Consumer Financial Protection Bureau

Consumer Financial Protection Bureau's Mid-Year Report on Student Loan Complaints Reveals Reports of Auto-Default When Co-Signer Dies or Files Bankruptcy

  • The CFPB issued a mid-year report on student loan complaints and highlighted co-signer issues reported by borrowers. The complaints included lenders placing loans into auto-default when a co-signer dies or files for bankruptcy.
  • According to the report, over 90 percent of private student loans are co-signed and many of those contracts include an option for lenders to demand the full balance of a loan when a borrower's co-signer dies or files for bankruptcy. Borrowers complained, however, that lenders automatically placed the loan in default, even when the borrower was paying the loan as agreed.
  • Co-signer releases are often available after a certain period of on-time payments. The report also discusses complaints that lenders do not make the option of obtaining a co-signer release known and that the criteria for a release are not clear and transparent.
  • The report proposes lender alternatives to auto-default, including assessing the borrower's eligibility for co-signer release, providing the opportunity to provide a new co-signer, or providing time to refinance the loan.

Data Privacy

Michigan Attorney General Advocates for Data Privacy Standards for Affordable Care Act Navigators

  • Michigan AG Bill Schuette urged the state legislature to pass legislation that would create data privacy standards for navigators of the Patient Protection and Affordable Care Act, who are charged with collecting a variety of sensitive personal information, such as names of the insured, birth dates, social security numbers, and protected health records.
  • House Bill 4576, introduced by State Representative Hugh Crawford, would allow the state to regulate navigators and protect consumer privacy by amending the Michigan Insurance Code to require navigators to complete a comprehensive training program, submit to a criminal background check including fingerprinting, and be certified as a navigator prior to performing any duties.
  • In a related effort, AG Schuette and 10 other AGs sent a letter last December to the Secretary of the U.S. Department of Health and Human Services voicing concern over the lack of consumer privacy protections related to navigators and recommending similar protections to those proposed in the bill.
  • The Michigan House of Representatives passed the bill in December 2013 and the Michigan Senate Health Policy Committee voted favorably on the bill on March 18, 2014. The bill now faces a vote of the Senate as a whole.


New York Attorney General Settles Allegations With Internet Food-Delivery Company Regarding Tips Paid to Delivery Workers

  • New York AG Eric Schneiderman settled with GrubHub Inc., an Internet food-delivery company created when GrubHub merged with Seamless North America LLC, to resolve allegations that Seamless used a fee structure that created a potential incentive for restaurants to illegally retain a portion of tips meant for delivery employees.
  • New York labor laws prohibit an employer, the employer's agent, or any person from retaining a portion of an employee's tips. Seamless allegedly calculated and charged a fee to its restaurant partners based on a percentage of the total food, drink, taxes, and tips paid by customers. After withholding this fee, Seamless sent the remaining amount to the restaurant.
  • Pursuant to the agreement, GrubHub must:

    • Use a fee calculation in future contracts that excludes tips;
    • Make an effort to transition restaurants with old contracts to new contracts;
    • Notify all restaurant partners of their labor law obligations;
    • Include a requirement in all new contracts that restaurants must comply with all laws applicable to delivery workers; and
    • Include notice on all billing invoices that tips are the property of the employee.

Major Retailer Settles Allegations of Illegal Hiring Practices With New York Attorney General

  • New York AG Eric Schneiderman settled with Bed Bath & Beyond to resolve allegations that it automatically disqualified job applicants based solely on criminal history in violation of New York state law.
  • New York law requires employers to conduct an individualized assessment of candidates and consider a number of mitigating factors, including any evidence of rehabilitation. Bed Bath & Beyond allegedly disseminated information at a job fair stating that it did not hire convicted felons, regardless of any evidence of rehabilitation.
  • Pursuant to the settlement, Bed Bath & Beyond will:

    • Modify its policies to comply with state law;
    • Conduct employee training on those policies;
    • Preserve records of its hiring decisions;
    • Provide periodic reports to the AG; and
    • Pay $125,000, with $40,000 of that amount paid as restitution to individuals that were denied employment and $15,000 of that amount donated to organizations providing job training and placement services for individuals with criminal records.
  • AG Schneiderman recently settled similar allegations with background check agencies.


North Carolina Attorney General Appeals Objection to Electricity Rate Increase to State Supreme Court

  • North Carolina AG Roy Cooper filed a brief with the North Carolina Supreme Court asking it to intervene again to oppose Duke Energy's proposed 7.2 percent rate increase and 10.5 percent return on equity for shareholders.
  • The North Carolina Supreme Court held in April 2013 that the state Utilities Commission (Commission) must determine the impact on consumers before setting an allowable profit margin and agreeing to raise rates. That order reversed the Commission's decision to grant the rate increase and remanded the case back to the Commission.
  • After re-reviewing the proposed increase on remand, the Commission approved the rate increase again. AG Cooper objects because he believes that the approval does not appropriately consider consumers.


Federal Appeals Court Upholds EPA Mercury and Air Toxics Standards Supported by 17 State Attorneys General

  • The U.S. Court of Appeals for the District of Columbia upheld the Environmental Protection Agency's (EPA) Mercury and Air Toxics Standards (MATS) rule, which was supported by 17 intervening AGs, Erie County, Pennsylvania, and the cities of Baltimore, New York, and Chicago.
  • Several state, industry, labor, and environmental petitioners challenged the rule, which was issued in 2012 and provided emission standards for a number of listed hazardous air pollutants emitted by coal- and oil-fired electric utility steam generating units.
  • The 17 AGs, led by Massachusetts AG Martha Coakley and California AG Kamala Harris, joined by the cities and county, argued that toxic mercury emissions from power plants threatened public health and required national Clean Air Act controls.
  • The court held that the EPA's determination that the regulation of hazardous air pollutant emissions from electric power plants under the Clean Air Act was "appropriate and necessary."

Maryland Attorney General Sues for State Retirement and Pension System Losses Allegedly Resulting from Deepwater Horizon Oil Spill

  • Maryland AG Douglas Gansler filed a lawsuit against BP p.l.c., BP America, Inc., BP Exploration & Production, Inc., and three BP executives in the U.S. District Court for the Southern District of Texas alleging that BP made false and misleading statements regarding its commitment to safety reforms, oil spill prevention, and response capabilities that resulted in investment losses by the Maryland State Retirement and Pension System (SRPS) after the April 2010 Deepwater Horizon oil spill in the Gulf of Mexico.
  • The Maryland SRPS owned shares of BP stock acquired between November 2007 and April 2010 that fell in value after the spill and allegedly resulted in losses to the Maryland SRPS.
  • AG Gansler alleges violations of sections 10(b) and 20(a) of the Exchange Act, Rule 10b-5, and common law deceit. He requests compensatory and exemplary damages, equitable relief, and costs and expenses, including attorney fees.

Financial Industry

New York Attorney General Subpoenas High-Speed Trading Firms

  • New York AG Eric Schneiderman sent subpoenas to more than six high-speed trading firms seeking information on the access these firms have to the technology services of trading venues. The firms included Tower Research Capital LLC, Chopper Trading LLC, and Jump Trading LLC.
  • The subpoenas follow AG Schneiderman's recent call for tougher regulations and market reforms to address what he calls the unfair advantages obtained by high-frequency traders using high-speed technology to allegedly gain early access to market information—a practice he calls "insider trading 2.0."
  • According to a news report, a source at a trading firm stated that the subpoena was "exploratory in nature" and that the AG's office seemed to be "casting a wide net involving the U.S. equity market." The report also asserts that the U.S. Justice Department, U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, and Federal Bureau of Investigation are investigating high-speed and automated trading.

Health Care

Connecticut Attorney General Recommends Legislation Governing Hospital Facility Fees and Physician Practice Acquisitions

  • Connecticut AG George Jepsen issued a report on hospital facility fees and hospital acquisitions of independent physician practices. In the report, he recommends that the legislature pass pending legislation that he proposed, which is aimed at improving notification and increasing transparency.
  • Hospital facility fees are charges meant to cover the overhead costs of the hospital, but are in addition to the charges billed by the medical provider. AG Jepsen believes that these fees can be expensive and confusing for patients. House Bill 5337 proposes timely, written, plain language notice of these fees to patients.
  • AG Jepsen also highlights in the report that physician practices often charge higher fees after hospitals acquire them. Senate Bill 35 proposes mandatory written notification to the AG anytime merger, acquisition, or other information regarding market concentration is filed with the Federal Trade Commission or the U.S. Department of Justice where a hospital, hospital system, or other health care provider is a party to the merger or acquisition.


Ohio Attorney General Announces Rule to Ban New Synthetic Drugs and Seeks Legislation Allowing Attorney General Temporary Emergency Scheduling Authority to Ban Future Hazardous Drugs

  • Ohio AG Mike DeWine and the Ohio State Board of Pharmacy announced that an administrative rule banning two chemicals used as synthetic drugs is now in effect.
  • The Ohio State Board of Pharmacy, using its authority through an administrative rule process, classified the chemical compounds known as PB-22 and 5F-PB-22 as Schedule I controlled substances, making their sale and use illegal in Ohio.
  • AG DeWine has been working with State Representative Robert Sprague to develop legislation that would grant the AG temporary emergency scheduling authority to ban, for at least one year, any compound the AG believes to be an imminent hazard to public safety—allowing the administrative rule or legislative process to proceed at standard pace to determine if the ban should be permanent.

States v. Federal Government

Texas Attorney General Questions Federal Government's Taking of Private Property

  • Texas AG Greg Abbott sent a letter to the director of the federal Bureau of Land Management (BLM) raising concern over reports that BLM planned to take privately held property located in Texas along the Red River.
  • According to the letter, BLM is in the early phases of developing a plan to regulate land along the Red River. As part of that plan, BLM is allegedly considering taking 90,000 acres that currently belong to Texas private landowners. AG Abbott argues that an interstate boundary compact, agreed to by Texas and Oklahoma and ratified by legislation enacted by Congress in 2000, is determinative of BLM's land interest.
  • The letter asks BLM to:

    • Delineate the process for the plan;
    • Describe the procedural due process that will be afforded to state landowners whose land may be taken;
    • Confirm the current boundary and that the interstate boundary compact is determinative or provide legal analysis for BLM's position; and
    • Delineate the amount of territory impacted.

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.