United States: State AGs In The News - April 23rd, 2015

Consumer Financial Protection Bureau

CFPB Settles With Military Payroll Processor Over Camouflaged Fees

  • The Consumer Financial Protection Bureau (CFPB) settled with Fort Knox National Company and its subsidiary, Military Assistance Company, LLC, for charging hidden fees when processing military allotments in violation of the Consumer Financial Protection Act (CFPA). The military allotment system allows service members to transfer a portion of their pay into a pooled bank account out of which a processor makes payments to service members' creditors.
  • The CFPB alleged that the companies failed to send statements to clients and did not disclose certain fees charged in connection with their processing services, including a $5 fee to send a letter to the service member or to their current or past creditors, as well as a recurring monthly fee of $12 to $20 if an account sat idle with a positive balance for more than six months.
  • The consent order requires the respondents to pay $3.1 million in monetary relief to be administered by the CFPB as redress for injured consumers. It also requires respondents to cease all actions alleged to be in violation of the CFPA, to assist the CFPB in locating injured consumers, and to create and maintain records that demonstrate compliance with the order for five years.

Consumer Protection

Vermont Attorney General Adopts Regulations to Clarify State's "GE" Labeling Requirements

  • Vermont AG Bill Sorrell formally adopted regulations to implement Act 120, Vermont's law requiring that food products made with genetically engineered ingredients provide certain disclosures on the label.
  • The new regulations, Consumer Protection Rule 121 (Rule), set forth the requirements for labeling unpackaged and packaged food produced or partially produced with genetic engineering, provide the format for sworn statements certifying that foods were not produced with genetic engineering (when applicable), and outline a safe harbor period whereby the AG will provide 30 days' notice prior to issuing a civil investigative demand or initiating an enforcement action against any retailer alleged to be in violation of Act 120.
  • The Rule indicates that violators can be liable for civil penalties up to $1,000 per day, per "uniquely named, designated and marketed product" in violation of the Rule. Act 120 and the Rule take effect on July 1, 2016.

FTC and CFPB Bring Lawsuit Against Mortgage Servicer

  • The Federal Trade Commission (FTC) joined with the Consumer Financial Protection Bureau (CFPB) to bring a lawsuit in federal court in Minnesota alleging that Green Tree Servicing, LLC, violated the FTC Act, the Consumer Financial Protection Act, Fair Credit Reporting Act, Fair Debt Collections Practices Act, and the Real Estate Settlement Procedures Act in connection with its residential mortgage loan servicing and debt collection practices.
  • The complaint alleges that Green Tree failed to honor loan modification agreements in connection with mortgages it acquired from prior servicers; delayed recognition of the in-process modification status of other borrowers; demanded payment from struggling borrowers without providing loss mitigation options such as loan modifications, deferrals, extensions or forbearances; and employed aggressive and threatening debt collection practices.
  • The proposed stipulated order, which must be approved by the court, requires Green Tree to pay $48 million in consumer redress and $15 million in civil penalties. The order also requires Green Tree to implement programs that enhance consumer loss mitigation options, ensure the accuracy of consumer loan information before servicing the loans, and substantiate collection amounts when consumers are in the process of loan modifications or when there is reason to believe that Green Tree has flawed loan information.

Data Privacy

Delaware Attorney General Announces Quartet of Online Privacy Bills

  • Delaware AG Matt Denn and state lawmakers announced an array of proposed legislation to increase consumer privacy on the internet and through social media. AG Denn indicated that the proposals are designed to be consistent with laws already on the books in other states such as California and Georgia. The proposals include the following, which will be introduced in the upcoming legislative session:
    • The Delaware Online Privacy and Protection Act, which would restrict marketing of certain products to children and require commercial internet services that collect personally identifiable information to provide users with an explanation as to how the service uses that information.
    • The Employer Use of Social Media Act, which would prohibit employers from requiring employees and applicants to provide the employer with access to personal social media accounts.
    • The Victim Online Privacy Act, which would make it unlawful to post or solicit information online related to a participant in the Department of Justice's Address Confidentiality Program for the purpose of inciting violence or harm to that person.
    • The Student Data Privacy Protection Act, designed to create guidelines for school districts, schools, teachers, and staff regarding permissible methods of collecting and using student data for appropriate educational purposes. It would also create procedures to protect the privacy and data security of students and their parents/guardians.


New York Attorney General Presses Legislation to Ban Microbeads

  • New York AG Eric Schneiderman announced that the Microbead-Free Waters Act—legislation designed to address the increased presence of plastic microbeads from personal care products in waters across the state—passed the State Assembly and now awaits consideration by the Senate.
  • Microbeads are used as abrasives in consumer products like toothpaste and body scrubs in lieu of natural materials like ground almonds or pumice. According to the AG, because microbeads are made of plastic, they absorb a variety of chemicals they come into contact with, and over time they become "toxic-sponges." If released from a controlled system, such as municipal wastewater treatment, they can become a hazard for aquatic ecosystems.
  • The Act seeks to ban the sale of any cosmetic product in which microbeads are intentionally added; it defines microbeads as sub-five-millimeter plastic components of personal cosmetic products. The recent legislative efforts to ban microbeads stem from a study conducted by AG Schneiderman, which identified a large number of wastewater treatment facilities from which microbeads are being discharged.

States v. Federal Government

Supreme Court Holds State Antitrust Laws Not Preempted by U.S. Natural Gas Act

  • The U.S. Supreme Court issued a 7-2 decision in favor of the respondents in ONEOK, Inc. v. Learjet, Inc., holding that the U.S. Natural Gas Act does not preempt state antitrust laws that seek to prevent price-fixing in retail gas markets.
  • The dispute consolidated multiple lawsuits, originally brought in state courts, into one multi-district litigation in the District of Nevada. The original plaintiffs (respondents at the Supreme Court) included an array of retail gas purchasers, from manufacturers to school districts and universities. The original defendants (petitioners at the Supreme Court) were a group of interstate pipelines and gas providers.
  • The decision was in line with arguments made by a group of 21 AGs, led by Kansas AG Derek Schmidt, through an amici brief. The AGs had emphasized the distinction between the federal law's intent to occupy the field when regulating interstate wholesale markets, and the state interest to protect consumers and small businesses purchasing through in-state retail markets. The petitioners, backed by an amicus brief from the federal government, had argued that the state laws were preempted because the challenged industry practices, although applied at the retail level, affected the interstate wholesale market.

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