United States: State AGs In The News - November 24th, 2015

2015 Elections

Louisiana Runoff Elections Produce Surprise

  • In what many commentators are calling an upset, Democrat John Bel Edwards defeated Republican David Vitter, 56 to 44 percent, in the Louisiana runoff election for the governor's office. Mirroring other states' recent elections, the Louisiana race was one of the costliest in state history, with at least $30 million claimed to have been spent by campaigns and outside groups.
  • In the runoff for the AG position, incumbent Buddy Caldwell lost his attempt to secure a third term to Republican Jeff Landry. Landry had made Caldwell's use of outside law firms to litigate alleged Medicaid fraud cases by pharmaceutical companies a key target for criticism in his campaign.


FCC Chairman Finds No Fault in "Binge[ing]-On" Video

  • In a recent statement, Federal Communications Commission (FCC) Chairman Tom Wheeler stated that he believed T-Mobile's new "Binge-On" service—which allows customers to watch unlimited videos, in a downgraded quality, from 24 listed streaming services without such usage counting against their data plan (also known as "zero-rating")—does not run afoul of the FCC's Open Internet Order.
  • T-Mobile indicated that if consumers want higher definition video, they can opt out of the Binge-On service and have the associated data count against their monthly data limits. It also claimed that the service is "open to any legit streaming service... at absolutely no cost to them."
  • Yet some open Internet advocates view this type of arrangement as restrictive on competition, arguing that consumers are less likely to use video services that count against data caps. For example, Public Knowledge argued that rather than allowing T-Mobile to select which services can stream their videos with a zero-rating, consumers should be allowed to choose the service providers they want to be exempted.
  • Although Chairman Wheeler's statement that Binge-On is "pro-competitive" and "innovative" might alleviate some concerns that Internet service providers (ISPs) have regarding zero-rating, it is not dispositive of the issue: The Binge-On service might not facially run afoul of the specific rule against paid prioritization—which prohibits ISPs from favoring certain data in exchange for consideration of any kind, or from prioritizing the content and services of their affiliates—but the application of zero-rated services does fall under the FCC's General Conduct Standard, which looks to whether a service "unreasonably interferes with or disadvantages" other service providers' access to consumers, or consumers' access to the Internet.

Consumer Financial Protection Bureau

CFPB Sees Integrity Lacking

  • The Consumer Financial Protection Bureau (CFPB) filed a Notice of Charges against Integrity Advance, LLC and CEO James Carnes, alleging that the online lender violated the Truth in Lending Act, Electronic Fund Transfer (EFT) Act, and Consumer Financial Protection Act.
  • The CFPB alleged that Integrity entered into contracts with consumers that contained default terms permitting a loan to be rolled over multiple times, accruing additional finance charges each time, even though the disclosures were based upon that loan being repaid in a single payment with no rollovers. For example, if the loan was rolled over four times, a consumer borrowing $300 would ultimately pay $765 in finance charges—$675 more than the $90 finance charge disclosed in Integrity's contract. In addition, Integrity allegedly conditioned the loans on consumers' agreement to repay the loans through pre-authorized electronic fund transfers in violation of the EFT Act.
  • The CFPB is not the first regulator to raise issues with Integrity's online lending practices. In 2013, Minnesota AG Lori Swanson was awarded over $7.7 million in restitution and statutory damages in her case against Integrity. Integrity, a Delaware-based company, challenged the application of Minnesota state law to its practices as inconsistent with the Interstate Commerce Clause of the U.S. Constitution, but lost on appeal at the Supreme Court of Minnesota.

Consumer Protection

Massachusetts Enters Fantasy Sports Regulation Derby

  • Massachusetts AG Maura Healey is proposing a set of regulations to create greater consumer protection for participants in daily fantasy sports (DFS):

    • The regulations prohibit persons under the age of 21 from participating in DFS, and ban advertisements or marketing promotions at schools or colleges campuses. In addition, DFS operators are restricted from offering contests based on college or high school sports.
    • The regulations would also seek to provide greater transparency regarding who is playing against consumers, limiting participation by professional athletes, DFS operators' employees, and, in some cases, professional and expert DFS players.
    • Finally, the regulations would ensure truthful advertisements, and would establish limits on the amount of money that players can keep on deposit with DFS operators.
  • The proposed regulations were filed with the Secretary of State's Office, and members of the public can submit comments until January 22, 2016.

FTC Gives Nod to Parental Selfies for COPPA Compliance

  • The Federal Trade Commission (FTC) recently approved an application submitted by Jest8 Ltd. (now Riyo, Inc.) to use a "face match to verified photo identification" method for providing verifiable parental consent for a child to use an online service covered by the Children's Online Privacy Protection Act (COPPA).
  • The FTC approved Riyo's application in a letter, following publication in the Federal Register and a comment period. The approved method is a two-step process. First, a parent provides a digital image of her government-issued driver's license or passport, which is analyzed to ensure it is authentic. The parent is then prompted to take and submit a photo of her face with a phone camera or webcam, which is compared to the image on the identification using facial recognition technology.
  • In responding to public comments on Riyo's proposed method, the FTC specified that it was not determining whether other forms of facial recognition, such as comparing one image against a database of images, would be permissible. The FTC also indicated that its approval was conditioned on the fact that both images are deleted shortly after confirmation, negating security concerns stemming from a service provider unnecessarily storing the personally identifiable information contained on government-issued identification cards.
  • In addition to this new parental selfie method, COPPA verification rules continue to allow parents to provide verified consent through forms submitted via mail, fax, or electronic scans. It also allows parents to call specified numbers, or to provide credit cards for payments.

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