State AG Monitor

State AGs in the News

Posted in Consumer Financial Protection Bureau, Consumer Protection, Financial Industry, State AGs in the News, States v. Federal Government

Consumer Financial Protection Bureau

CFPB Proposes New Regulations for Prepaid Accounts

  • The Consumer Financial Protection Bureau (CFPB) issued proposed regulations pertaining to prepaid accounts under the Electronic Fund Transfer Act and the Truth in Lending Act.
  • The proposed regulations require companies issuing prepaid accounts to disclose applicable fees using an industry-wide, standardized format. The regulations also require that issuers provide free access to account balances, investigate and resolve errors efficiently, and limit consumer losses for stolen funds or lost cards.
  • The proposed regulations call for credit-style protections if the prepaid account is combined with a credit product. Issuers must determine a consumer’s ability to make payments prior to offering credit, provide a monthly billing statement, and limit late fees and interest charges. The credit protections also prohibit issuers from automatically using funds loaded on a prepaid account to repay the credit account.
  • The proposed regulations are open for public comment for 90 days following publication in the Federal Register.

CFPB Takes Action Against Mortgage Lender

  • The CFPB and Franklin Loan Corporation agreed to entry of a Stipulated Final Judgment and Order in federal court in California to resolve allegations by the CFPB that Franklin violated the Federal Reserve Board’s Loan Originator Compensation Rule and the Consumer Financial Protection Act.
  • The CFPB’s complaint alleged that Franklin improperly paid loan officers quarterly bonuses for steering borrowers into mortgages with higher interest rates.
  • Franklin has agreed to pay $730,000 to the CFPB to redress affected consumers and to be permanently enjoined from making unlawful compensation payments to its loan officers.

Consumer Protection

Pennsylvania Attorney General Sues Payday Lending Operation

  • Pennsylvania AG Kathleen Kane filed a lawsuit against Think Finance Inc., Selling Source, LLC, and associated companies and individuals for making illegal pay-day loans to consumers using the internet. The lawsuit alleges violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, the Corrupt Organizations Act, and the Fair Credit Extension Uniformity Act.
  • The lawsuit is based, in part, on defendants’ alleged use of a complex scheme to evade state laws prohibiting payday lending, including partnerships with Native American tribes and the use of “rent-a-bank” facilities as cover for illegal lending activity.
  • The attempted use of tribal immunity to avoid state lending laws has been a recurring theme in other operations targeted by the CFPB, the Federal Trade Commission, and various AGs.
  • The lawsuit is pending in the Court of Common Pleas of Philadelphia County and seeks injunctive relief, restitution, and civil penalties. It also asks that defendants notify the relevant credit bureaus and request that they remove all negative information related to the lending operation.

Massachusetts Shuts Down Vacation Club

  • Massachusetts AG Martha Coakley reached a settlement with C&S Marketing, Inc., d/b/a Fantasia Travel Group and Only Way 2 Go Travel, Travel Services Inc. d/b/a Outrigger Vacation Club, and Charles Caliri and other related individuals, for alleged violations of the Massachusetts Consumer Protection Act.
  • The lawsuit alleged that consumers were sold memberships that were essentially worthless and that defendants induced consumers to purchase vacation club memberships using high pressure sales tactics and falsely promising deep discounts on vacation packages, cruises, accommodations, and other travel services.
  • The consent order requires the defendants to pay over $200,000 in restitution and prohibits defendants from selling travel or vacation services in Massachusetts.

Financial Industry

Florida Leads Multistate Effort Against Life Insurance Practices

  • Florida AG Pam Bondi, along with the Department of Financial Services and the Office of Insurance Regulation (FLOIR), led a multistate effort that culminated in a $3.2 million settlement with Sun Life Assurance Company of Canada and related companies (Sun Life) over allegations of unfair insurance trade practices.
  • The investigation and settlement with Sun Life is part of a larger multistate examination process initiated in 2011 in coordination with the National Association of Insurance Commissioners’ Life/Annuities Claim Settlement Practices Task Force.
  • The multistate process grew out of an initial investigation by FLOIR that allegedly revealed that life insurance companies used the Social Security Administration’s Death Master File to cease payments of annuities to decedents, but did not use that same information to initiate payments to beneficiaries under the decedents’ life insurance plans.
  • In addition to the payment, Sun Life will be required to undertake modifications of its business practices, provide quarterly reporting to state officials, and be subject to compliance monitoring for more than 3 years.

States v. Federal Government

Attorneys General From Twenty-One States Argue Against Maryland Gun Law

  • A group of AGs from 21 states filed an amici brief in the U.S. Court of Appeals for the Fourth Circuit, arguing that the Maryland Firearm Safety Act of 2013 violates the Second Amendment of the U.S. Constitution.
  • The Maryland law, which prohibits ownership of certain models of semiautomatic rifles and high capacity magazines, was upheld on summary judgment at the U.S. District Court for the District of Maryland on August 12, 2014.
  • The lawsuit is Steven V. Kolbe et al v. Martin J. O’Malley, No. 1:13-cv-02841 (D. Md. 09/27/2013), Appeal No. 14-1945 (4th Cir.).

Outgoing Maryland Attorney General Gansler to Join DC Firm

Posted in 2014 Election

Maryland AG Doug Gansler, who fell short in his 2014 gubernatorial bid after Lt. Governor Anthony Brown prevailed over him in the Democratic primary, announced that he will join the Washington, DC-based law firm BuckleySandler LLP when he leaves office in January. Gansler has said that he will be joining the firm’s Government Enforcement and Complex Litigation practices, focusing particularly on cybersecurity and privacy compliance.

This marks a return to private practice for Gansler after years of public service. He began his career at the law firm Coburn & Schertler, and later joined Howrey & Simon, before becoming an Assistant U.S. Attorney in 1992. After six years, in 1998, he was elected State’s Attorney for Montgomery County, where, among other cases, he prosecuted the Beltway Snipers. In 2006, he was elected AG of Maryland and was reelected in 2010. Gansler’s replacement, AG-elect Brian Frosh (D), takes office on January 5, 2015.

State AGs in the News

Posted in Antitrust, Consumer Protection, Environment, False Claims Act, Mortgages/Foreclosures, State AGs in the News, States v. Federal Government

Antitrust

New York Attorney General Opposes Taxi and Limousine Commission Rule

  • In a letter to the New York City Taxi and Limousine Commission, New York AG Eric Schneiderman urged the Commission to revise its proposed rule that would require for-hire vehicle companies to agree in writing before allowing their drivers to accept dispatches from rival companies.
  • The proposed rule would prohibit for-hire vehicle drivers – many of whom operate as independent contractors – from accepting fares outside of their primary dispatching company, a practice that allows drivers to reduce downtime between dispatches, increasing driver efficiency and shortening customer waiting time.
  • AG Schneiderman indicated that the proposed rule raised serious antitrust concerns by encouraging agreements between competitors, ultimately leading to higher fares and lower-quality service.

Consumer Protection

Florida Attorney General Claims Fraud Recovery Scheme is Deceptive

  • Florida AG Pam Bondi filed a lawsuit against Consumer Collection Advocates Corp. (CCA) and its principal, Michael Robert Ettus, for allegedly violating the Florida Deceptive and Unfair Practices Act and the Florida Telemarketing Act.
  • The lawsuit alleges that CCA targeted previous fraud or scam victims by promising to recover their lost funds in exchange for upfront payments and a percentage of any recovery. The lawsuit further alleges that CCA rarely succeeded in recovering victims’ lost funds.
  • The Federal Trade Commission (FTC) filed a similar lawsuit against CCA and Ettus in federal court in the Southern District of Florida. In that suit, the FTC seeks injunctive relief, restitution, disgorgement, and costs.

Nevada Attorney General Settles with Hormone Therapy Provider

  • Nevada AG Catherine Cortez Masto reached a $9.5 million settlement to resolve claims that Wyeth Pharmaceuticals Inc. and Wyeth LLC (both acquired by Pfizer Inc. in 2009), and Pharmacia & Upjohn Company LLC (acquired by Pfizer in 2003) allegedly mislead consumers about the safety and efficacy of certain hormone treatments for postmenopausal women in violation of the Nevada Deceptive Trade Practices Act.
  • As part of the settlement, Pfizer agreed to donate $8 million to fund women’s health care programs at the University of Nevada School of Medicine and University Medical Center. In addition, Pfizer will pay $1.5 million to offset investigation costs.

Environment

Missouri Attorney General Secures $7.3 Million From Lead Mining Companies

  • Missouri AG Chris Koster announced a $7.3 million settlement with Cyprus Amax Minerals Company and Missouri Lead Smelting Company for alleged violations of the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, the U.S. Clean Water Act, and the Missouri Clean Water Law.
  • The claimed environmental damages at the core of the settlement stem from lead mining and smelting operations at the Buick Mine during the period 1968 to 1986.
  • The settlement included the U.S. Department of Interior, Fish and Wildlife Service and the U.S. Department of Agriculture, Forest Service, and has been lodged as a consent decree in U.S. District Court for the Eastern District of Missouri.

Vermont Attorney General Sues Landfill for Failure to Control Odors

  • Vermont AG William Sorrell filed a lawsuit against Moretown Landfill Inc. for alleged violations of the Vermont Solid Waste Management Rules, Air Pollution Control Regulations, Water Pollution Control statute, and other violations relating to facility certifications and permits.
  • The AG’s lawsuit alleges that Moretown failed to capture and control certain landfill gases, maintain safe leachate levels, prevent windblown debris, and conduct random load inspections. The lawsuit seeks civil penalties and costs.

False Claims Act

Oklahoma Attorney General Settles With Dental Practice

  • Ocean Dental, P.C., has agreed to pay $5,050,000 to settle claims brought by Oklahoma AG Scott Pruitt, working together with the U.S. Attorney for the Western District of Oklahoma, based on alleged violations of the U.S. False Claims Act.
  • AG Pruitt and the U.S. Attorney alleged that during the period 2005 to 2010, dentists working for Ocean Dental submitted false claims to the Oklahoma Medicaid program by billing for more dental work than was actually performed.
  • In 2012, in a related criminal case, one of the dentists associated with Ocean Dental’s conduct pled guilty to health care fraud, and was ordered to pay $375,672 in restitution to Medicaid and to serve 18 months in federal prison.

Mortgages/Foreclosures

Colorado Attorney General Settles With Foreclosure Firms

  • Colorado AG John Suthers settled with three law firms alleged to have violated the Colorado Consumer Protection Act and the Colorado Fair Debt Collection Practices Act by charging improper and inflated fees for foreclosure-related services.
  • The firms Janeway Law Firm, Medved Dale Decker & Deere, LLC, and the Law Office of Michael P. Medved, and their principals, agreed to pay $1.8 million, collectively, in restitution, costs, and fees, along with an additional $1.1 million of suspended fees if they fail to comply with the consent judgment. The consent judgment requires the firms, among other things, to avoid the use of affiliated third-party vendors and to charge only the actual amount incurred for the services of third-party vendors.
  • AG Suthers previously settled with the firm Aronowitz & Mecklenburg, LLP, for $13 million and has filed suit against Castle Law Group based on similar claims. According to AG Suthers, these two firms handle the majority of foreclosures in Colorado.

States v. Federal Government

At Supreme Court, Maryland Fights for the Right to Tax Income Earned Outside the State

  • On November 12, The U.S. Supreme Court heard oral argument in Comptroller of the Treasury of Maryland v. Wynne. The case centers on the scope of authority a state has to tax income earned in other states.
  • Maryland AG Douglas Gansler argued that states have the authority to tax residents’ income earned in other states, even where the residents can demonstrate that they paid income taxes to another state on that quantum of income.
  • The case is on appeal from a 2013 decision by the Maryland Court of Appeals, holding that Maryland’s tax scheme violated the Commerce Clause of the U.S. Constitution. Specifically, the court ruled that Maryland’s lack of a credit against Maryland taxes for income-related taxes paid in other states created a barrier to interstate commerce.

State AGs in the News

Posted in 2014 Election, Consumer Protection, Environment, Health Care, Mortgages/Foreclosures, State AGs in the News, States v. Federal Government

2014 Election

AG Election Results

  • The results are in for the 2014 State AG elections. Incumbents running for re-election performed well, winning in all of their races. Overall, Republicans picked up two spots, bringing the balance of State AGs to 27 Republicans and 23 Democrats.
  • For a complete list of results, please see our recent blog post.

Consumer Protection

Maryland Attorney General Finds Multiple Violations of Consumer Protection Laws

  • Maryland AG Douglas Gansler issued a Final Order, finding that David Lee Mansel, Jr., doing business under various names including Maryland Appliance Repair Co., violated the Maryland Consumer Protection Act.
  • The Consumer Protection Division alleged that Mansel operated without proper licenses, recommended unnecessary repairs, and failed to carry out work after receiving payment.
  • The Order requires Mansel to make an initial restitution payment of $100,000 and any additional amount necessary to fully compensate affected consumers. The Order also requires Mansel to pay a civil penalty of $166,000.

Environment

Attorneys General Petition for Supreme Court Review of EPA Rule

  • Michigan AG Bill Schuette led a group of 23 states in petitioning the U.S. Supreme Court to review a decision from the U.S. Court of Appeals for the District of Columbia Circuit on the legality of a recent Environmental Protection Agency (EPA) rule limiting mercury and other emissions from power plants.
  • A group of sixteen states and the District of Columbia intervened in support of the EPA at the D.C. Circuit, and now oppose the petition together with the EPA.
  • A divided D.C. Circuit found in favor of the EPA on the promulgation of its Mercury and Air Toxins Standards (MATS) rule for power plants. Specifically, the D.C. Circuit found that the EPA was not required to consider the industry compliance costs associated with the implementation of the MATS rule, which requires coal-fired power plants to cut mercury emissions by 90 percent in the next four years.
  • The case, State of Michigan et al. v. EPA, case number 14-46, is being considered together with Utility Air Regulatory Group v. EPA and National Mining Association v. EPA.

Health Care

State Attorneys General Argue in Support of Federal Assistance to Purchase Health Insurance

  • Virginia AG Mark Herring and 17 other State AGs filed an amici brief in support of provisions in the U.S. Affordable Care Act (ACA) in a forthcoming decision by the U.S. Court of Appeals for the District of Columbia Circuit.
  • The brief argues in favor of federal assistance credits for low- and moderate-income individuals who purchase health insurance through a federally-facilitated exchange. The AGs emphasize that without federal assistance the ACA would burden state insurance markets, and could be seen as unconstitutionally coercing states into building their own exchanges to comply with federal law.
  • The case, Halbig v. Burwell, is on appeal before the full en banc United States Court of Appeals for the District of Columbia Circuit and is scheduled for argument December 17, 2014.
  • In King v. Burwell, a similar case decided the same day, a three-judge panel at the U.S. Court of Appeals for the 4th Circuit found unanimously in favor of the federal assistance provisions of the ACA.

Mortgages/Foreclosures

Vermont Attorney General Settles With Mortgage Servicer

  • Vermont AG William Sorrel settled with a national mortgage servicer, Green Tree Servicing LLC, on claims of unfair trade practices associated with debt collecting and late payment of property taxes.
  • AG Sorrel’s investigation alleged that Green Tree called consumers while at work or after 9:00 PM, and, in addition, indicated to third parties that the consumer had debt.
  • The settlement agreement requires Green Tree to pay $55,250 to Vermont consumers and $176,750 to the state.

States v. Federal Government

States Argue in Support of Decision Barring Federal Court Jurisdiction Over State Tax Issues

  • A group of 25 AGs, led by Illinois AG Lisa Madigan, submitted an amici brief to the U.S. Supreme Court arguing that the U.S. Tax Injunction Act (TIA) precludes lawsuits in federal court over state law tax issues.
  • In 2010, Colorado passed a law that required out-of-state retailers to report information about Colorado consumer purchases to the Colorado Department of Revenue. The petitioner – a trade association of internet retailers and marketers – brought claims alleging that the Colorado law is unconstitutional under the Commerce Clause because it discriminates against out-of-state retailers and imposes an undue burden on interstate commerce.
  • The U.S. District Court for the District of Colorado granted the petitioner’s request to enjoin the Colorado law on grounds that it violated the Commerce Clause. However, the Tenth Circuit vacated the injunction on appeal and ruled that the TIA precludes federal courts having jurisdiction to consider the petitioner’s claims.
  • The case, Direct Marketing Association v. Brohl, is scheduled for oral argument on December 8, 2014.

2014 November State Attorneys General Elections Results

Posted in 2014 Election

Thirty states and the District of Columbia elected their AG yesterday. Four other states elected their Governor, who will appoint the state’s AG.

  • All incumbent AGs won their elections.
  • Twelve new AGs were elected to office:
    • Arizona – Republican Mark Brnovich
    • Arkansas – Republican Leslie Rutledge
    • Colorado – Republican Cynthia Coffman
    • Delaware – Democrat Matt Denn
    • DC – Democrat Karl Racine
    • Maryland – Democrat Brian Frosh
    • Massachusetts – Democrat Maura Healey
    • Nebraska – Republican Doug Peterson
    • Nevada – Republican Adam Laxalt
    • New Mexico – Democrat Hector Balderas
    • Texas – Republican Ken Paxton
    • Wisconsin – Republican Brad Schimel
  • Four AGs and one former AG ran for Governor:
    • Texas Republican AG Greg Abbott was elected Governor.
    • In Florida, Democratic former Governor and AG Charlie Crist was defeated by Republican Incumbent Governor Rick Scott.
    • In Massachusetts, Democratic AG Martha Coakley was defeated by Republican Charlie Baker.
    • In New Mexico, Democratic AG Gary King was defeated by Republican Incumbent Governor Susana Martinez.
  • One former AG is leading his race for U.S. Senate:
    • Former Alaska Republican AG Dan Sullivan is currently leading by a few percentage points over Democratic Incumbent Senator Mark Begich.

After picking up two seats, Republicans will now hold a majority of State AG seats. The 2015 AG political composition will be 27 Republicans to 23 Democrats. That balance might change slightly over the coming months due to a small number of states where the new governor or newly-seated legislature will appoint the AG. The states to watch are Alaska, where Independent Bill Walker is currently leading over Republican Incumbent Governor Sean Parnell, and Maine, where the state Senate races are too close to call and a Republican victory would create uncertainty for current AG Democrat Janet Mills.

To view the rest of the AG election results, please click here.

For further analysis of the 2014 election, please join Bernie Nash, head of Dickstein Shapiro’s State AG practice, as he partners with the Association of Corporate Counsel to present a webcast on how this new AG landscape will affect the business community.

The webcast is today at 3 PM EST/12 PM PST. Register here.

State AGs in the News

Posted in 2014 Election, Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Environment, False Claims Act, For-Profit Colleges, Mortgages/Foreclosures, State AGs in the News

Hot News

State Attorney General Enforces Federal Statute: Something New or Déjà Vu?

  • In a recent blog post, Dickstein Shapiro partner Maria Colsey Heard discusses the expanding authority of State AGs to enforce federal laws and provides insight and specific examples of federal statutes that “deputize” State AGs.

2014 Election

Live-Tweeting: Attorney General Election Results

  • On Tuesday, November 4, Dickstein Shapiro Associate Chris Allen will be live-tweeting as AG election results are confirmed throughout the evening.
  • Join the discussion at #2014StateAGElection.

ACC Webcast: Expert Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice, will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.

Antitrust

Connecticut Regulators Approve Frontier Communication’s Purchase of AT&T’s Wireline Business

  • The Connecticut Public Utilities Regulatory Authority recently approved Frontier Communications Corporation’s purchase of AT&T Inc.’s wireline operations in Connecticut, after months of negotiations with Frontier, Connecticut AG George Jepsen, and Governor Malloy to address consumer protection issues.
  • As part of the approval process, Frontier agreed to a three-year freeze on landline telephony rates, reduced broadband prices for veterans, assurances not to pass on costs to consumers, and an agreement to invest $63 million in capital improvements to bring faster Internet service to Connecticut residents.
  • Frontier’s acquisition was approved by the Federal Communications Commission and the U.S. Department of Justice earlier this year, and the parties can now move forward with finalizing the $2 billion acquisition.

Consumer Financial Protection Bureau

CFPB Publishes Revised List of Rural and Underserved Counties

  • The Consumer Financial Protection Bureau (CFPB) published its 2015 list of counties designated as rural or underserved for purposes of federal consumer financial regulation.
  • The designation of rural or underserved determines how CFPB regulations and the Truth in Lending Act are applied in the designated counties, specifically affecting the types of mortgages available and the terms for lending.

Consumer Protection

Federal Court Approves LCD Flat Screen Settlements Reached by Eight AGs

  • A federal court approved the distribution of the LCD Flat Screen Settlements reached by Missouri AG Chris Koster, as co-liaison counsel, seven other AGs, and class counsel for a nationwide class of consumers. The settlement, which was originally reached in 2012, will resolve claimed violations of state and federal antitrust laws, and state consumer protection laws.
  • In 2010, AG Koster originally filed suit together with the AGs of Arkansas, Michigan, Wisconsin, and West Virginia against leading TFT LCD panel manufacturers, which was consolidated in federal court for the Northern District of California with a similar lawsuit filed by the AGs of Florida and New York, and a nationwide consumer class action.
  • The settlement provides $1.1 billion in restitution nationwide, with $24 million designated for Missouri consumers. In addition, AG Koster secured $2.2 million in civil penalties, to be placed in the Missouri School Fund.

Data Privacy

California Attorney General Issues Report Analyzing 2013 Data Breaches; Shows Malware and Hacking Dominant in Retail Breaches

  • California AG Kamala Harris published her office’s second annual report regarding the 167 data breaches reported in 2013 (as compared to 131 in 2012), affecting potentially 18.5 million California residents.
  • The report, which provides an analysis of the breaches by industry sector and breach type, indicates that approximately 53 percent of the breaches in 2013 were the result of either hacking or malware, with physical theft and loss of data (26 percent) and unintentional errors (18 percent) as the other main sources of data breaches.
  • The report provides a variety of practical recommendations specific to the retail and health care sectors, as well as overall recommendations for business and consumers, including recommendations for the implementation of tokenization solutions to devalue payment card data and chip-enabling point-of-sale terminals.

Environment

Attorney General Triad Opposes NRC Rule, Again

  • AGs from Connecticut, New York, and Vermont challenged the Nuclear Regulatory Commission’s (NRC) Final Rule on the Continued Storage of Spent Nuclear Fuel, issued September 19, 2014.
  • In their Petition for Review to the U.S. Court of Appeals for the D.C. Circuit, the AGs argued that the NRC has not conducted a thorough analysis to support the conclusion underlying the revised rule – that spent nuclear fuel can be safely stored on site at decommissioned nuclear reactors. The AGs allege violations of the National Environmental Policy Act, the Administrative Procedures Act, and the Atomic Energy Act.
  • These same three AGs previously collaborated on this issue in 2011, resulting in a finding by the D.C. Circuit that federal law required the NRC to conduct a review of environmental and public health concerns associated with long-term storage of the highly radioactive spent fuel. The AGs allege that instead of conducting a full environmental analysis as ordered by the D.C. Circuit, the NRC simply reissued the old rule.

False Claims Act

Federal Judge Rules Clean Hands Are Not a Prerequisite for FCA Whistleblowing

  • A federal judge in the Southern District of Texas, ruling on a motion for partial summary judgment, stated that a relator’s unclean hands are not a bar to defendant’s liability, but only to the relator’s eventual award.
  • The court reasoned that because the qui tam relator is representing the state’s interests, the relator’s “unclean hands” are not a barrier to litigation. Twenty-two AGs are parties to the case, Susan Ruscher et al. vs. Omnicare, Inc., 4:08-cv-03396 (S.D. Tex.).

For-Profit Colleges

Wisconsin Attorney General Sues For-Profit College Under Claims of Deceptive Marketing

  • Wisconsin AG J.B. Van Hollen filed a lawsuit against Corinthian Colleges, Inc., alleging violations of state consumer protection laws relating to the marketing practices used by the school for its now-closed Everest College campus in Milwaukee.
  • The Complaint, which was filed in Wisconsin State Circuit Court, seeks restitution, civil penalties, investigation costs and fees, and injunctive relief. In 2013, Corinthian closed its Everest College Milwaukee campus, and provided refunds to all students who failed to graduate.

Mortgages/Foreclosures

Massachusetts Attorney General’s Lawsuit Against Federal Housing Agencies Dismissed

  • A federal judge dismissed Massachusetts AG Martha Coakley’s lawsuit against the Federal Housing Finance Agency (FHFA) and government-sponsored entities (GSE) Fannie Mae and Freddie Mac, finding that the court did not have oversight over the dispute.
  • The lawsuit alleged that the FHFA and the GSEs violated a 2012 Massachusetts state law by refusing to sell distressed mortgages to certain nonprofit organizations. The law was designed to help communities avoid the negative effects of foreclosures through a program that would allow homeowners to reacquire their houses.

States Probe Mortgage Servicer’s Alleged Backdating of Mortgage Assistance Rejection Letters

  • Ocwen Financial Corporation is drawing scrutiny from state regulators for allegedly failing to comply with the terms of a December of 2013 Consent Order between 49 states and the CFPB.
  • AGs from Florida, Illinois, and Iowa, and New York’s Department of Financial Services, are looking into Ocwen’s practice of allegedly backdating rejection letters to homeowners seeking to modify the terms of their mortgages.
  • The Consent Order brought closure to claims that Ocwen had deceived borrowers and impeded homeowners from taking effective mitigation actions during the financial crisis. It specifically required Ocwen to provide $125 million to people who lost their homes to foreclosure.
  • States are allowed to withdraw from the Consent Order if Ocwen fails to make the required payments.

State Attorney General Enforces Federal Statute: Something New or Déjà Vu?

Posted in Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Financial Industry, Health Care, States v. Federal Government

Washington AG Bob Ferguson recently announced that he had filed a “first of its kind” lawsuit against a private company and its chief executive for violations of the 2010 Restore Online Shoppers’ Confidence Act (ROSCA). AG Ferguson alleges that Internet Order, LLC, violated ROSCA’s limitations on “negative option” product purchase plans. While this action is a significant “first” under ROSCA, the more general idea that a State AG can sue a private entity to enforce a federal statute is something we have seen before.

During our country’s bicentennial year, the Hart-Scott-Rodino Act created authority for State AGs to bring civil suits to enforce certain provisions of the federal antitrust laws. [Note: As counsel to the Senate Subcommittee on Antitrust and Monopoly from 1971 to 1977, our own StateAGMonitor editor, Bernard Nash, was responsible for drafting the Hart-Scott-Rodino Act and executing the legislative strategy that overcame two filibusters prior to enactment.] Under Hart-Scott-Rodino, State AGs are authorized to seek treble damages as well as costs and attorney’s fees. State AGs are still exercising their authority under Hart-Scott-Rodino. In 2011 and 2012, 33 State AGs filed suits against Apple, Inc. and e-book publishers for alleged price-fixing. The Southern District of New York rejected Apple’s challenge to state standing. See In re Elec. Books Antitrust Litig., 88 Fed. R. Serv. 3d 618 (S.D.N.Y. 2014).

From Congress’ perspective, state enforcement is palatable across political camps as it mixes increased industry oversight with increased federalism. There are other examples of the joint federal-state enforcement model:

  • The Dodd-Frank Act created a new federal regulator, the Consumer Financial Protection Bureau (CFPB), to oversee a wide range of financial activity including auto lending, student loans, mortgage servicing, and other financial services. Dodd-Frank also provided authority for State AGs to investigate and sue consumer finance companies for unfair or deceptive activity, or for violations of rules promulgated by the CFPB. Connecticut, Florida, Illinois, Mississippi, and New York recently initiated lawsuits against a diverse range of defendants.
  • The 2008 Consumer Product Safety Improvement Act permits State AGs to sue companies that sell, manufacture, or distribute unsafe or defective consumer products that “may affect such State or its residents.”
  • The 2009 Health Information Technology for Economic and Clinical Health Act gives State AGs the power to bring civil actions in federal court where they have “reason to believe that an interest of one or more of the residents of that State has been or is threatened or adversely affected” by a violation of federal health privacy requirements contained in the Health Insurance Portability and Accountability Act.
  • The Children’s Online Privacy Protection Act (COPPA) provides for state enforcement where the AG “has reason to believe that an interest of the residents of that State has been or is threatened” by a website operator or online service provider who has violated substantive COPPA provisions. State AGs may seek injunctive relief along with damages and restitution on behalf of state residents.

In addition, there are enforcement agreements between federal agencies and various State AGs. For example, the U.S. Department of Labor and the New York AG’s Labor Bureau formed a partnership agreement to allow cooperation in enforcing federal wage and hour laws. Likewise, the National Association of Attorneys General and the U.S. Equal Employment Opportunity Commission signed a memorandum of understanding outlining their intent to maintain joint enforcement operations under federal and state employment discrimination laws.

The Washington AG’s ROSCA lawsuit serves as an important reminder: Businesses conducting federal compliance planning must recognize and take into account State AG authority under an array of important federal statutes with potent remedies.

State AGs in the News

Posted in Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, False Claims Act, Marijuana, Medicaid Fraud

Hot News

Join Us for Expert Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice, will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.

Antitrust

Pennsylvania Attorney General Plays Referee to Dueling Healthcare Networks

  • Pennsylvania AG Kathleen Kane threatened to sue Highmark Inc. over actions that she alleges are in violation of a recent consent decree between Highmark and the University of Pittsburgh Medical Centers (UPMC).
  • In 2013, Highmark acquired West Penn Allegheny Health System, making Highmark a significant competitor to UPMC in certain markets. In order to ensure that consumers were not harmed by increased competition between the two healthcare networks, AG Kane brokered an agreement to ensure that patients insured by Highmark had access to UPMC’s network of physicians.
  • AG Kane and UPMC object to a new Highmark Medicare Advantage plan that allegedly denies Highmark’s insureds access to UPMC physicians as in-network providers.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau Issues Report on the Private Student Loan Market

  • The Consumer Financial Protection Bureau (CFPB) issued a report highlighting its findings on the state of the market for private student loans.
  • According to the report, which is based on more than 5,300 complaints from October 1, 2013 to September 30, 2014, struggling borrowers are being provided with few option from lenders to avoid default, including a lack of information on how to avoid default, a lack of affordable loan modification programs, and the temporary nature of the programs that do exist.

Consumer Protection

New York Investigation Into Airbnb Implies Recurring Violations of New York Law

  • New York AG Eric Schneiderman recently published a report outlining his office’s investigation into short-term lodging rentals in New York City facilitated through Airbnb, Inc.
  • The report, which is based on private-party rentals during a 54 month period starting in January 2010, alleges that 72 percent of the unique unit rentals violate NYC Administrative Code on building use, zoning, and more. In addition, the report claims that Airbnb hosts generated $304 million in revenue and Airbnb earned over $40 million in fees—numbers that would equate to approximately $33.5 million in unpaid hotel taxes.
  • In addition, the report concludes that 37 percent of all revenue during the investigation period came from only six percent of hosts located in just a few elite Manhattan neighborhoods. AG Schneiderman uses these findings to rebut the idea that Airbnb is mainly a tool for average residents to supplement their income with an occasional guest.
  • Airbnb contested the accuracy of some of the findings, but stated that it was moving forward to “work together on some sensible rules that stop bad actors and protect regular people who simply want to share the home in which they live.”

Michigan Attorney General Secures Settlement With Propane Supplier

  • Michigan AG Bill Schuette announced a settlement with AmeriGas Propane, L.P. to resolve complaints of price-gouging and other customer issues emanating from propane sales last winter.
  • AmeriGas will provide almost $570,000 in value through credits, waived fees, and future discounts to the approximately 5,600 customers affected.

Data Privacy

Nine States Reach $850K Settlement With TD Bank Over 2012 Data Breach

  • A group of nine states, led by Florida AG Pam Bondi, agreed on settlement terms with TD Bank, N.A., regarding a 2012 incident in which TD Bank is alleged to have lost unencrypted backup tapes containing information on approximately 260,000 customers nationwide.
  • The settlement  obligates TD Bank to make reforms to its data protection policies, including requirements that backup tapes be encrypted before they are transported from TD Bank facilities, and that Florida consumers are notified of future breaches in a timely manner.
  • TD Bank reported that it has not seen any unusual incidents of fraud related to the data breach, and that the bank has “continually enhanced” its technologies and processes since the breach was reported in 2012.

False Claims Act

U.S. Court of Appeals Reaffirms the Need for Firsthand Knowledge in Whistleblower Suits

  • The U.S. Court of Appeals for the Third Circuit upheld a district court decision dismissing claims that drug makers AstraZeneca and Bristol-Myers Squibb violated the False Claims Act.
  • The claims at issue were originally brought in 2003 by Karl Schumann, an employee of Medco Health Solutions, Inc., a pharmacy benefits management company acquired by Express Scripts, Inc. in 2012. Schumann originally brought the claims on behalf of 11 states and the federal government, alleging that AstraZeneca and Bristol-Myers had paid $60 million in kickbacks in order to facilitate Medco’s approval of certain drugs. After a long investigation, the states and federal government did not intervene.
  • Medco previously settled with the U.S. government for $155 million in 2006, resolving similar allegations of violations of the False Claims Act.

Antidepressant Maker Settles With States for $31 Million

  • Organon USA Inc. settled a 50-state investigation into allegations that it violated state false claims acts through sales of antidepressant drugs Remeron and Remeron SolTab to Medicaid.
  • The AGs alleged that Organon failed to provide Medicaid the best price on relevant products, as required by law, by omitting information on applicable discounts and rebates, and by otherwise reporting inflated retail prices for Medicaid reimbursement. They also alleged that Organon offered kickbacks in the form of market share discounts, and encouraged the use of its drugs for non FDA-approved or “off-label” uses.
  • The multistate investigation originated from two separate qui tam lawsuits brought by former Organon employees in federal district court in Texas and Massachusetts. Organon is currently a wholly-owned subsidiary of Merck & Co., Inc.

Marijuana

Washington State Judge Confirms Local Government Authority to Regulate Marijuana Shops

  • A second Washington state Superior Court judge has ruled in line with a formal opinion issued by AG Bob Ferguson, instructing that local governments retain authority to regulate and/or ban marijuana businesses in their jurisdiction.
  • AG Ferguson’s opinion, issued earlier this year, stated that Initiative 502 – the 2012 ballot initiative permitting the use of recreational marijuana in Washington State – does not obligate local government to allow marijuana businesses.
  • Plaintiffs from the prior case are currently appealing to the Washington Supreme Court in efforts to overturn the ruling in support of local government regulation.

Medicaid Fraud

Texas Settles Medicaid Fraud Lawsuit With Generics Manufacturer for $37.5 Million

  • Texas AG Greg Abbott reached a settlement agreement with Ranbaxy Pharmaceuticals, Inc., Ranbaxy Laboratories, Inc., Ranbaxy USA, Inc., and Ranbaxy, Inc. (collectively “Ranbaxy”) to bring to a close a 2012 lawsuit claiming violations of the Texas Medicaid Fraud Prevention Act.
  • AG Abbott alleged that, starting in 1997, Ranbaxy reported inflated market prices to the state Medicaid program for its pharmaceuticals. Because Medicaid programs reimbursed pharmacies for their costs based on prices reported by Ranbaxy, pharmacies allegedly were able to maintain higher profit margins – via larger Medicaid rebates – by selling Ranbaxy products. The result, as alleged, was to create an incentive for pharmacies to use Ranbaxy products over similar competing products.
  • Under the terms of the settlement, Ranbaxy will pay approximately $17.9 million to the State of Texas, $17.9 million to the federal government, and $4 million to AG Abbott’s office for attorneys’ fees and costs.
  • Ranbaxy issued the statement that it “believes that it fully complied with all relevant laws…” and that it “settled the matter to avoid any further distraction and uncertainty of continued litigation with the State of Texas.”

State AGs in the News

Posted in 2014 Election, Antitrust, Consumer Protection, Environment, False Claims Act, State AGs in the News

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.

Antitrust

Texas Attorney General Settles Investigation of Municipal Advising Firm

  • Texas AG Greg Abbott reached an agreement with R. Craig Rathmann and his financial advising firm, Rathmann & Associates, L.P., regarding an investigation into Rathmann’s alleged anticompetitive conduct.
  • According to AG Abbott, Rathmann had an agreement with his former employer, RBC Capital Markets, LLC (RBC), whereby Rathmann and RBC allocated municipal utility clients, and Rathmann agreed to direct his clients to RBC for bond underwriting in exchange for RBC not soliciting Rathmann’s financial advisory clients.
  • The settlement agreement requires Rathmann to pay $450,000 “in lieu of civil penalties,” and to reimburse the AG for investigative costs and attorneys’ fees. It also requires, for a period of three years, that Rathmann notify clients that they can select their own bond underwriter and that the rate of reimbursement for bond underwriting services is negotiable.

Consumer Protection

National Rent-to-Own Chain Settles California Privacy and Consumer Protection Lawsuit

  • Aaron’s, Inc., the second largest national chain of rent-to-own furniture and home electronics stores, has agreed to settle a lawsuit brought by California AG Kamala Harris for $28.4 million.
  • The complaint alleged violations of the Karnette Rental-Purchase Act for charging improper late fees and for overcharging customers who satisfied contracts early. It also alleged violations of California privacy laws for installing spyware on rented computers that allegedly allowed Aaron’s to monitor keystrokes, take screen shots, and geo-locate the compute without customer consent.
  • As per the terms of the settlement, Aaron’s will provide up to $25 million in restitution, in the form of refunds to over 100,000 customers. It will also pay a civil penalty of $3.4 million to the state.
  • Aaron’s settled similar spyware-related allegations with the Federal Trade Commission last year.

New York Attorney General Recovers $16 Million for Citi Customers

  • New York AG Eric Schneiderman reached an agreement with Citigroup Global Markets, Inc. (CGMI), to close an investigation into claims that CGMI charged customers excess advisory fees.
  • Customers with CGMI accounts pay a fee for advisory services – usually ranging from 1% to 1.5%. However, some customers had negotiated a lower fee when they opened their account, yet were unknowingly charged the higher rate.
  • As a result of the agreement, CGMI will provide approximately $16 million in refunds to more than 31,000 customers nationwide.

Vermont Attorney General Seeks Input on New Labeling Law

  • Vermont AG William Sorrell is planning to hold public meetings to obtain feedback from producers, retailers, and consumers regarding how to implement Act 120, the new law requiring food products to list genetically engineered ingredients.
  • Under Vermont law, AG Sorrell is responsible for promulgating rules for the implementation of Act 120, which is scheduled to go into effect on July 1, 2016.  AG Sorrell will later solicit official public comments on the proposed draft rule.
  • Earlier this year the Grocery Manufacturers Association and three other food industry groups filed a lawsuit to enjoin Act 120. This lawsuit remains pending in federal court in the District of Vermont.

Environment

Pennsylvania Clamps Down on Fracking Fluid Leaks

  • Pennsylvania AG Kathleen Kane and Department of Environmental Protection (DEP) are investigating EQT Corporation in connection to a discharge of fracking fluids into waterways from a natural gas drill site in 2012.
  • The DEP is seeking a $4.5 million civil penalty from EQT Corporation – the largest fine in Pennsylvania for a fracking-related environmental incident.
  • The state recently entered into a consent order with Range Resources Corporation over environmental damage from leaked fracking fluids, resulting in a $4.15 million civil penalty. Meanwhile AG Kane is also pursuing criminal charges against XTO Energy Inc., in connection to a fracking-related spill in 2010.

Fourteen States Oppose Broader Definition of “Waters” Under the Clean Water Act

  • West Virginia AG Patrick Morrisey, joined by AGs and governors from thirteen other states, submitted a letter commenting on a proposed rule to broaden the definition of “waters of the United States” as used in the U.S. Clean Water Act (CWA) to include smaller streams and wetlands. The proposed rule was put forth earlier this year by the Environmental Protection Agency (EPA) and the Army Corp of Engineers.
  • AG Morrisey’s letter argues against redefining the term “waters” in the manner proffered. The AGs and governors indicate that the proposed rule would expand the jurisdiction of the EPA beyond what was intended by Congress when it passed the CWA. The letter iterates that such a broad definition would infringe on states’ abilities to effectively regulate the use of land.
  • As we have previously reported, there are also AGs who are in favor of the proposed rule, broadening the definition of “waters,” and thus, broadening the jurisdictional scope of the CWA.

False Claims Act

Skilled Nursing Home Chain Settles Multistate Investigation Into Claims of Substandard Care

  • Extendicare Health Services, Inc. (Extendicare) has agreed to pay $32.3 million to the federal government and $5.7 million to eight states in order to resolve claims that it violated the False Claims Act by billing Medicare and Medicaid for substandard nursing services.
  • The AGs alleged that Extendicare and its subsidiary Progressive Step Corporation failed to staff an adequate number of skilled nurses, and did not follow appropriate protocols to protect residents from risks like ulcers and falls. Extendicare denied all allegations.
  • According to the U.S. Department of Justice, this is the largest ever “failure of care” settlement in the skilled nursing industry. In addition to the monetary penalties, Extendicare is required to enter into a five-year corporate integrity agreement and provide for an independent monitor selected by the U.S. Office of the Inspector General.

New York Attorney General Settles with Specialty Pharmacy

  • New York AG Eric Schneiderman settled allegations that Sorkin’s Rx Ltd d/b/a CareMed Pharmaceutical Services (Sorkin’s) made false claims to the New York State Medicaid program.
  • According to AG Schneiderman, Sorkin’s contacted insurance companies claiming to be from a prescribing physician’s office in order to obtain expeditious authorizations for certain specialty drugs. In addition, Sorkin’s allegedly restocked and resold unused dosages of specialty drugs Rituxan and Procrit without crediting back Medicaid and Medicare Part D plans for the initial purchase.
  • The AG’s investigation resulted from a qui tam lawsuit filed by a Sorkin’s employee. The settlement requires Sorkin’s to pay $846,224 in restitution to Medicaid, with New York receiving $465,423 of the restitution funds.

State AGs in the News

Posted in 2014 Election, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Environment, Financial Industry, For-Profit Colleges, Mortgages/Foreclosures, State AGs in the News

Hot News

California Requires Identity Theft Protection for Data-Breached Customers

  • California governor Jerry Brown recently signed into law AB 1710, requiring businesses that handle customer data to provide identity theft prevention services at no charge for 12 months following a data breach.
  • In light of the increasing scope and frequency of data breaches, other states may follow with revisions to their laws on post-breach mitigation requirements.
  • For more information, please see our recent blog post by Dickstein Shapiro Counsel Aaron Lancaster.

State AGs and the High Court: 2014 Term Preview

  • The October 2014 term of the U.S. Supreme Court is underway, and similar to previous years, there are more than a few disputes with significant interest from state AGs.
  • Dickstein Shapiro Partner Milton Marquis and Counsel Ann-Marie Luciano discuss a few of these cases in a recent blog post, covering topics ranging from the state action exemption, to antitrust liability, to consumers’ rights under the Truth in Lending Act.

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 2:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro’s State AG practice will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.

Consumer Financial Protection Bureau

CFPB Takes Action to Shutter Mortgage Services Referral Schemes

  • The CFPB entered into a Consent Order with Lighthouse Title, Inc. resolving allegations that the company violated Section 8(a) (the anti-kickback provisions) of the Real Estate Settlement Procedures Act and accompanying regulations.
  • The CFPB alleged that the kick-back came from “marketing service agreements” (MSAs) through which Lighthouse would agree to pay for marketing services from real estate brokers and other companies, but where the payment amount was based, in part, on the number of referrals it had received from that vendor.
  • Under the terms of the Consent Order, Lighthouse must pay a $200,000 civil penalty, terminate all existing MSAs, and is prohibited from entering into new MSAs.

Consumer Protection

Iowa Enters Consent Order With Online Lender Despite Claims of Tribal Jurisdiction

  • Iowa AG Tom Miller entered a Consent Order with CashCall, Inc. over claims that it charged consumers exorbitant interest rates – in excess of 169% APR – along with illegal fees associated with online loans, in violation of Iowa’s consumer laws.
  • CashCall had alleged that it was outside Iowa’s regulatory jurisdiction because it was a California entity and only extended its loans through an agreement with Western Sky Financial, LLC, an entity located on the Cheyenne River Sioux Reservation in South Dakota. AG Miller disputed CashCall’s jurisdictional argument.
  • The Consent Order admits no fault, but requires CashCall to pay $1.5 million in restitution and to cease offering future loans to consumers in Iowa. It also forbids CashCall from reporting Iowans to credit reporting agencies, and requires CashCall to request that credit reporting agencies remove its past reports on Iowa borrowers.
  • CashCall is currently involved in multiple lawsuits based on similar allegations, including a lawsuit filed by the Consumer Financial Protection Bureau (CFPB) for violating the Consumer Financial Protection Act’s prohibitions on unfair, deceptive, and abusive acts and practices.

Attorneys General From All 50 States and the Federal Trade Commission Reach Nationwide Settlement on Cramming

  • AT&T Mobility LLC has agreed to pay $80 million to the Federal Trade Commission (FTC) for consumer refunds, $20 million in penalties and fees to the AGs, and a $5 million penalty to the Federal Communications Commission to resolve allegations that unauthorized third-party charges were placed on customer bills for subscriptions and services, a practice commonly referred to as “cramming.”
  • AT&T Mobility issued the following statement:

In the past, our wireless customers could purchase services like ringtones from other companies using Premium Short Messaging Services (PSMS) and we would put those charges on their bills. Other wireless carriers did the same.

While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services.

Today, we reached a broad settlement to resolve claims that some of our wireless customers were billed for charges from third-parties that the customers did not authorize. This settlement gives our customers who believe they were wrongfully billed for PSMS services the ability to get a refund.

Data Privacy

Attorneys General Probe Customer Notification Following JPMorgan Data Breach

  • Connecticut AG George Jepsen and Illinois AG Lisa Madigan are investigating circumstances surrounding JPMorgan Chase & Co.’s (JPMorgan) recent data breach.
  • The AGs appear to be particularly interested in when JPMorgan was aware that its customer data had been breached, and what efforts it took to timely notify customers.
  • As we have noted, data breach notification is largely an issue of state law. In many cases, state laws do not require notification unless customer names were stolen in connection to credit card or bank account access information, or social security numbers. In addition, state laws vary as to how long a company has to notify data-breached customers: some states require a specific period (e.g., one month), whereas others use more ambiguous terms (e.g., a reasonable period). For more on the role of state AGs in this area see our previous blog post.

Environment

Gas Developers Agree to Disclose the Financial Risks of Fracking

  • New York AG Eric Schneiderman reached agreements with natural gas developers Anadarko Petroleum Corporation (Anadarko) and EOG Resources, Inc. (EOG) to end a three-year investigation into their use of hydraulic fracturing processes (fracking).
  • Anadarko and EOG agreed to make disclosures in their federal securities filings about the financial risks to investors stemming from the use of fracking. These risks would include potential environmental impacts, such as damage to natural aquifers, as well as the future regulatory action, including bans and moratoriums.
  • The investigation was conducted under the authority of New York’s Martin Act, a 1921 state securities law that provides the AG broad authority to access the financial records of New York businesses.

Financial Industry

New York Attorney General Investigates Securities Ratings Firm

  • New York AG Eric Schneiderman is investigating Standard & Poor’s Financial Services LLC (S&P) in response to allegations that it altered mortgage bond ratings in order to win future business from the issuing banks.
  • S&P has been named as a defendant in multiple lawsuits related to its role in rating mortgage-backed securities and the financial crisis, including separate lawsuits brought by 20 AGs and by the U.S. Department of Justice. Seventeen of the state lawsuits had been joined and removed to federal court as one multidistrict lawsuit. However, as previously blogged, in June a federal judge separated the lawsuits and remanded them back to state courts.

For-Profit Colleges

Fourteen Attorneys General Seek Better Federal Regulation of For-Profit Colleges

  • As announced by Kentucky AG Jack Conway, a bipartisan group of 14 AGs wrote a letter in support of legislation to increase federal oversight of the for-profit college industry.
  • The letter, addressed to U.S. Senator Richard Durbin and U.S. Representative Elijah Cummings, voices the group’s support for S. 2204, the “Proprietary Education Oversight Coordination Improvement Act,” a bill under consideration in Congress that would improve coordination among federal regulators.
  • AGs are employing different methods to deal with recent complaints surrounding for-profit colleges. As we have blogged earlier this year on July 3, July 24, and July 31, these methods include investigations and lawsuits, but also a push for greater state regulations to increase disclosures and provide better information to students.

Mortgages/Foreclosures

New York Attorney General Sues Mortgage Rescuers for Fraud

  • New York AG Eric Schneiderman brought a lawsuit against an allegedly fraudulent mortgage rescue operation for violations of New York law. The lawsuit seeks an injunction against the defendants’ actions, restitution, and penalties and costs.
  • The lawsuit alleges that Litvin Law Firm and other defendants induced consumers in 31 states to purchase non-existent “forensic loan audits” and other foreclosure prevention services and would automatically charge consumers a monthly fee ranging from $595 to $750.
  • We have previously blogged on similar fraudulent mortgage relief lawsuits brought by the AGs of Arizona, Indiana, and Massachusetts, among others. In addition, the FTC has initiated many similar lawsuits based on alleged violations of the FTC Act and the Mortgage Assistance Relief Services rule.