United States: State AGs In The News - January 7, 2015

Consumer Protection

New York AG Demands Fantasy Sports Websites Give Back Money

  • New York AG Eric Schneiderman has amended his lawsuit against prominent daily fantasy sports gaming sites FanDuel, Inc. and DraftKings, Inc., this time asking the court to order them to return all the money collected from New York State consumers, and to pay a fine of up to $5000 per player. With approximately 600,000 New York based daily fantasy sports consumers, paying an estimated $200 million in entry fees in 2015, the monetary implications of the AG's amended complaint could exceed $3 billion.
  • In the amended complaint, AG Schneiderman expands on the deceptive practices arguments from the initial complaint (as opposed to the illegal gambling arguments), emphasizing allegations that the websites misrepresent the amounts won and the likelihood of winning. The AG also claims that the sites employ "incentive advertising" where a consumer must spend additional money in order to fully gain access to current winnings and bonuses. In contrast, authorities in Illinois and Nevada have recently ruled that daily fantasy sports fall under their state's definition of gambling (with less emphasis on deceptive practices).
  • The New York AG had been granted a temporary injunction blocking the operation of FanDuel and DraftKings on December 11. But on the same day, a New York appeals court granted a stay of that injunction, allowing the websites to continue operations pending a January hearing.

FTC Slows Fast Cash From Online Tribal Lenders

  • The Federal Trade Commission (FTC) voted 4-0 to approve settlement agreements with Red Cedar Services Inc. and SFS Inc., doing business online as 500 Fast Cash and One Click Cash respectively. The FTC had alleged that the online lenders violated the Truth in Lending Act and the Electronic Funds Transfer Act, and had committed deceptive practices under the FTC Act when enticing consumers to take out short-term loans online.
  • The complaint alleged that Red Cedar and SFS charged undisclosed and inflated fees on the short-term ("payday") loans offered, and threatened consumers with arrest or prosecution if they failed to pay the additional undisclosed fees. In addition, the FTC alleged that the lenders conditioned the loan on consumers' consent to preauthorize electronic fund transfers, and assessed multiple finance charges for accessing the consumers' accounts to make payment.
  • The lawsuit was filed in federal court for the District of Nevada and involved tribal entities from Oklahoma (e.g., Red Cedar) and Nebraska (SFS). The FTC cleared a key procedural hurdle in 2014 when District Judge Gloria Navarro ruled that the FTC has jurisdiction to sue tribal entities in federal court for deceptive practices under Section 5 of the FTC Act. The tribal entities had claimed immunity.
  • The final orders require Red Cedar and SFS to each pay $2.2 million as equitable monetary relief and to extinguish all consumer debts issued prior to December 2012, the latter contributing to an overall estimated value of $353 million. It also requires the lenders to accurately disclose the total amount a consumer will owe when initiating a payday loan, including the interest rates, finance charges, and any prepayment penalties.

FTC Shines Light on Brain Training

  • The FTC settled claims against Lumos Labs, Inc., doing business online as Lumosity, for alleged violations of the FTC Act in connection to marketing "brain training" software. The Commissioners voted 4-0 to approve the final order, with Commissioner Brill offering a concurring statement emphasizing the need for "rigorous, scientific support" for advertising claims related to improving consumers' health.
  • The complaint alleged that Lumosity "preyed on consumers' fears about age-related cognitive decline" to sell subscription access to a series of online games that it claimed would improve consumers' mental performance on everyday tasks; delay cognitive decline; and reduce impairment associated with strokes, PTSD, ADHD, etc. The FTC argued that Lumosity's claims were deceptive under the FTC Act because they relied on false proofs and misleading testimonials, or were made without proper scientific substantiation.
  • The proposed final order imposes a $50 million judgment on Lumosity, of which all but $2 million is suspended based on the company's financial statements and ability to pay. It requires the company to send emails to customers who had auto-renew subscriptions, offering a copy of the final order and a link to cancel. It also requires Lumosity to provide the FTC a list of its customers over a five-year period ending on December 31, 2014.

Data Privacy

New York AG and Uber Agree to Limit Access to God

  • New York AG Eric Schneiderman reached a settlement with Uber over allegations that the private car-for-hire company insecurely stored user and driver data and permitted company executives and staff to access rider information—including a map that tracked a rider's current location—through a portal referred to as "God View."
  • The investigation into the use of customer geolocation information is rumored to have originated when a reporter indicated that an Uber executive had tracked her without her permission and emailed her "logs" that described her rides in Uber cars.
  • Under the assurance of discontinuance, Uber agreed to encrypt rider geolocation and other sensitive rider information, and to adopt a multifactor authentication protocol for accessing it. Uber also agreed to limit access to the God View portal to designated company executives with a legitimate business objective. In addition, Uber agreed to pay a $20,000 fine for failing to provide notice to the AG regarding a 2014 data breach.

FTC Drills Through Dental Software Provider's Encryption Claims

  • The FTC reached an agreement with Henry Schein Practice Solutions, Inc. to resolve claims that the provider of dental office management software falsely claimed to offer industry-standard encryption that met regulatory requirements under the Health Insurance Portability and Accountability Act.
  • The administrative complaint alleged that Schein knowingly offered software that used a less complex form of encryption to protect patient personal information when compared to the "Advanced Encryption Standard," represented by the National Institute of Standards and Technology (NIST) to be the industry standard. In addition, the FTC alleged that Schein continued to market its software as "encrypted" even after NIST published a vulnerability alert specifically identifying the encryption standard used by Schein's software as "weak."
  • This resolution marks the first time the FTC has imposed monetary penalties for advertisements specifically related to data security. The consent order—which is subject to public comment for 30 days—requires Schein to pay $250,000 in consumer redress, cease making misleading statements about the strength of its data protection, and notify customers within 60 days if the "encrypted" software currently offered uses a weaker encryption standard than what is recommended by NIST.

Environment

DOJ Seeks $48 Billion From Volkswagen

  • The U.S. Department of Justice filed a lawsuit against Volkswagen AG; Audi AG; Volkswagen Group of America, Inc.; Porsche AG; and Porsche Cars North America, Inc. (collectively, VW), alleging that the carmaker violated the U.S. Clean Air Act by installing "defeat devices" to hide the actual amount of nitrogen oxide (NOx) emissions generated by the claimed clean diesel engines.
  • The claims center around four separate types of alleged violations Clean Air Act:

    • VW sold vehicles with false certificates of conformity with U.S. regulations;
    • VW sold vehicles that contained defeat devices;
    • VW tampered with emissions control systems; and
    • VW failed to disclose the presence of devices that could alter the performance of the emissions control system under certain conditions.
  • The complaint seeks civil penalties up to $32,500 for each violation prior to January 2009, and $37,500 for each violation thereafter. When applied to the indicated 600,000 vehicles, the combined penalties sought add up to $48 billion—significantly greater than the previous estimate of $18 billion. The DOJ is also seeking various forms of injunctive relief, including mitigation of current excess NOx emissions and prevention of future defeat devices.

Other Regulatory Issues

New Year, New Dietary Guidelines

  • The U.S. Department of Health and Human Services has put out the 2015–2020 Dietary Guidelines for Americans, offering five "overarching guidelines" and some specific recommendations for healthy eating.
  • The issue is not without controversy, and in this case led to a Congressional hearing in December. On certain topics, like the role of cholesterol (the warning against it was dropped in this edition) and whether red meat is healthy in any amount (the rumored recommendation against eating red meat did not materialize), the Guidelines pit different sectors of the economy against others.

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.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.