The State AG Report Weekly Update October 6, 2016

Breaking News

AG Consumer Protection Staff Meet for Semi-Annual Seminar: Financial Technology, Consumer Lending, and Settlement Annuities in Focus

  • In a new blog post, Maria Colsey Heard discusses the National Association of Attorneys General (“NAAG”) Fall 2016 Consumer Protection Seminar, held in Phoenix, Arizona this week. The semi-annual event drew consumer protection staff from AG offices across the country who are responsible for initiating and conducting investigations and litigations under states’ broad unfair and deceptive trade practices laws.



New York Attorney General Issues Cease and Desist to Trump Charity Over Alleged Charity Law Violations

  • New York AG Eric Schneiderman issued a cease and desist order to the Donald J. Trump Foundation over allegations that the charity violated New York’s Executive Law.
  • According to the AG’s office, the Trump Foundation failed to register with New York State’s Charities Bureau, and as a result, failed to provide annual financial reports and annual audited statements to the Bureau as required under N.Y. Exec. Law § 172.
  • Pursuant to the AG’s Notice of Violation, the Trump Foundation must cease its solicitations for donations and file delinquent financial reports to the Charities Bureau within fifteen days of receiving the notification.


Consumer Protection

50 AGs Settle with Retailer for Allegedly Engaging in Deceptive Trade and Abusive Debt Collection Practices

  • 50 AGs reached a settlement with USA Discounters, Ltd., also doing business as USA Living and Fletcher’s Jewelers (collectively “USA Discounters”), to resolve allegations that the now-defunct retailer’s consumer financial practices violated multiple state and federal consumer protection laws.
  • According to the AGs’ offices, USA Discounters allegedly engaged in abusive tactics to collect on credit from service members, veterans, and government employees, including contacting service members’ chains-of-command to guarantee payment. The retailer also allegedly charged excessive fees, improper late fees, and among other things, unlawfully sued consumers in Virginia courts regardless of the consumer’s location.
  • Under the terms of the settlement, USA Discounters must pay approximately $40 million in civil penalties, write off account balances or provide credits to consumers, write off judgments not obtained in the proper state, and among other things, correct negative comments on consumers’ credit reports. As we previously reported, Colorado AG Cynthia Coffman sued USA Discounters over similar allegations, which was settled separately in August 2016.


Colorado Attorney General Settles with Electronics Repair Company Over Alleged Failure to Complete Repairs

  • Colorado AG Cynthia Coffman reached a settlement with County Line Vacuum & Appliance d/b/a AAAA TV Electronics and Vacuum (“AAAA TV”), its sales manager, and owner to resolve allegations that the company failed to provide repair services as advertised.
  • According to the AG’s office, the company advertised “in-home” television repairs, but instead allegedly sent untrained employees to consumers’ homes to collect televisions to bring into the shop for repairs. Once the televisions were in the store, the company allegedly charged inflated prices for repairs that were never performed.
  • Under the terms of the settlement, AAAA TV must pay $400,000 to the state, surrender three company vehicles, and is permanently prohibited from performing electronics repairs.


New York Attorney General Reaches Agreement with Herbal Supplement Manufacturer Following Investigation of Ingredients

  • New York AG Eric Schneiderman reached an agreement with NBTY, Inc., to resolve an investigation into the ingredients found within the herbal supplement manufacturer’s products.
  • According to AG Schneiderman, his office issued cease and desist letters in early 2015 to several retailers that carry NBTY’s products after a genetic study of its herbal supplements allegedly failed to detect genetic material from the plants depicted on its packaging labels. The study also allegedly detected DNA associated with plants not listed on the labels, as well as the presence of potential allergens, including peanuts and soy.
  • Under the terms of the Assurance of Discontinuance, NBTY must invest $250,000 in genetic research and education for herbal authentication, incorporate genetic barcoding to ensure supplement ingredients match product labels, improve quality procedures with suppliers, and among other things, randomly test herbal products for major allergens on an annual basis.


Court Rules Energy Shot Company’s Advertising Does Not Violate Oregon Consumer Protection Laws

  • After a trial on the merits, the Oregon Circuit Court of Multnomah County ruled against the State of Oregon on all counts in its case against Living Essentials, LLC and Innovation Ventures, LLC (collectively “Living Essentials”), the makers of liquid energy shot product 5-hour ENERGY®.
  • In its verdict, the court found that AG Rosenblum’s allegations regarding the advertising claims made by Living Essentials were not actionable under Oregon law. As we previously reported, the Indiana Superior Court of Marion County also ruled in favor of Living Essentials against claims brought by Indiana AG Greg Zoeller.


Financial Industry

Massachusetts Attorney General Settles with National Mortgage Servicer Over Alleged Abusive Collection Practices

  • Massachusetts AG Maura Healey reached a settlement with Ditech Financial, LLC, formerly known as Green Tree Servicing, LLC, to resolve allegations that the national mortgage servicer violated Massachusetts law by engaging in abusive debt collection practices.
  • According to the AG’s office, Ditech’s collectors allegedly engaged in unfair business practices by harassing borrowers with excessive collection calls and failing to notify debtors of their right to seek detailed information regarding their debt.
  • Under the terms of the Assurance of Discontinuance, Ditech must pay $1.4 million to the state in restitution. Ditech must also comply with collection call limits, complete an in-person training with its collectors, and implement an automated quality control system to prevent collectors from placing excessive calls, among other things.


State v. Federal

Four Attorneys General File Suit to Block Federal Government’s Internet Transfer

  • The United States District Court for the Southern District of Texas denied a request by four AGs for a temporary restraining order (“TRO”) and preliminary injunction to halt the transition of authority over the Internet’s domain name system (“DNS”) from the National Telecommunications & Information Administration (“NTIA”) to a private global multi-stakeholder community convened by the Internet Corporation for Assigned Names and Numbers (“ICANN”), which is the contractor that oversees DNS and other Internet-related systems.
  • According to the AGs’ complaint, the transition without congressional authorization would violate the Property Clause of the U.S. Constitution. The AGs also contend that the transition from a government entity to private entity would violate the First Amendment by potentially subjecting the DNS to censorship by the private entity. The AGs allege censorship would not occur under the continued oversight of the U.S. government over the DNS.
  • A U.S. Government Accountability Office (“GAO”) study, relied upon by NTIA, found that the transition of authority does not constitute a handover of government property because the government will retain certain rights as well as intellectual and tangible property related to the DNS. The transition was completed on October 1, following the court’s denial of the TRO and preliminary injunction.