Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) issued an advisory opinion affirming that federal law often prohibits debt collectors from charging “pay-to-pay” fees. These charges, commonly described by debt collectors as “convenience fees,” are imposed on consumers who want to make a payment in a particular way, such as online or by phone. The advisory opinion interprets the language in Section 808 of the Fair Debt Collection Practices Act, which prohibits debt collectors from collecting any amount that is not expressly authorized by the underlying agreement or permitted by law.

The CFPB took action against the owner of a student-loan debt relief company for allegedly withdrawing hundreds of thousands of dollars from student borrowers’ bank accounts, without authorization. Frank Gebase, Jr. controlled a company that took the borrowers’ money after allegedly obtaining their names and account information from a previous student-loan debt-relief scammer that the CFPB shut down. The CFPB’s proposed settlement, if entered by the court, would ban Gebase from the debt-relief industry and order him to pay a $175,000 penalty.

Federal Trade Commission

The Federal Trade Commission (FTC) sued Walmart for allegedly facilitating money transfer fraud that cost customers hundreds of millions.. In its lawsuit, the FTC alleges that for years, the company turned a blind eye while scammers took advantage of its failure to properly secure the money transfer services offered at Walmart stores. The company did not properly train its employees, failed to warn customers, and used procedures that allowed fraudsters to cash out at its stores, according to the FTC’s complaint. The FTC is asking the court to order Walmart to return money to consumers and to impose civil penalties for Walmart’s violations.

The FTC sued two companies for illegally restricting customers’ right to repair their purchased products. The FTC’s complaints against Harley-Davidson Motor Company Group, LLC and Westinghouse outdoor generator maker MWE Investments, LLC charge that the companies’ warranties included terms that conveyed that the warranty is void if customers use independent dealers for parts or repairs. Following the FTC’s 2021 right to repair report Nixing the Fix, the Commission issued a Policy Statement on Repair Restrictions Imposed by Manufacturers pledging to ramp up investigations into illegal repair restrictions.

The FTC announced that it will launch an inquiry into the prescription drug middleman industry, requiring the six largest pharmacy benefit managers to provide information and records regarding their business practices. The agency’s inquiry will scrutinize the impact of vertically integrated pharmacy benefit managers on the access and affordability of prescription drugs. As part of the inquiry, the FTC will send compulsory orders to CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc.

The FTC announced that consumers reported losing more than $1 billion to fraud involving cryptocurrencies from January 2021 through March 2022, according to a new analysis. Consumer reports of fraud suggest cryptocurrency is quickly becoming the payment of choice for many scammers, with about one out of every four dollars reported lost to fraud paid in cryptocurrency. The FTC’s latest Consumer Protection Data Spotlight finds that most of the cryptocurrency losses consumers reported involved bogus cryptocurrency investment opportunities, which totaled $575 million in reported losses since January 2021.

The FTC has proposed a rule to ban junk fees and bait-and-switch advertising tactics in motor vehicle sales. The FTC cited a surge in auto prices and high number of consumer complaints in discussing the need for its action. The FTC hopes the proposed rule would protect consumers and honest dealers by making the car-buying process more clear and competitive. It would also allow the commission to recover money when consumers are misled or charged without their consent. Comments to the proposal are due 60 days from the date of publication.

The FTC finalized an order against CafePress over allegations that it failed to secure consumers’ sensitive personal data including Social Security numbers and covered up a major data breach. The commission’s order requires the company to bolster its data security and requires its former owner, Residual Pumpkin Entity, LLC, to pay a half million dollars to compensate small businesses.

U.S. Department of Justice

The U.S. Department of Justice (DOJ) announced a settlement agreement with Meta Platforms Inc., formerly known as Facebook Inc., resolving allegations that it engaged in discriminatory advertising in violation of the Fair Housing Act (FHA). The proposed agreement resolves a contemporaneously filed lawsuit alleging that Meta’s housing advertising system discriminates against Facebook users based on their race, color, religion, sex, disability, familial status and national origin. If approved by the court, the settlement requires changes to Meta’s practices to take effect by the end of 2022 and payment of a civil penalty of $115,054, which DOJ states is the maximum under the FHA.

DOJ announced the arrest of an owner of technology companies who allegedly obtained $45 million from over 10,000 victims through an investment scheme. According to the indictment, Neil Chandran, 50, of Las Vegas, owned a group of technology companies that he used in a scheme to defraud investors by falsely promising extremely high returns on the premise that one or more of his companies, was about to be acquired by a consortium of wealthy buyers

DOJ announced the seizure of the SSNDOB Marketplace, a series of dark websites that operated for years and were used to sell personal information, including the names, dates of birth, and Social Security numbers belonging to individuals in the United States. The SSNDOB Marketplace has listed the personal information for approximately 24 million individuals in the United States, generating more than $19 million USD in sales revenue.

In Other Federal News

The U.S. Education Department (Department) announced it will discharge all remaining federal student loans borrowed to attend any campus owned or operated by Corinthian Colleges Inc. (Corinthian) from its founding in 1995 through its closure in April 2015. As a result, 560,000 borrowers will receive $5.8 billion in full loan discharges. This includes borrowers who have not yet applied for a borrower defense discharge, who will have their Corinthian loans discharged without any additional action on their part. The action is the largest single loan discharge the Department has made in history.

The Federal Communications Commission announced the closure of a loophole in laws targeting illegal robocalls. Starting June 30, certain small phone companies must comply with FCC rules to implement caller ID authentication tools on their networks, just as large voice service providers have been required to do since June 30, 2021. The FCC stated that these small phone companies are suspected of facilitating large numbers of illegal robocalls and therefore shortened the extension of the compliance deadline by one year. The FCC acted following a letter from 51 attorneys general in August 2021 demanding the loophole be closed.

The U.S. Food and Drug Administration issued marketing denial orders (MDOs) to JUUL Labs Inc. for all of their products currently marketed in the United States. As a result of the MDOs, the company was required to stop selling and distributing these products. In addition, those currently on the U.S. market must be removed, or risk enforcement action. Thereafter, the U.S. Court of Appeals for the D.C. Circuit entered a temporary stay of the MDOs to give the Court sufficient time to consider JUUL’s forthcoming emergency motion for stay pending court review.

The Commodity Futures Trading Commission charged a South African national with operating a $1.7 billion international fraudulent multilevel marketing scheme. Cornelius Johannes Steynberg was charged with using websites and social media, to solicit Bitcoin from members of the public for participation in a commodity pool operated by his company, Mirror Trading International Proprietary Limited. The defendants misappropriated, either directly or indirectly, all of the Bitcoin they accepted from the pool participants in violation of the Commodity Exchange Act. Sternberg is a fugitive from South African law enforcement but was recently detained in the Federative Republic of Brazil on an INTERPOL arrest warrant.

The Consumer Product Safety Commission announced that a new federal standard for infant sleep products took effect on June 23rd. The new Safety Standard for Infant Sleep Products, is intended to provide a safe sleep environment for babies up to 5 months old. It requires that any product marketed or intended for sleep must meet one or more of the federal safety standards for cribs (full-size and non-full-size), bassinets and cradles, play yards, or bedside sleepers, and if the product does not already meet one of these regulatory standards, then it must meet the safety standard for bassinets and cradles.

The Securities and Exchange Commission announced a $25 million settlement with UBS Financial Services Inc. to resolve fraud charges relating to a complex investment strategy referred to as YES, or Yield Enhancement Strategy. According to the SEC’s order, UBS marketed and sold YES to approximately 600 investors but failed to share significant risk data with advisors or clients.

Other articles in this edition include:

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