The State AG Report Weekly Update May 4, 2017

Consumer Financial Protection Bureau

CFPB Files Lawsuit Against Four Online Lenders for Allegedly Collecting on Voided Debts

  • The Consumer Financial Protection Bureau (“CFPB”) filed a lawsuit against online lenders Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. for allegedly deceiving consumers and collecting on debts that were void under state law governing interest rates and lender licensing.
  • According to the CFPB’s complaint, the lenders offered loans between $300 and $1,200 with annual interest rates ranging from 440 to 950 percent, violating the state’s licensing requirements and interest-rate caps and effectively rendering the loans void in whole or in part. The CFPB found that the lenders deceived consumers about what payments were not owed, collected loan payments on loans where consumers were under no obligation to pay, and failed to disclose the real cost of credit to prospective borrowers.
  • The CFPB’s complaint seeks restitution for consumers, civil penalties, and injunctive relief prohibiting the collection of void loans, among other things.

Consumer Protection

Massachusetts Attorney General Settles with Student Loan Debt Relief Company Over Upfront Fees

  • Massachusetts AG Maura Healey reached a settlement with student loan debt relief company DFL International d/b/a US Direct Student Loan Services (“DFL”) to resolve allegations that the company used unfair and deceptive practices to target student loan borrowers.
  • According to the AG’s office, DFL allegedly charged consumers illegal upfront fees to receive debt relief assistance and falsely led customers to believe it was affiliated with the federal government.
  • Under the terms of the settlement, DFL is required to refund $6,500, discontinue student loan services, and not sell or disseminate Massachusetts customer information.
  • AG Healey launched a Student Loan Assistance Unit in December 2015, and this settlement is its fourth enforcement action since inception against a student loan debt relief company.

New York Attorney General Settles With Developers for Allegedly Harassing Rent-Controlled Tenants

  • NY AG Eric Schneiderman reached a settlement with companies overseeing tenant property at 22 Spring Street, 102 Norfolk Street, 113 Stanton Street, and 210 Rivington Street on New York City’s Lower East Side and the companies’ controllers for allegedly harassing rent controlled tenants in an effort to seek tenant buyouts, violating state rent regulations.
  • According to the AG’s office, the companies allegedly engaged in widespread construction to coerce rent-stabilized tenants to move, later hiring a “tenant relocator" to warn tenants about the now unsafe living conditions and advocate moving out of the property. The companies also allegedly failed to correct a number of pending building code violations during building construction.
  • According to the terms of the settlement, the companies must agree to pay $175,000 to the state’s Department of Housing Preservation and Development fund, $50,000 in penalties, fees, and enforcement costs to the state, hire an independent management company approved by the AG’s office to manage the property, and comply with all residential building regulations.

Oklahoma Attorney General Sues Tornado Shelter Construction Company for Alleged Fraud

  • Oklahoma AG Mike Hunter filed criminal charges against the owner of Tornado King Shelters, a company that builds tornado shelters, for allegedly embezzling payment for contracted work.
  • According to the AG’s Consumer Protection Unit who conducted the investigation, Tornado King allegedly failed to complete work following full or partial payment and its owner was unresponsive to customers who attempted to contact the company.
  • If convicted, the owner of Tornado King Shelters would face up to $5,000 in fines and restitution and up to five years in prison per count.

Tennessee Attorney General Sues Law Firm for Allegedly Targeting Bus Crash Victims

  • Tennessee AG Herbert Slatery III filed a lawsuit against Texas law firm The Witherspoon Law Group PLLC, its investigators, and its associates (collectively “Witherspoon”) over allegations that Witherspoon violated state law when it targeted families of victims of the Chattanooga school bus crash and attempted to solicit business within 30 days of a tragedy.
  • According to the AG’s office, Witherspoon allegedly used its investigators to make contact with victims’ families as they made arrangements at funeral homes, offered to pay for funeral costs in exchange for contracting legal services and, in at least one instance, told families that the funeral home would refuse to bury their children unless they entered into a contract with Witherspoon.
  • The lawsuit seeks injunctive relief, civil penalties, and restitution for victims, among other things.

Medicaid Fraud

Indiana Attorney General Settles with Healthcare Providers Over Allegations of Medicaid Fraud

  • Indiana AG Curtis Hill reached a settlement with healthcare providers Indiana University Health Inc. (“IU Health) and HealthNet Inc. (“HealthNet”) to resolve allegations that financial arrangements between the two entities violated the federal and state False Claims Act and the federal Anti-Kickback Statute.
  • According to the AG’s office, IU Health allegedly offered HealthNet an interest-free line of credit exceeding $10 million, inducing HealthNet to refer its obstetrics and gynecology patients to IU Health’s hospital instead of offering options to patients, which is required by law. Further, the settlement alleges that HealthNet billed Medicaid at doctors’ rates, while in actuality midwives were used to deliver high-risk pregnancies.
  • Under the terms of the settlement, IU Health and HealthNet will pay $18 million, of which Indiana will receive $7.78 million, among other things.