Digest 10.3.2019 The State AG Report Weekly Update

Consumer Protection

FTC Files Lawsuit Against Online Dating Service Operator Over Alleged Fraud

  • The Federal Trade Commission filed suit against Match Group, Inc.—which operates, Tinder, OKCupid, PlentyOfFish, and other online dating services—over alleged deceptive advertising, consumer exposure to fraud, and other unfair practices in violation of the FTC Act and the Restore Online Shoppers’ Confidence Act (“ROSCA”).
  • According to the complaint, Match Group allegedly advertised its dating sites using misleading and fictitious communications from potential suitors, exposed consumers to the risk of fraud by certain other users by allowing likely fraudulent communications on its sites; failed to adequately disclose the terms of guarantees the services offered; made it difficult to cancel subscriptions; and denied consumers access to paid-for services following charge disputes.
  • The complaint seeks civil penalties, injunctive relief, consumer redress, and costs.

Data Privacy & Security

New York Attorney General Sues National Donut Chain Over Alleged Data Breach

  • New York AG Letitia James filed a lawsuit against Dunkin’ Brands, Inc., the franchisor of Dunkin’ Donuts, over allegations that it failed to secure data connected to store-branded value cards in violation of state consumer protection law and data breach notification statute.
  • According to the complaint, Dunkin’ Brands allegedly failed to protect consumer information from “brute force attacks”—repeated, automated attempts to gain access to accounts with stolen usernames and passwords—and failed to notify affected consumers of the unauthorized access, among other things.
  • The complaint seeks injunctive relief, restitution, civil penalties, and notification to affected consumers, among other things.

Financial Industry

South Carolina Department of Consumer Affairs, CFPB Sue Brokers Over Alleged Misrepresentations

  • The South Carolina Department of Consumer Affairs (“SCDCA”) and the Consumer Financial Protection Bureau (“CFPB”) filed suit against high-interest credit brokers Life Funding Options, Inc., Performance Arbitrage Company, Inc., and the owner of the companies (collectively, “LFO”) over allegations that LFO misrepresented and brokered high-interest credit contracts to consumers in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the South Carolina Consumer Protection Code.
  • According to the complaint, LFO misrepresented to consumers—including veterans—that a high-interest credit offer was actually a sale of the consumer’s pension payments, which is prohibited by state and federal law, and failed to disclose the products’ interest rates.
  • The complaint seeks voiding of the relevant contracts, injunctive relief, restitution, redress, disgorgement, civil penalties, and costs.

State AGs in the News

Kansas Attorney General Issues Opinion on Taxation of Remote Sellers

  • Kansas AG Derek Schmidt issued Opinion No. 2019-8, regarding the validity of a Kansas Department of Revenue policy, “Sales Tax Requirements for Retailers Doing Business in Kansas” (“Policy”), that would require every out-of-state retailer, regardless of physical presence in the state, to collect and remit sales or compensating use tax on any property or services delivered into Kansas.
  • In the Opinion, AG Schmidt concludes that creation and enforcement of the Policy exceeds the Department’s authority, was not a lawfully adopted rule or regulation, and is inconsistent with South Dakota v. Wayfair, Inc. et al., 585 U.S. __, 138 S.Ct. 2080 (2018), which held that collection and remittance of taxes by out-of-state retails—subject to a “safe harbor” threshold of sales—does not categorically violate the Commerce Clause.
  • AG Schmidt observed that “Wayfair cannot fairly be read to have eliminated all Commerce Clause limits” on state tax authority, and that because the Policy does not provide a safe harbor threshold, it is not consistent with Wayfair.

Washington Attorney General Obtains Order Against Campaign Firm Over Allegedly Deceptive Contribution Solicitations

  • Washington AG Bob Ferguson obtained an order against a for-profit signature-gathering firm Citizen Solutions, LLC and its owner (collectively, “Citizen Solutions”) finding that it violated the State’s Fair Campaign Practices Act.
  • According to the judgment, Citizen Solutions engaged in a scheme to intentionally conceal from the public that donated funds were being used for the personal benefit of a political activist and signature-gathering costs for a different initiative than the initiative for which the funds were purportedly collected, among other things.
  • The judgment directs Citizen Solutions to pay $300,000 in civil penalties, $117,500 in unpaid contempt sanctions, and $622,255 in costs and fees.

State v. Federal

Court Upholds FCC Repeal of Net Neutrality Rule, Rejects Preemption of State Action

  • The U.S. Court of Appeals for the D.C. Circuit partially upheld the Federal Communications Commission’s (“FCC”) authority to repeal its 2015 net neutrality rule—a rule intended to prevent internet service providers form imposing content-based restrictions or pricing on internet traffic.
  • In the case, Mozilla et al v. FCC, the Court held that the FCC’s 2018 order repealing the net neutrality rule was permitted and not “arbitrary and capricious,” but agreed with the petitioning AGs that the portion of the FCC order that barred states from adopting open-Internet protections was beyond the FCC’s authority.
  • As previously reported, 23 AGs challenged the FCC’s order in January 2018 by petitioning for its review by the courts. 23 Democratic AGs filed a brief in support of the petition and 3 Republican AGs filed an amicus brief in support of the FCC, urging the court to deny the petition.