Digest 3.29.2018 The State AG Report Weekly Update


New York Attorney General Reaches Settlement with Telemarketing Company to Resolve Allegations of Fraudulent Charitable Solicitations

  • New York AG Eric Schneiderman announced a settlement with telemarketing company Menacola Marketing, Inc., d/b/a Neighborhood Outreach, its president, and its manager (collectively, “Menacola”) to resolve an investigation into claims that they violated the Solicitation and Collection of Funds for Charitable Purposes provisions of New York’s Executive Law by allegedly soliciting donations on behalf of shell charities and filing false registration information with the AG’s Charities Bureau.
  • According to the AG’s office, Menacola allegedly raised nearly $190,000 between 2010 and 2016 on behalf of allegedly fraudulent shell charities, retained eighty-five percent of the funds it raised, used fundraising scripts provided by an individual Menacola knew was banned from fundraising in the state, and falsely represented the status of disciplinary actions in other jurisdictions to the state’s Charities Bureau.
  • Under the terms of the assurance of discontinuance, Menacola Marketing, Inc. must cease operations and dissolve, and its president and manager are prohibited from future charitable fundraising in the state and must pay $100,000 to the state to be distributed to legitimate veteran’s charities.

Consumer Protection

Arkansas Attorney General Files Lawsuit Against Online Candy Retailer Over Alleged Deceptive Advertising and Refund Practices

  • Arkansas AG Leslie Rutledge filed a complaint against online candy retailer Treatsie, LLC and its owners (collectively, “Treatsie”) over allegations that they violated the Arkansas Deceptive Trade Practices Act by allegedly engaging in deceptive advertising and deceptive customer service-related practices.
  • According to the complaint, Treatsie allegedly failed to deliver gourmet and artisanal sweets to subscribing customers on time and as advertised; failed to respond to inquiries, complaints, and requests to cancel orders and receive refunds; and made unauthorized charges to customers’ accounts.
  • The complaint seeks restitution on behalf of affected consumers, civil penalties, and injunctive relief against Treatsie.

Federal Trade Commission and New York Attorney General Reach Settlement with Debt Collector to Resolve Abusive Debt Collection Allegations

  • The Federal Trade Commission (“FTC”) and New York AG Schneiderman reached a settlement with debt collector 4 Star Resolution LLC, six related entities, and three related individuals (collectively, “4 Star”) to resolve allegations that they engaged in misleading, threatening, and abusive debt-collection practices in violation of the Federal Trade Commission Act, the federal Fair Debt Collection Practices Act, and New York’s General Business Law provisions governing unfair and deceptive trade practices and fair debt collection practices.
  • According to the FTC’s and AG Schneiderman’s complaint, 4 Star allegedly provided misleading contact information to consumers, failed to provide mandatory legal disclosures, falsely accused consumers of committing bank or check fraud or other crimes in connection with their debts, and threatened consumers with severe criminal consequences for failure to make immediate payments.
  • Under the two separate stipulated orders and judgments reached with eight of the 4 Star business and individual defendants and one individual and one business defendant, the settling parties must pay $30 million and approximately $18.8 million, respectively, with both amounts to be suspended upon the surrender of certain assets, and are enjoined from participating in debt collection, debt buying-and-selling, misrepresenting financial products and services, and profiting from customers’ personal information.

Massachusetts Attorney General Reaches Settlement with Competitive Electricity Supplier to Resolve Alleged Deceptive Sales Practices

  • Massachusetts AG Maura Healey announced a settlement with competitive electricity provider Viridian Energy, LLC (“Viridian”) to resolve allegations that it engaged in unfair and deceptive sales practices in violation of state law to convince consumers to switch to Viridian as their electricity service provider.
  • According to the AG’s office, Viridian allegedly paid independent sales agents to convince consumers that they would save money by switching to Viridian and hired a door-to-door third-party marketer who allegedly engaged in aggressive marketing tactics, made false representations about savings, and sometimes switched consumers to Viridian’s service without authorization.
  • According to the AG’s office, Viridian has agreed to make changes to its marketing practices, stop marketing its electricity supply door-to-door for two years, and pay $4.6 million in restitution to affected customers and $400,000 to the state for investigative costs, future investigations of competitive electricity suppliers, and the state’s General Fund.

Financial Industry

Arizona Enacts “Regulatory Sandbox” Legislation Promoted by Attorney General Mark Brnovich to Encourage FinTech Innovation

  • Arizona Governor Doug Ducey signed into law Arizona’s Regulatory Sandbox Program—a program intended to encourage financial technology innovation in the state by easing the regulatory costs imposed on prospective innovators who seek to introduce new technologies, products, services, and business models. Arizona is the first U.S. state to enact such a program.
  • Once the new law takes effect 90 days after the current legislative session adjourns, businesses will be permitted to apply to the Arizona Attorney General for permission to introduce proposed financial technology and other financial sector innovations to a limited number of Arizona residents on a small scale for a period of up to three years without completing the full licensure process usually required by Arizona law.
  • According to Arizona AG Mark Brnovich, who promoted the legislation as a way of reducing the regulatory barriers that prevent the testing of new products, the Regulatory Sandbox Program model is based on similar programs that have enjoyed initial success in Australia, Singapore, and the United Kingdom.

New York Attorney General Announces Settlement with Investment Bank to Resolve Allegations of Fraudulent Electronic Trading Practices

  • New York AG Schneiderman announced a settlement with Bank of America Corporation and its subsidiary Merrill Lynch, Pierce, Fenner and Smith Incorporated (collectively, “Bank of America Merrill Lynch”) to resolve an investigation into claims that they violated New York’s Martin Act, securities laws, and Executive Law by allegedly misleading clients regarding the safety and sophistication of certain securities trading services and attempting to conceal the full details of certain securities transactions from clients.
  • According to the AG’s office, Bank of America Merrill Lynch allegedly routed millions of equity securities orders to third-party electronic liquidity providers while telling clients that the orders were executed in house and took deliberate steps to conceal the truth from clients, including by altering client transaction reports and reprogramming electronic trading systems.
  • Under the terms of the settlement agreement, Bank of America Merrill Lynch will pay $42 million to the state, refrain from further violations of the applicable laws, engage a third-party to conduct a review of its electronic policies and procedures, and admit the investigative findings detailed in the settlement agreement.

For-Profit Colleges

Massachusetts Attorney General Reaches Settlement with Online Business School to Resolve Unfair and Deceptive Acts and Practices Allegations

  • Massachusetts AG Healey announced a settlement with online business school the New England College of Business and Finance (“NECB”) to resolve allegations that it violated state regulations governing the operation of for-profit and occupational schools by allegedly failing to make adequate pre-enrollment disclosures to prospective students and by engaging in high-pressure sales tactics.
  • According to the AG’s office, NECB allegedly failed to disclose information about tuition and fees, employment statistics, graduation rates, and program completion times at least 72 hours prior to prospective students’ entry into enrollment agreements and directed phone and text message solicitations to prospective students more than twice a week.
  • According to the announcement, NECB will pay a total of $79,000 to the state to cover investigative costs, provide monetary relief to affected consumers, and fund consumer education. NECB will also waive certain institutional debt owed by eligible students and send out revised disclosures to currently-enrolled students.