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The State AG Report Weekly Update June 25, 2015

Breaking News

NAAG Elects New Leadership

  • The National Association of Attorneys General (“NAAG”) elected new leadership at its annual Summer Meeting, which took place June 16-18 in San Diego, California.
  • South Dakota AG Marty Jackley will serve as President of NAAG for the 2015-2016 term. Mississippi AG Jim Hood, who previously served as President, will now be the Immediate Past President.  Connecticut AG George Jepsen and Kansas AG Derek Schmidt were elected to serve as President-Elect and Vice President, respectively.
  • The NAAG elects its officers yearly, typically rotating through NAAG’s four Regions (East, Midwest, South, and West).

 Consumer Financial Protection Bureau

CFPB Asks Internet Search Engines to Better Monitor Student Debt Relief Advertisements

  • The Consumer Financial Protection Bureau (“CFPB”) Student Loan Ombudsman sent letters to Google, Bing, Yahoo! and Facebook over concerns that “aggressive advertising” on these sites by student loan debt relief companies is preying on distressed student borrowers seeking information about loan repayment options.
  • In its letter to Google, for example, the CFPB asks the company to more closely monitor the advertising on search terms used most frequently by students seeking loan relief and to “drive traffic toward unbiased sources of information.” The CFPB also asks the search engine to work closely with federal and state agencies, as it did during the foreclosure crisis, to reign in debt relief scams that take advantage of students through the company’s search products.

Consumer Protection

Indiana Attorney General Sues Company for Alleged Study Guide Scam

  • Indiana AG Greg Zoeller filed a complaint against The College Network, Inc., an Indiana-based company, over allegations that the company used deceptive marketing to sell college-level study guides in violation of state consumer protection laws.
  • According to AG Zoeller’s office, College Network allegedly advertised its study programs as preparation for end-of-course equivalent exams that would be accepted for credit at various participating colleges and universities, but no such partnerships existed, and there were no guarantees that a student or that such credits would be accepted at “participating” schools.  AG Zoeller further alleges that the company steered students into costly, non-traditional student loans, in order to pay for the costly study guides, through a third-party credit union which typically required payments immediately and had interest rates of at least 12 percent.
  • New York AG Schneiderman earlier this month filed a similar complaint against College Network, as well as a lender and credit union involved in the alleged scheme.

New York Attorney General Settles with Ride-Sharing Company over Allegations It Failed to Follow State Laws for Operating a For-Hire Livery Service

  • New York AG Eric Schneiderman and the New York State Department of Financial Services reached a settlement with Lyft Inc., a ride-sharing service, over allegations that it violated state laws for operating a for-hire livery service without proper licensing and insurance for its drivers, and failing to comply with for-hire licensing rules.
  • The settlement resolves a lawsuit filed by AG Schneiderman and the New York State Department of Financial Services that asserted that Lyft was a taxi service subject to the rules and regulations governing that business, including the requirement that drivers obtain commercial licenses and carry state-authorized insurance.
  • Under the settlement, Lyft has agreed to pay $300,000, will obtain licensing through the New York Taxi and Limousine Commission, and will require its drivers to carry insurance issued by a state-authorized insurer, among other things.

New York Attorney General Settles with Auto Dealerships over Allegations that They Deceptively Sold Add-On Items

  • New York AG Eric Schneiderman reached a settlement with three auto dealerships over allegations that the companies violated state consumer protection laws by using deceptive and misleading practices to sell add-on items to customers.
  • According to AG Schneiderman, investigations by his office revealed that the car dealerships would charge customers for additional products they were entered into without their knowledge or after being told the product was free. In addition, the AG further alleges that these products were often bundled into the vehicle sale price and not separately itemized.
  • Under the consent order agreement, the dealerships will pay $13.5 million in monetary relief to consumers and $325,000 in penalties, fees, and costs to the state.
  • According to reports, AG Schneiderman served notice of his intent to sue on eleven other automobile dealerships who have allegedly engaged in similar practices.

Oregon Attorney General Settles with Subscription Service for Allegedly Scamming Consumers

  • Oregon AG Ellen Rosenblum entered an Assurance of Voluntary Compliance (“AVC”) with 19 companies and 9 individuals who allegedly operated a magazine and newspaper subscription scam out of White City, Oregon (“White City enterprise”) for violating state consumer protection laws.
  • According to the complaint, the White City enterprise allegedly sent solicitations made to look like invoices sent directly from magazine and newspapers publishers, when they were actually from third-parties. The solicitations allegedly claimed that subscriptions were the “lowest newsstand price possible” when they were in fact 40-100 percent higher.  Under the AVC, the companies have agreed to pay restitution, $3 million in penalties, and will cease from engaging in newspaper and magazine subscription services, among other things.
  • This is the first settlement following a joint investigation of the companies and coordinated lawsuits filed by Oregon, New York, Minnesota, Missouri, and Texas earlier this year.

West Virginia Attorney General Settles with Lender for Allegedly Violating State Debt Collection Laws

  • West Virginia AG Patrick Morrisey entered an Assurance of Discontinuance (“AOD”) with Dominion Management Services, Inc. d/b/a CashPoint, a Virginia company, over allegations that the lender violated state debt collection laws when collecting on debts owed by West Virginia residents.
  • According to AG Morrisey’s office, CashPoint sold car title loans, a type of short-term high-interest loan which uses a car title as collateral, to West Virginia residents, and would allegedly collect on these debts by making harassing phone calls, sharing personal debt related information to third parties, and contracting with unlicensed third parties to have vehicles seized.
  • Under the AOD, CashPoint admitted no wrongdoing but has agreed to, in part, cancel delinquent balances totaling over $2 million, release vehicle liens, and return clear car titles to affected consumers. The company will also pay the state $85,000 in penalties.

Pharmaceuticals

Forty-Eight Attorneys General and the Federal Government Settle with Pharmaceutical Company for Alleged Off-Label Marketing

  • Forty-Eight Attorneys General and the federal government announced a settlement with Inspire Pharmaceuticals, Inc. (“Inspire”) over allegations that the company violated the False Claims Act for off-labeling marketing of its drug, AzaSite, approved by the Food and Drug Administration (“FDA”) to treat pink eye.
  • According to the complaint, Inspire allegedly marketed AzaSite for non-FDA approved uses where it broadly cited to the drug’s anti-inflammatory effects, among other things, and as a result doctors wrote prescriptions for use beyond the treatment of pink eye.  The complaint further alleges that Inspire had been previously warned about its advertisements of the drug by the FDA in 2011.

  • Inspire has agreed, under the terms of the settlement, to pay $5.9 million in total to states and the federal government to reimburse for false claims submitted to state and federal health care programs as a result of the alleged off-label marketing.

State v. Federal

Ten Attorneys General Ask Congress to Investigate Coercion by a Federal Agency over Medicaid Expansion

  • Ten AGs, led by Kansas AG Derek Schmidt and Texas AG Ken Paxton, sent a letter to the Chairman of the U.S. House Energy and Commerce Committee requesting that the committee investigate the Centers for Medicare and Medicaid Services (“CMS”), a federal agency within the U.S. Department of Health and Human Services, for allegedly coercing states into expanding their Medicaid programs in violation of the U.S. Constitution.
  • In the letter, the AGs allege that CMS denied or threatened to deny federal funding to states under a program which provides matching funds to states who provide state funds to healthcare providers serving indigent populations, because the states have not expanded their Medicaid programs as envisioned by the Affordable Care Act.  The AGs argue, in part, that the program serves populations who would not be covered by the expanded Medicaid program and therefore is unrelated funding being unlawfully withheld to coerce states into expanding their Medicaid programs.
  • Florida also recently filed a complaint against the federal government regarding this issue, and Kansas and Texas have submitted a joint amicus brief in support of Florida in that case, Scott et al v. United States Department of Health and Human Services et al., Case No. 3:15-cv-00195 (N.D. Fla.).

Massachusetts Attorney General Urges Congress to Pass Legislation to Address Solutions for Long-Term Nuclear Fuel Storage

  • Massachusetts AG Maura Healey sent a letter to the U.S. Senate Committee on Environment and Public Works urging Congress to pass legislation to increase the safety and security of nuclear power plants and decommissioned sites, and storage of spent nuclear fuel, in particular.
  • In the letter, AG Healey urges Congress, in the absence of action by the Nuclear Regulatory Commission (“NRC”), to pass legislation that will provide a long-term solution for the storage of spent nuclear waste.  AG Healey, in the letter, also expresses support for particular legislation currently pending before the Committee, including the Safe and Secure Decommissioning Act of 2015, the Nuclear Plant Decommissioning Act of 2015, and the Dry Cash Storage Act of 2015.
  • Massachusetts has one nuclear power plant, the Pilgrim Nuclear Power Station located in Plymouth, Massachusetts. AG Healey’s predecessor had sought to stop the NRC from relicensing the plant in 2011 because of public safety and environmental concerns about how the plant stored spent fuel.