United States: State AGs In The News - October 9th, 2014

Last Updated: October 16 2014
Article by Bernard Nash and Lori E. Kalani

Hot News

California Requires Identity Theft Protection for Data-Breached Customers

  • California governor Jerry Brown recently signed into law AB 1710, requiring businesses that handle customer data to provide identity theft prevention services at no charge for 12 months following a data breach.
  • In light of the increasing scope and frequency of data breaches, other states may follow with revisions to their laws on post-breach mitigation requirements.
  • For more information, please see our recent blog post by Dickstein Shapiro Counsel Aaron Lancaster.

State AGs and the High Court: 2014 Term Preview

  • The October 2014 term of the U.S. Supreme Court is underway, and similar to previous years, there are more than a few disputes with significant interest from state AGs.
  • Dickstein Shapiro Partner Milton Marquis and Counsel Ann-Marie Luciano discuss a few of these cases in a recent blog post, covering topics ranging from the state action exemption, to antitrust liability, to consumers' rights under the Truth in Lending Act.

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 2:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro's State AG practice will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.

Consumer Financial Protection Bureau

CFPB Takes Action to Shutter Mortgage Services Referral Schemes

  • The CFPB entered into a Consent Order with Lighthouse Title, Inc. resolving allegations that the company violated Section 8(a) (the anti-kickback provisions) of the Real Estate Settlement Procedures Act and accompanying regulations.
  • The CFPB alleged that the kick-back came from "marketing service agreements" (MSAs) through which Lighthouse would agree to pay for marketing services from real estate brokers and other companies, but where the payment amount was based, in part, on the number of referrals it had received from that vendor.
  • Under the terms of the Consent Order, Lighthouse must pay a $200,000 civil penalty, terminate all existing MSAs, and is prohibited from entering into new MSAs.

Consumer Protection

Iowa Enters Consent Order With Online Lender Despite Claims of Tribal Jurisdiction

  • Iowa AG Tom Miller entered a Consent Order with CashCall, Inc. over claims that it charged consumers exorbitant interest rates – in excess of 169% APR – along with illegal fees associated with online loans, in violation of Iowa's consumer laws.
  • CashCall had alleged that it was outside Iowa's regulatory jurisdiction because it was a California entity and only extended its loans through an agreement with Western Sky Financial, LLC, an entity located on the Cheyenne River Sioux Reservation in South Dakota. AG Miller disputed CashCall's jurisdictional argument.
  • The Consent Order admits no fault, but requires CashCall to pay $1.5 million in restitution and to cease offering future loans to consumers in Iowa. It also forbids CashCall from reporting Iowans to credit reporting agencies, and requires CashCall to request that credit reporting agencies remove its past reports on Iowa borrowers.
  • CashCall is currently involved in multiple lawsuits based on similar allegations, including a lawsuit filed by the Consumer Financial Protection Bureau (CFPB) for violating the Consumer Financial Protection Act's prohibitions on unfair, deceptive, and abusive acts and practices.

Attorneys General From All 50 States and the Federal Trade Commission Reach Nationwide Settlement on Cramming

  • AT&T Mobility LLC has agreed to pay $80 million to the Federal Trade Commission (FTC) for consumer refunds, $20 million in penalties and fees to the AGs, and a $5 million penalty to the Federal Communications Commission to resolve allegations that unauthorized third-party charges were placed on customer bills for subscriptions and services, a practice commonly referred to as "cramming."
  • AT&T Mobility issued the following statement:

In the past, our wireless customers could purchase services like ringtones from other companies using Premium Short Messaging Services (PSMS) and we would put those charges on their bills. Other wireless carriers did the same.

While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services.

Today, we reached a broad settlement to resolve claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorize. This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund.

Data Privacy

Attorneys General Probe Customer Notification Following JPMorgan Data Breach

  • Connecticut AG George Jepsen and Illinois AG Lisa Madigan are investigating circumstances surrounding JPMorgan Chase & Co.'s (JPMorgan) recent data breach.
  • The AGs appear to be particularly interested in when JPMorgan was aware that its customer data had been breached, and what efforts it took to timely notify customers.
  • As we have noted, data breach notification is largely an issue of state law. In many cases, state laws do not require notification unless customer names were stolen in connection to credit card or bank account access information, or social security numbers. In addition, state laws vary as to how long a company has to notify data-breached customers: some states require a specific period (e.g., one month), whereas others use more ambiguous terms (e.g., a reasonable period). For more on the role of state AGs in this area see our previous blog post.

Environment

Gas Developers Agree to Disclose the Financial Risks of Fracking

  • New York AG Eric Schneiderman reached agreements with natural gas developers Anadarko Petroleum Corporation (Anadarko) and EOG Resources, Inc. (EOG) to end a three-year investigation into their use of hydraulic fracturing processes (fracking).
  • Anadarko and EOG agreed to make disclosures in their federal securities filings about the financial risks to investors stemming from the use of fracking. These risks would include potential environmental impacts, such as damage to natural aquifers, as well as the future regulatory action, including bans and moratoriums.
  • The investigation was conducted under the authority of New York's Martin Act, a 1921 state securities law that provides the AG broad authority to access the financial records of New York businesses.

Financial Industry

New York Attorney General Investigates Securities Ratings Firm

  • New York AG Eric Schneiderman is investigating Standard & Poor's Financial Services LLC (S&P) in response to allegations that it altered mortgage bond ratings in order to win future business from the issuing banks.
  • S&P has been named as a defendant in multiple lawsuits related to its role in rating mortgage-backed securities and the financial crisis, including separate lawsuits brought by 20 AGs and by the U.S. Department of Justice. Seventeen of the state lawsuits had been joined and removed to federal court as one multidistrict lawsuit. However, as previously blogged, in June a federal judge separated the lawsuits and remanded them back to state courts.

For-Profit Colleges

Fourteen Attorneys General Seek Better Federal Regulation of For-Profit Colleges

  • As announced by Kentucky AG Jack Conway, a bipartisan group of 14 AGs wrote a letter in support of legislation to increase federal oversight of the for-profit college industry.
  • The letter, addressed to U.S. Senator Richard Durbin and U.S. Representative Elijah Cummings, voices the group's support for S. 2204, the "Proprietary Education Oversight Coordination Improvement Act," a bill under consideration in Congress that would improve coordination among federal regulators.
  • AGs are employing different methods to deal with recent complaints surrounding for-profit colleges. As we have blogged earlier this year on July 3, July 24, and July 31, these methods include investigations and lawsuits, but also a push for greater state regulations to increase disclosures and provide better information to students.

Mortgages/Foreclosures

New York Attorney General Sues Mortgage Rescuers for Fraud

  • New York AG Eric Schneiderman brought a lawsuit against an allegedly fraudulent mortgage rescue operation for violations of New York law. The lawsuit seeks an injunction against the defendants' actions, restitution, and penalties and costs.
  • The lawsuit alleges that Litvin Law Firm and other defendants induced consumers in 31 states to purchase non-existent "forensic loan audits" and other foreclosure prevention services and would automatically charge consumers a monthly fee ranging from $595 to $750.
  • We have previously blogged on similar fraudulent mortgage relief lawsuits brought by the AGs of Arizona, Indiana, and Massachusetts, among others. In addition, the FTC has initiated many similar lawsuits based on alleged violations of the FTC Act and the Mortgage Assistance Relief Services rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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