title loans, as well as certain longer-term loans with high total costs of credit and certain other characteristics.
  • Comments on the proposed rule are due on September 14, 2016.

Consumer Protection

Florida Attorney General, Federal Trade Commission File Complaints Against Student Debt Relief Companies

  • Florida AG Pam Bondi and the Federal Trade Commission (“FTC”) filed joint complaints against student loan debt relief operators Consumer Assistance, LLC, Consumer Assistance Project, Corp., Palermo Global, LLC, and Chastity Valdes (collectively “Consumer Assistance”) and Student Aid Center Inc., Damien Alvarez, and Ramiro Fernandez-Moris (collectively “Student Aid Center”) for alleged violations of state and federal consumer protection laws.
  • According to the complaint filed against Consumer Assistance, the company allegedly charged illegal up-front fees and falsely told its customers that they qualified for government student loan forgiveness programs that would reduce their debt loads and repair their credit scores. The complaint filed against Student Aid Center alleges that the company falsely told consumers that they would qualify for loan forgiveness or lower monthly payments if they paid illegal up-front fees, and further alleges that the company’s website contained false claims that consumers could qualify for student loan forgiveness and consolidation, as well as false representations about the company’s money-back guarantee.
  • The complaints seek, among other things, restitution and refunds for consumers, disgorgement of ill-gotten moneys, and other equitable relief.
  • The AGs of Washington and the District of Columbia also filed separate actions against Student Aid Center.

Kansas Attorney General Settles with Billing Services Company to Resolve Cramming Allegations

  • Kansas AG Derek Schmidt reached a settlement with Billing Services Group North America, Inc. (“Billing Services”) over allegations that the company added unauthorized charges to consumers’ home telephone bills – a practice commonly known as “cramming.”
  • According to the AG’s office, Billing Services allegedly billed Kansas consumers for third-party services to their landline telephone bills when the consumers had not authorized or accepted the charges.
  • Under the terms of the settlement, which follows an earlier action by the FTC, Billing Services agreed to cease its practice of adding unauthorized charges to consumers’ bills.

Data Privacy

FTC Weighs in on FCC Privacy Rules for Broadband Internet Service Providers

  • The FTC filed comments with the Federal Communications Commission (“FCC”) regarding the FCC’s proposed rulemaking that would regulate how broadband Internet Service Providers (“ISPs”) can use and share customer data. The FCC filed a notice for a proposed rulemaking on April 20, 2016.
  • The FTC comments express general support over the FCC proposed rulemaking, but also urge the FCC to, among other things, revise the definition of personally identifiable information (“PII”) to: (a) explicitly include consumer devices, not just consumers; (b) require privacy notices to be clearer, shorter and more standardized by providing a safe harbor for companies that utilize an FCC drafted “model notice”; (c) require express consent for changes in data use of previously collected consumer information; and (d) ensure the rules protect broadband ISPs ability to stop unwanted calls to consumers.
  • In a separate statement filed by FTC Commissioner Maureen K. Ohlhausen, the Commissioner stated that she “strongly supports” the FTC staff’s comments, but cautioned the FCC to avoid promulgating rules with broad opt-in requirements that may stifle usages of data by companies that benefit consumers.

White House Releases Privacy Framework for Health Initiative

  • The White House released a framework of privacy rules to protect health data as part of President Barack Obama’s Precision Medicine Initiative (“PMI”), which is set to use patient-powered research to improve health care by making it more individualized.
  • The framework aims to protect data collected or used by individuals, researchers, developers, citizen scientists and health care providers, including genetic, health and environmental data, while still allowing individuals access to their own information and promoting research and development.
  • According to the administration, it will implement the framework for any federal agencies that will take part in the PMI.

 Health Care

Connecticut Attorney General Settles with Psychiatrist Over Alleged False Claims Act Violations

  • Connecticut AG George Jepsen, along with the U.S. Department of Health and Human Services’ Office of the Inspector General (“OIG”), reached a settlement with psychiatrist Naimentulla Syed to resolve allegations that he violated state and federal false claims act laws by allegedly submitting false claims to the state’s Medicaid program and to the federal Medicare program.
  • According to the AG’s office, Syed allegedly knowingly submitted up-coded claims for services provided under the state’s Medicaid program. Specifically, the AG’s office alleged that Syed submitted medical claims for providing psychotherapy services and office visits for longer durations than he actually provided.
  • Under the terms of the settlement, Syed will, among other things, make a cash payment of approximately $400,000 to the state and federal government, and will forfeit approximately $21,000 that the state withheld during the investigation.

Connecticut Attorney General Settles with Group Home Operator to Resolve Joint State and Federal Investigation Regarding Medicaid Overpayment

  • Connecticut AG George Jepsen, along with the OIG, reached a settlement with REM Connecticut Community Services, Inc. (“REM”), a Medicaid group home operator, to resolve allegations that the company submitted claims for unallowable expenses to the state’s Medicaid program.
  • According to the AG’s office, REM allegedly reported certain interest costs in its annual cost report that were not allowed under standards set by the state. As a result, REM was allegedly overpaid by the state’s Medicaid program.
  • Under the terms of the settlement, REM will, among other things, make a cash payment of approximately $311,000 to the state and federal government, and will forfeit approximately $1.19 million in payments that the state withheld during the investigation.
  • The settlement proceeds will be split equally between Connecticut and the federal government.

New York Attorney General Settles with Pharmacy to Resolve Allegations Regarding Prescriptions Written by Excluded Provider

  • New York AG Eric Schneiderman reached a settlement with pharmacy Vasuscript, Inc. (“Vasuscript”), to resolve allegations that it violated the state False Claims Act by billing the state Medicaid program for prescriptions that were written by an excluded Medicaid provider.
  • According to the AG’s office, Vasuscript allegedly submitted and received payments on approximately 4,600 Medicaid claims for prescriptions that were written by Dr. Mikhail Strutsovskiy. Dr. Strutsovskiy had previously been excluded from the Medicaid program by the New York Department of Health, rendering prescriptions written by him ineligible for Medicaid reimbursement.
  • Under the terms of the settlement, the pharmacy will pay New York State $442,000 plus $36,000 in damages.