United States: State AGs In The News - August 27th, 2015

Consumer Financial Protection Bureau

CFPB Joins With New York Department of Financial Services to Sue Pension Advance Companies

  • The Consumer Financial Protection Bureau (CFPB) and the New York Department of Financial Services (DFS) filed a lawsuit against Pension Funding LLC, Pension Income LLC, and managers Stephen Covey, Edwin Lichtig, and Rex Hofelter ("defendants"), for violating the Consumer Financial Protection Act and various New York state laws.
  • The complaint alleges that defendants used deceptive practices to steer military veterans and civil servants to defendants' website, and then offered lump sum cash advances to the consumers in exchange for their agreement to redirect all or part of their pension payments to defendants over a period of eight years. The complaint alleged that defendants falsely advertised their product was a pension buyout (not a loan), and that it had low or no applicable interest rate and no associated costs or fees. In addition, defendants allegedly misrepresented that their product would not appear on credit reports, was not taxable, and was better than a home equity loan.
  • The CFPB and DFS, however, claim that the effective interest rate was usually greater than 28 percent—a full 12 percent higher than what is allowed by New York state usury laws, and significantly higher than comparable products such as credit cards and home equity lines. Plaintiffs seek a permanent injunction, as well as damages, disgorgement, civil penalties, and costs and fees.

Consumer Protection

AGs Seek Clarity and Procedures for Cancelation of Student Debt

  • AGs from 11 states sent a letter to the U.S. Department of Education (DOE), requesting enhanced procedures and policies to govern the process of discharging student debt associated with attendance at Corinthian and other for-profit schools.
  • The AGs' letter specifically asks that the DOE address four main concerns:
    • the creation of a simplified process for student borrowers to apply for discharge of their loans;
    • greater participation of AGs in the process of determining whether a for-profit school has committed a deceptive practice;
    • loan discharges based on groups or cohorts of students, based on the AGs' investigative results (not individual applications); and
    • clear guidance as to the types of loans that are eligible, the extent to which students can recover amounts already paid, and the ability to discharge loans that have already been consolidated.
  • The DOE announced that it is undertaking a rulemaking process that will clarify how certain borrowers can seek debt relief, and will strengthen provisions to hold colleges accountable for wrongdoing that results in loan discharges. The DOE plans to hold public hearings in September to establish a negotiated rulemaking committee.

FTC Shines Light on UV Disinfectors

  • The Federal Trade Commission (FTC) reached settlements with Angel Sales, Inc. and Zadro Health Solutions, Inc., resolving claims that the companies violated the FTC Act by engaging in unfair and deceptive practices and false advertising in connection with the marketing of devices that use ultraviolet light to disinfect shoes, water, and surfaces.
  • The FTC alleged ( Angel Sales, Zadro) that the companies made unsubstantiated claims about their devices' efficacy in killing certain levels of bacteria and fungi. For example, Angel Sales claimed its device "kills over 95% of germs, bacteria, even the fungus responsible for the highly contagious MRSA bacteria – in less than one hour" and Zadro claimed its products "safely kill 99.99% of targeted bacteria." The FTC also alleged that the companies falsely implied that scientific studies supported their claims.
  • The stipulated orders ( Angel Sales, Zadro) prohibit the companies from making unsubstantiated claims, expressly or by implication, and require 10 years of compliance and record-keeping. Although the FTC issued monetary judgments against both companies ($656,423 and $629,359, respectively), Angel Sales' judgment is suspended entirely, and Zadro's judgment partially based on their inability to pay. Zadro must provide $222,029 for consumer refunds.

Data Privacy

Court of Appeals Confirms FTC Authority Over Cybersecurity Practices

  • The Third Circuit Court of Appeals affirmed that the Federal Trade Commission (FTC) has authority to regulate companies' cybersecurity protections for consumer data under Section 5 of the FTC Act, prohibiting "unfair or deceptive acts or practices in or affecting commerce."
  • As we already reported, in FTC v. Wyndham Worldwide Corporation, the district court found that the FTC's enforcement authority included data breaches. Wyndham appealed that decision, arguing that the FTC did not have authority to punish private businesses for maintaining a different level of data security than that advised by the FTC.
  • In response, the Third Circuit indicated that Wyndham's liability was not based on the standard of data security it employed, but rather on the fact that it published a privacy policy "to attract customers who are concerned about data privacy" but failed to deliver by "investing inadequate resources in cybersecurity" and instead exposed its customers to substantial financial injury, while retaining the profits of their business.

Health Care

New York AG Pursues Hospitals With Alcohol Problems

  • New York AG Eric Schneiderman, together with the U.S. Attorney for the Eastern District of New York, reached settlements with multiple hospitals to resolve a joint investigation into alleged Medicare fraud and violations of the False Claims Act.
  • The AG alleged that SpecialCare Hospital Management Corporation, a for-profit hospital management company based in Missouri, referred patients to Columbia Memorial Hospital, St. Joseph's Medical Center, and Benedictine Hospital ("treatment hospitals") to receive medically unnecessary inpatient drug and alcohol treatment services, from unlicensed providers, in exchange for kickbacks in the form of an administrative services agreement.
  • SpecialCare and its former Chief Executive Officer agreed to pay $6 million to resolve the claims against it. SpecialCare also entered into a corporate integrity agreement with the U.S. Inspector General's Office, and agreed to a five-year injunction on doing business with any health care provider in New York that submits claims to Medicaid or Medicare. For their part in the alleged scheme, Benedictine agreed to pay $880,000; St. Joseph's $600,000; and Columbia Memorial $650,000.

Florida Looks to Crack Down on Rising Health Care Costs

  • Florida Governor Rick Scott has increased the number of planned audits of state hospitals from 31 to at least 129 in an effort to determine whether they have been overcharging Medicaid in violation of Florida law.
  • The audit follows an inquiry by the state Agency for Health Care Administration, in which the agency sought confirmation from various hospitals that they were in compliance with Florida Statute 409.975, which caps the rate that hospitals can charge the Medicaid program at 120 percent of the rate determined by the Agency.
  • Governor Scott's concerns over Medicaid overcharges likely stems from the state's budgetary problem, in which the state is looking to cut spending on Medicaid at a time when health care costs in the state are rising. By some accounts, Florida will be short $579 million in meeting its health care funding needs for 2016-17.


Federal Judge Looks Into Dark Pools, Doesn't See Viable Claims

  • A federal judge for the Southern District of New York has dismissed claims against major U.S. stock exchanges and Barclays Plc in connection with allegations that they created "dark pool" alternative trading platforms and allowed high-frequency traders to front-run regular investors' trades.
  • The court conceded that the dark pools might lack a "productive purpose" and "merely allow[ed] certain traders to exploit technological inefficiencies." Yet it found that the exchanges, as self-regulated organizations, enjoyed "absolute immunity" against plaintiffs' claims that they created complex orders for, and provided nonpublic information to, high-frequency traders, allowing the traders to exploit the infrastructure of the data feeds and networking of the exchanges. The judge indicated that such immunity even applies when the exchanges "act in a capricious, even tartuffian manner which causes enormous damage."
  • In February, a New York state court denied Barclays' motion to dismiss claims brought by AG Eric Schneiderman, alleging that Barclays violated the New York Martin Act when it made material misrepresentations to investors regarding how its dark pool trading platforms operated. That case is ongoing.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions