Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) published guidance regarding data security requirements for financial companies. The circular provides guidance to consumer protection enforcers, including examples of when firms can be held liable for lax data security protocols.

The CFPB settled with Hello Digit, LLC, a financial technology company, resolving allegations that it used a faulty algorithm that caused overdrafts and overdraft penalties for customers. The settlement requires Hello Digit to pay redress to its harmed customers. It also fines the company $2.7 million for its actions.

The CFPB issued an interpretive rule related to digital marketing providers for financial firms and when they are considered to be subject to federal consumer financial protection law. According to the interpretive rule, when digital marketing providers go beyond traditional advertising, for example, are materially involved in the development of content strategy, they are covered by the Consumer Financial Protection Act as service providers.

Federal Trade Commission

The Federal Trade Commission (FTC) will obtain $100 million for consumer redress from healthcare company Benefytt Technologies, two subsidiaries, and 2 former officers for lying to consumers about their sham health insurance plans and using deceptive lead generation websites to lure them in, according to the FTC. The FTC’s complaint also alleged the company illegally charged people exorbitant junk fees for unwanted add-on products without their permission. In addition to the $100 million payment, the proposed court order bans the employees from selling or marketing any healthcare-related product.

The FTC took action against online home buying firm Opendoor Labs Inc., for allegedly cheating potential home sellers by tricking them into thinking that they could make more money selling their home to Opendoor than on the open market using the traditional sales process.  Opendoor has agreed to a proposed order requiring payment of $62 million the FTC expects to use for consumer redress.

The FTC is seeking public comment on the prevalence of “commercial surveillance and data security practices that harm consumers.” According to the Advanced Notice of Proposed Rulemaking, the FTC is seeking comment on  “whether it should implement new trade regulation rules or other regulatory alternatives concerning the ways in which companies collect, aggregate, protect, use, analyze, and retain consumer data, as well as transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive.” Comments are due by October 21, 2022.

The FTC is sending payments totaling more than $9.7 million to 61,990 former customers of LendingClub Corporation. It is the second distribution of funds in this matter and brings the total amount refunded to consumers to more than $17.6 million. The FTC sued LendingClub in April 2018, charging that the company advertised “no hidden fees” yet failed to disclose hundreds or even thousands of dollars in hidden up-front fees which it deducted from the loan proceeds.

The FTC is seeking additional public comment on how children are affected by digital advertising and marketing messages that may blur the line between ads and entertainment. The FTC is seeking public input in conjunction with an October 19, 2022 event that will examine these topics and the public will also have until November 18, 2022 to submit comments following the event.

U.S. Department of Education

The U.S. Department of Education (Department) announced that it is forgiving more than $5.4 billion in federal student debts for students of  ITT Technical Institute (ITT) and Westwood College due to those former for-profit schools’ alleged deceptive conduct prior to their closure. The Department is forgiving $3.9 billion in full loan discharges for more than 208,000 former ITT students who attended from January 1, 2005, through its closure in September 2016. $1.5 billion in loan discharges will also be provided to more than 79,000 former Westwood students. In both cases, the Department relied in large part upon evidence gathered and submitted by state attorneys general.

The U.S. Department of Education announced that it has approved more than $10 billion in debt relief for over 175,000 borrowers in 10 months through the Public Service Loan Forgiveness (PSLF) program. This follows changes the Department announced in October 2021 that transformed the program by changing certain rules to make it easier for public servants with federal student loans to have their debts cancelled. Temporary changes to the PSLF program that broadened the availability of debt relief to borrowers with loans originated prior to the Direct Loan program, i.e. FFEL and Perkins loans, expire on October 31, 2022. Attorneys general from 20 states have urged the Department to extend the temporary changes due to the lack of awareness among many borrowers who are eligible.

In Other Federal News

The U.S. Consumer Product Safety Commission announced that The TJX Companies Inc. will pay a $13 million civil penalty for selling, offering for sale, and distributing recalled consumer products. The firm allegedly knowingly sold, offered for sale, and distributed approximately 1,200 recalled products at its brick-and-mortar retail stores, including T.J. Maxx, Marshalls, HomeGoods, and online.  The majority of the post-recall sales were products recalled due to the risk of infant suffocation and death including the Kids II Rocking Sleepers, Fisher-Price Rock ‘n Play Sleepers, and Fisher-Price Inclined Sleeper Accessory for Ultra-Lite Day & Night Play Yards. The company also agreed to a compliance monitoring plan requiring reporting for 5 years.

The CPSC announced that Segway Powersports Inc. (SPI) has been assessed a $5 million civil penalty. The settlement resolves CPSC’s charges that SPI knowingly imported ATVs without a CPSC-approved ATV action plan as required by federal law.  ATV action plans are required by the Consumer Product Safety Act in order to promote the safe and responsible use of ATVs, particularly for children under age 16. All but $1.25 million of the civil penalty is suspended based on SPI’s ability to pay.

The U.S. Department of Justice (USDOJ) announced the guilty plea of a California man who solicited millions of dollars in contributions to two political action committees (PACs) based on false and misleading representations that the funds would be used to support dueling presidential nominees of the two major political parties during and after the 2016 election cycle. Of the approximately $3.5 million raised, the two PACs contributed approximately $19 to legitimate political causes. As part of his plea, Robert Reyes, Jr. agreed to forfeit $809,920.40 that he received for his participation in the scam-PACs during the scheme.

The Federal Communications Commission announced the selection of USTelecom’s Industry Traceback Group, the incumbent, to continue as the registered consortium that conducts private-led efforts to trace back the origin of suspected unlawful robocalls.

The U.S. Food and Drug Administration (FDA) issued a warning letter to VPR Brands LP (doing business as, “Krave Nic) for marketing illegal flavored nicotine gummies – the first warning letter for this type of product. The FDA noted that these types of gummies are of particular public concern because of their resemblance to kid-friendly food or candy products and the potential to cause severe nicotine toxicity or even death among young children. The FDA stated that the firm had not submitted a premarket tobacco product application, and does not have a marketing authorization order to manufacture, sell or distribute these products in the U.S.

The FDA issued a final rule to provide access to over-the-counter (OTC) hearing aids. In 2017, Congress passed bipartisan legislation requiring the FDA to create a category of OTC hearing aids, but it has not been fully implemented until now. Consumers could see OTC hearing aids available in traditional retail and drug stores as soon as mid-October when the final rule takes effect.

The Securities and Exchange Commission charged 11 individuals for creating and promoting a $300 million fraudulent crypto pyramid and Ponzi scheme that allegedly defrauded millions of retail investors in the U.S. and worldwide. The currency involved was Forsage, and those charged include the four founders, who were last known to be living in Russia, the Republic of Georgia, and Indonesia, as well as three U.S.-based promoters. They operated Forsage.io, a website that allowed millions of retail investors to enter into transactions via smart contracts that operated on the Ethereum, Tron, and Binance blockchains.

Other articles in this edition include:

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