Earlier this year, the Attorney General Alliance (AGA) conducted an important webinar highlighting the risks of organized retail crime (ORC) to retail organizations, employees, and customers. ORC presents substantial dangers in both the online and brick-and-mortar settings, necessitating cooperative efforts between businesses and government actors to combat this illicit activity. Retail clients should be aware of pandemic-driven upticks in ORC, increased safety risks to employees and customers, and proposed solutions like the INFORM Act that may impose new business obligations in the effort to prevent ORC.

An Increase in ORC

ORC refers to acts of theft by professional criminals both in-store and online. ORC is much more serious than casual shoplifting and is closely linked to dangerous crimes like human trafficking and money laundering. Participants in ORC are generally extremely well-organized and intentional. In stark contrast to the casual shoplifter who likely engages in his or her crime of choice no more than a few times per week, organized retail criminals can easily hit several stores in a single day. Moreover, because their aim is resale, rather than personal use, these criminals tend to target in-demand products. These include cosmetics, fragrances, allergy medications, razor blades, designer clothing, batteries, drills, over-the-counter drugs, and baby formula.

While ORC has existed for decades, shifts in purchaser behavior during the coronavirus pandemic appear to have dangerously increased its felt effects; retailers, for one, are taking a substantial financial hit. Scott Draher, an asset protection and safety executive for Lowe’s, noted that while maybe 25% of all Lowe’s losses in 2015 resulted from ORC, that number is now around 60%. Although the exact cause of this spike in ORC activity is unclear, it may be that pandemic-era buyers, in their efforts to avoid in-person shopping, are more willing to purchase products from questionable sources, creating increased resale opportunities for ORC participants.

The increase in demand for certain goods—even from uncertain sources—has also fueled another troubling ORC trend: An increase in violence. It appears that ORC criminals are becoming more brazen and aggressive. Many will do anything to get out the door with their stolen goods, including harming people in their way. Employees, in particular, have been regularly threatened with mace and other weapons. According to Ben Dugan, part of the ORC investigations team for CVS Health, the key driver of this increased aggression is the desire to meet escalating demand; the recent increase in online sales of the products targeted by ORC criminals, about 30%, roughly mirror the increase in theft.

ORC also creates troubling consumer safety risks apart from the risk of altercation with a fleeing criminal. Consider an organized retail criminal who steals and resells baby formula. This sensitive product may not be stored the right way prior to resale, or the thief may tamper with the contents or change expiration dates on the packaging. More generally, third-party sellers are simply not held to the same product integrity and safety standards that would otherwise apply. These risks are particularly high in the context of online sales, where consumers have less information about the product and the seller—and thus less opportunity to obtain legal redress.

Proposed Solutions

Any conversation on ORC would be incomplete without a discussion of potential solutions—a fact to which the AG Alliance webinar panelists were clearly attuned. Notably, panelists like Tania Maestas, Chief Deputy AG for New Mexico, quickly dismissed the idea of a uniform ORC statute as the panacea to address this type of criminal activity. This comes as no great shock, since the types of ORC seen and the way ORC is committed can vary significantly across states. Panelists appeared to favor collaboration, including between state AG offices and businesses, over a legislative one-size-fits-all solution. Specific solutions were also discussed.

First, one important potential solution to ORC is felony charge enhancement, since, in most states, ORC offenders are generally charged only with misdemeanors. Most state anti-theft laws were originally drafted with one-time offenses in mind. Thus, they do not reflect the seriousness of ORC. What is most important is the ability to aggregate offenses across jurisdictions, even just within one state—something more and more states are allowing. Without this aggregation, individual incidences of ORC almost always fall below the felony threshold. This means states are unable to prosecute offenders effectively or to establish meaningful deterrence to multi-member and often very profitable criminal organizations.

Second, the INFORM Act is a new piece of legislation that Congress is expected to take back up in the coming days. According to Ben Dugan, consumers are often misled by bulk sales, thinking high volume means legitimacy. In reality, bulk sellers have no way to get new products in bulk at 50% of the cost of manufacturing. Thus, lots of sales at a substantial discount is actually an excellent indicator of stolen goods. While the INFORM Act is narrower than other regulation, it still poses risks discussed above. The manner in which Congress might mitigate these risks is yet to be seen.

Conclusion

Retailers should stay privy to new trends in ORC, including the ways these crimes are being committed, the types of products likely to be targeted, and the level of violence to expect. Moreover, retailers should anticipate future criminal legislation or consumer safety regulation as government actors work to craft a new legal framework that prevents ORC since it is a dangerous form of organized crime with the potential not only to harm a retailer’s bottom line, but to physically injure employees and customers.

Crowell & Moring will continue to monitor legislative and regulatory changes in this space.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AGs have taken. Here are this week’s updates.

Monday, May 10, 2021: 

Antitrust

  • A bipartisan coalition of 45 attorneys general sent a letter to Congress asking the federal government to provide support for state antitrust enforcement. The attorneys general explain that antitrust enforcement requires significant resources, and additional funding for state agencies will allow them to be better partners to federal agencies in antitrust actions.

CFPB

  • The Consumer Financial Protection Bureau (“CFPB”) is determining whether TMX Finance LLC violated a $9 million settlement agreement, according to an order that became public on May 10, 2021. The CFPB rejected the company’s argument that the request was too vague and that it failed to provide fair notice.
  • According to a quarterly report, MoneyGram International Inc. received notice from the Consumer Financial Protection Bureau (“CFPB”) that the CFPB is considering enforcement activity against it for allegedly violating the Remittance Rule, the Electronic Fund Transfer Act, and the Consumer Financial Protection Act with its money transfers.

Environment

  • New Jersey Attorney General Grewal announced that his office filed nine environmental enforcement actions, including seven against polluters for contamination in environmentally overburdened communities. The complaints have been brought against a broad range of activity, including the release of toxic chemicals and chemical and food waste contaminants as well as illegal dumping.
  • Wisconsin Attorney General Kaul led a coalition of 19 attorneys general in a comment letter to the U.S. Environmental Protection Agency (“EPA”) supporting its proposal to include 29 PFAS substances in its fifth Unregulated Contaminant Monitoring Rule. The inclusion of the substances will require public water systems to monitor for them and to provide data about the occurrence of contamination involving these substances. The letter also asks the EPA to require monitoring for total PFAS, validate an analytical method for total PFAS, advance environmental justice, and lower the minimum reporting levels.

Healthcare

  • Pennsylvania Attorney General Shapiro announced that the Multilateral Pharmaceutical Merger Task Force, which includes staff from the Department of Justice, the Federal Trade Commission, the European Commission Directorate General for Competition, the U.K.’s Competition and Markets Authority, and state attorneys’ general offices, is seeking public comments on how to update its analysis of pharmaceutical merger effects. The Task Force is posing certain general questions, such as what theories of harm it should consider and how to approach the market definition, as well as seeking comments on other issues.

Tuesday, May 11, 2021: 

Civil Rights

  • California Attorney General Bonta announced the launch of the Racial Justice Bureau within the California Department of Justice as well as a future virtual convening against hate crime with California’s Big City Mayors. According to the press release, these are California’s most recent efforts to combat bias and hate.

 Energy

  • Maryland Attorney General Frosh applauded that the Federal Energy Regulatory Commission (“FERC”) decided to modify its practice of allowing construction of natural gas pipelines before considering objections, which a coalition of attorneys general had argued against. FERC agreed that it should not limit the withholding of construction activities to affected landowners’ requests for a rehearing and announced a policy of presumptively staying pipeline approvals.

 False Advertising

  • Colorado Attorney General Weiser and Wyoming Attorney General Hill announced a joint settlement of lawsuits against two companies, Atlantic Publishers Group, LLC and Publishers Partnership Services, LLC, that targeted consumers across the U.S. with deceptive mailers advertising magazine subscriptions that were designed to look like renewal notices for the consumers’ existing subscriptions. The settlement includes a payment of $500,000 from the organizers of the scam and bans them from operating magazine subscription businesses and sending deceptive mailers in Colorado and Wyoming.

 Financial Services

  • The U.S. Senate voted to repeal the Office of the Comptroller of the Currency’s (“OCC”) “true lender” rule with a Congressional Review Act resolution, causing the American Bankers Association to express disappointment.

 FTC

  • During a National Association of Attorneys General panel, the Federal Trade Commission’s (“FTC”) Acting Chairwoman Slaughter stated that the FTC will partner more frequently and actively with state attorneys general after the Supreme Court denied its ability to seek restitution. Acting FCC Chairwoman Rosenworcel and Acting Consumer Financial Protection Bureau Director Uejio also indicated that they wish to work more closely with state attorneys general.

 Healthcare

  • Arizona Attorney General Brnovich announced that his office obtained a settlement against Budget Hearing Aids and its subsidiary Audien to stop them from misleading consumers about over-the-counter hearing devices. The companies allegedly advertised the hearing devices as FDA approved or registered even though they have not received such approval.

 Price Gouging

  • Several attorneys general, including Georgia Attorney General Carr, North Carolina Attorney General Stein, and South Carolina Attorney General Wilson, announced that their states’ price gouging laws are in effect in response to the Colonial Pipeline’s shutdown after a ransomware attack, which has resulted in a petroleum shortage. Georgia’s press release states that the price gouging law applies to products including motor fuel and diesel fuel, and that the COVID-19 state of emergency is still in effect, prohibiting price gouging of goods and services that are necessary to support public health.

 Wednesday, May 12, 2021: 

 COVID-19

  • Reports indicate that the Pennsylvania Attorney General’s Office is investigating a breach of COVID-19 contact tracing data that may have exposed around 72,000 people’s private information.

 Elder Fraud and Abuse

  • Minnesota Attorney General Ellison announced that his office obtained convictions against the former operator of home care nursing agency Caring & Compassionate Healthcare Agency for Medicaid fraud of over $1.8 million. Among other things, the defendant billed for registered nurse services that were actually performed by other employees and billed for services that did not occur, as well as engaged in fraud.

Environment

  • A coalition of six states and the California State Water Resources Control Board are asking the U.S. Army Corps of Engineers to respect states’ authority under Section 401 of the Clean Water Act to approve, deny, or impose conditions on federally permitted projects that could result in discharges into waters of the United States.

False Advertising

  • Arizona Attorney General Brnovich announced that his office filed a lawsuit against Amazon Home Warranty, LLC, which is not affiliated with Amazon.com, and its officers and affiliated entities for alleged misleading statements in connection with the sale of home warranties. For example, the defendants allegedly falsely advertised that they had been in business for around 10 years when they just started operating, promoted the business using fake reviews, and tried to conceal their connection with a failed home warranty company. The lawsuit seeks injunctive relief, restitution, and civil penalties.
  • Vermont Attorney General Donovan announced a settlement with auto dealer Poulin Auto Sales, Inc. for consumer protection violations such as a deceptive direct mail advertisement. The settlement requires the company to change its business practices, pay $15,000 in restitution, and pay a $5,000 civil penalty.

Labor

  • Massachusetts Attorney General Healey announced that three C-Mart grocery stores and their owners were cited for almost $1 million in restitution and penalties for wage theft and other employment law violations, such as overtime and earned sick leave violations, against more than 150 employees.

Price Gouging

Thursday, May 14, 2021: 

 False Claims

  • Nebraska Attorney General Peterson announced that his office settled a lawsuit with the owner of Kathy Wiley, LLC for false claims submitted to Nebraska Medicaid and its managed care contractors for mental health services. Nebraska alleged that the owner failed to maintain sufficient documentation to demonstrate services were actually provided.

Financial Misconduct

  • Illinois Attorney General Raoul announced that his office entered into a consent order with tax preparer Su Familia Income Tax for charging illegal fees for tax preparation services. The settlement includes injunctive relief and requires the company to pay over $100,000 in restitution to Illinois consumers.

Financial Services

  • On May 13, 2021, the Comprehensive Debt Collection Improvement Act, H.R. 2547, passed the House and has moved to the Senate. If it is enacted, the legislation would expand protections for borrowers, such as by limiting electronic methods of contact, and override a Supreme Court decision which limited liability for law firms working on nonjudicial foreclosures.

Price Gouging

  • New York Attorney General James issued a consumer alert about gasoline price gouging after the Colonial Pipeline cyber-attack. Attorney General James stated, “To be clear, the price gouging of fuel in New York state will not be tolerated for a moment. If our office sees profiteers take advantage of consumers by boosting prices to excess levels, we will not hesitate to take legal action.”

Friday, May 15, 2021: 

 Consumer Protection

  • Virginia Attorney General Herring issued a press release stating that his Consumer Protection Section has recovered over $403 million from consumer protection violators since 2014. The press release also states that the Consumer Protection Section was reorganized and enhanced to be more aggressive in 2016 and that the most complaints received in 2020 were related to automotive sales; followed by credit, loans, and debt collection and internet sales and service.
  • Kansas Attorney General Schmidt announced that health club company Genesis Health Clubs Management, Inc. agreed to a settlement requiring it to pay $15,000 in fees and civil penalties for violating the No-Call Act with unsolicited telemarketing calls. The settlement also includes injunctive relief.

Federal Matters

  • Texas Attorney General Paxton has sued the Biden administration for allegedly unlawfully removing Texas’ 1115 Medicaid waiver extension. The lawsuit seeks the reinstatement of the extension and argues that its removal was a breach of contract and government overreach.

Intellectual Property

  • Washington Attorney General Ferguson announced that his office filed a lawsuit against Landmark Technology A for its alleged patent troll conduct that Attorney General Ferguson is arguing violated the Patent Troll Protection Act and has been harming small businesses. This lawsuit is the first time Washington has enforced its patent troll law. North Carolina Attorney General Stein also filed an amicus brief in Middle District of North Carolina case Napco, Inc. v. Landmark Technology A, LLC to defend a 2014 North Carolina law against patent trolls, arguing that patent trolls stifle innovation by forcing companies to spend money to combat bad-faith patent claims.

Labor

  • Illinois Attorney General Raoul announced a settlement with roofing company Star Roofing and Siding Inc., resolving allegations that the company illegally withheld overtime pay from its employees, some of whom regularly worked more than 60 hours a week. The settlement includes injunctive relief, such as requiring the company to maintain GPS records for its vehicles, and a $101,000 payment.
  • California Attorney General Bonta announced the arraignment of the owners, operators, and certified public accountant of three California restaurants for alleged sales tax evasion and labor law violations. The 65 counts include filing a false tax return with intent to evade tax payments, failure to pay unemployment insurance and training tax, failure to pay income tax, failure to pay disability insurance, and grand theft of labor.

 

 

 

 

 

Today, New Mexico State Auditor Brian Colón announced his candidacy for State Attorney General. He hopes to follow the footsteps of former state auditor, now Attorney General Hector Balderas who is in his second term and term limited.

The former chairman of the New Mexico Democratic Party is now the first person to enter the race for the seat which has been primarily dominated by Democrats during the state’s 110 year history.

The General election will be in November 2022.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AGs have taken. Here are this week’s updates.

Monday, May 3, 2021:

CFPB

  • Consumer Financial Protection Bureau Acting Director Uejio and Federal Trade Commission Acting Chairwoman Slaughter sent notification letters to the U.S.’s largest apartment landlords reminding them of federal protections against evictions and requirements of notices under the Fair Debt Collection Practices Act (“FDCPA”). In connection with the letters, Acting Director Uejio stated, “Landlords should ensure that FDCPA-covered debt collectors working on their behalf, which may include attorneys, notify tenants of their rights under federal law. . .We will hold accountable debt collectors who move forward with illegal evictions.”

Consumer Protection

  • On April 30, 2021, U.S. District Judge Slomsky of the Eastern District of Pennsylvania ruled that the Pennsylvania Attorney General can sue business newsletter and law book publisher American Future Systems Inc. under Pennsylvania’s consumer protection law because business-to-business transactions are also subject to the Attorney General’s enforcement powers.

COVID-19

  • Florida Attorney General Moody announced that her office has obtained over $3 million in recoveries for consumers from COVID-19 related scams, purchases, and cancellations. The announcement also states that the price gouging hotline remains active and that the Attorney General’s Office continues to receive complaints about price gouging and other effects of the pandemic on consumer transactions.

 Energy

  • New Jersey Attorney General Grewal announced that solar company NRG Residential Solar Solutions LLC will pay about $69,000 to resolve allegations that it used deceptive sales practices to mislead consumers into leasing solar energy panels, failed to deliver the energy savings it had promised, and misrepresented its policies for servicing, installation, and financing the solar panels. In addition to the payment, the company must also significantly change its business practices and enter arbitration with consumers who choose this option for the next year.

Federal Matters

  • Illinois Attorney General Raoul, Nevada Attorney General Ford, and Virginia Attorney General Herring filed a notice of appeal in their lawsuit to ensure the federal government acknowledges the Equal Rights Amendment, which guarantees equal rights for all Americans regardless of their sex, as the 28th Amendment to the Constitution. A judge dismissed the lawsuit in March, but the attorneys general are arguing that the judge overlooked the role of Article V in amending the Constitution and gave too much weight to a deadline Congress gave for the amendment.

Financial Misconduct

  • New York Attorney General James announced the guilty pleas of the owners of upstate New York restaurants and bars for tax evasion. The defendants repaid $479,203.03 as part of their guilty pleas for underreporting over $4 million in taxable sales.

Tuesday, May 4, 2021:

CFPB

  • The Consumer Financial Protection Bureau (“CFPB”) released two reports demonstrating that Black and Hispanic mortgage borrowers are significantly more likely to be in a forbearance program or to be delinquent than white borrowers are, as well as that overall mortgage complaints to the CFPB are at their highest level in the past three years. In connection with the reports, Acting Director Uejio stated, “More borrowers are behind on their mortgage than at any time since the height of the Great Recession. Communities of color have been hit hard by the pandemic, and the latest data show that many borrowers are still hurting. The CFPB will continue to seek and actively respond to developments in the market, doing everything in our power to help families stay in their homes. As we warned mortgage servicers last month, unprepared is unacceptable.”

Civil Rights

  • District of Columbia  Attorney General Racine co-hosted a national convening with Connecticut Attorney General Tong and the Attorney General Alliance on countering anti-Asian American and Pacific Islander (“AAPI”) hate. The convening included many legal and policy experts as well as business leaders, advocates, and government officials, who met to discuss how to combat anti-AAPI hate with tangible solutions.

False Claims

  • Missouri Attorney General Schmitt announced that in-home health care provider Healthy Home & Family, Inc. and its owners entered into a $300,000 civil settlement agreement with his office for submitting false claims to Missouri Medicaid. The defendants sought payment for more hours than the amount of time care was actually provided and altered records to conceal the fraud. In addition to the payment, the company has agreed to enhanced oversight and monitoring.
  • Michigan Attorney General Nessel announced that the owner of home help provider Synergy Home Services has been charged with submitting false claims to Medicaid for services that were not provided including during times when beneficiaries were hospitalized and not receiving any home help services.

Federal Matters

  • Attorneys General announced the restoration of federal public safety funds to states under the Edward Byrne Memorial Justice Assistance Grant program now that the Department of Justice has agreed to remove immigration-related conditions.

Wednesday, May 5, 2021:

COVID-19

  • Massachusetts Attorney General Healey sent a letter on May 3, 2021 to several pharmacies asking them to reveal their data collection practices for COVID-19 vaccine recipients and the connection between this data collection and marketing. Attorney General Healey’s letter comes after reports surfaced that the data was being used to tailor marketing.

Labor

  • Pennsylvania Attorney General Shapiro applauded that the U.S. Department of Labor announced that it will withdraw the “Independent Contractor” rule which modified the independent contractor status test and which a coalition of 24 attorneys general opposed because of potential misclassification concerns.

Thursday, May 6, 2021:

Consumer Protection

  • Arkansas Attorney General Rutledge announced a $2.6 million judgment against timeshare exit company Real Travel, LLC and its founder for charging consumers high fees and then failing to deliver on promises to help consumers transfer or cancel their timeshare property interests. Under the judgment, the business and founder will also no longer be able to conduct timeshare or timeshare exit-related business in Arkansas.

Education

  • Pennsylvania Attorney General Shapiro announced that, effective May 5, 2021, $17,961,238.17 in fees owed to Pennsylvania from higher education students will be recalled to the Attorney General’s Office from private collection agencies. Pennsylvania will also stop sending outstanding student fees to for-profit debt collectors, and it will stop approving universities’ attempts to send these fees to for-profit debt collectors before using more consumer-friendly methods.

Federal Matters

  • New York Attorney General James released a report about her office’s investigation into fake public comments submitted to the Federal Communications Commission (“FCC”) related to a 2017 proceeding to repeal net neutrality rules. The investigation revealed that broadband companies funded a campaign to generate many of these fake comments in support of the repeal, which involved several lead generators. Attorney General James announced agreements with three of the lead generators, and issued a report recommending reforms such as deterrence and technical safeguards.

 Healthcare

  • Texas Attorney General Paxton filed a motion to intervene in Florida’s lawsuit against the Department of Health and Human Services and the Centers for Disease Control and Prevention for halting the operation of the cruise industry with “no-sailing” or “conditional-sailing” orders.
  • Georgia Attorney General Carr announced that Governor Kemp signed House Bill 509, which will provide a state-based healthcare source as an alternative to the Affordable Care Act and will preserve protections of preexisting medical conditions.
  • A coalition of 21 attorneys general sent a letter to Congress asking it to pass the Black Maternal Health Momnibus Act of 2021, which would help address the Black maternal mortality crisis by improving access to transportation, housing, and nutrition services. The legislation would also allow attorneys general to better protect their residents against race-based discrimination in healthcare.
  • Arkansas Attorney General Rutledge filed a lawsuit against chiropractic clinics 501 Pain & Rehab, LLC and 501 Pain and Rehab Family Clinic of Russellville, LLC, as well as two individuals involved with the clinics, for allegedly discarding patients’ personal and medical information in a public park, violating the Personal Information Protection Act and the Arkansas Deceptive Trade Practices Act. The lawsuit seeks injunctive relief, civil penalties, and license revocation or suspension.

Friday, May 7, 2021:

Charities

  • Ohio Attorney General Yost filed a lawsuit against the director of charity Pen Ohio for allegedly using the charity for personal enrichment. The lawsuit, which seeks injunctive and monetary relief, alleges that the director used $110,000 of charitable funds for his own benefit without obtaining the board’s approval, breached his fiduciary duties, and abused a charitable trust.

COVID-19

  • Oklahoma Attorney General Hunter announced an agreement with private pharmaceutical wholesaler FFF Enterprises to return hydroxychloroquine the state purchased for a full refund. The Oklahoma State Health Department purchased the drug at the beginning of the pandemic after the Food and Drug Administration (“FDA”) granted emergency use authorization for it as a virus treatment. However, the FDA subsequently revoked the authorization, and the company worked with the Attorney General’s office to provide the refund.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AGs have taken. Here are this week’s updates.

Monday, April 26, 2021:

Covid-19

  • New Jersey Attorney General Grewal announced that Shamrock Beef and Ale, which was charged with violating COVID-19 restrictions on bars and restaurants, has agreed to have its license suspended for the summer under a settlement with the New Jersey Division of Alcoholic Beverage Control.

Education

  • A coalition of 40 attorneys general led by Illinois Attorney General Raoul and Tennessee Attorney General Slatery is asking Congress to pass the EAGLES Act of 2021, which would expand the U.S. Secret Service’s National Threat Assessment Center to include research-based threat assessment training that would prevent targeted school violence.

Elder Fraud & Abuse

  • Michigan Attorney General Nessel announced The Sentinel Project, which will protect individuals in nursing facilities through unannounced site investigations by specially trained staff.
  • Florida Attorney General Moody announced that the Florida legislature has passed senior protection legislation that would expand the jurisdiction of the attorney general’s office to cover crimes against elderly individuals and disabled adults. Among other things, the legislation also criminalizes the intentional isolation of these individuals from family members and expands the availability and length of injunctive relief.

Environment

  • A coalition of 21 attorneys general, Denver, and Chicago, led by New York Attorney General James, sent a letter to Congress asking it to invalidate a Trump administration Environmental Protection Agency regulation, the methane “Rescission Rule,” which eliminates emissions limits.

Financial Misconduct

  • Washington D.C. Attorney General Racine announced that his office filed a lawsuit against fitness training company Oji Fit World for allegedly filing false Medicaid claims for fitness services for individuals with intellectual and developmental disabilities. The lawsuit seeks damages, civil penalties, and litigation costs.

Healthcare

  • Missouri Attorney General Schmitt announced that the owner of Old Town Pharmacy LLC and a pharmacy technician have been indicted for Medicaid fraud, after allegedly knowingly making false statements to MO HealthNet and forging prescriptions.

Tuesday, April 27, 2021:

CFPB

  • The Consumer Financial Protection Bureau (“CFPB”) officially delayed the mandatory compliance date of the General Qualified Mortgage final rule from July 1, 2021 until October 1, 2022. The CFPB believes that delaying the compliance date will allow more options and flexibility for lenders and borrowers.
  • The Consumer Financial Protection Bureau (“CFPB”) initiated an enforcement action through a consent order against Nationwide Equities Corporation for allegedly sending deceptive loan advertisements to older borrowers, misleading them about reverse mortgages. Under the consent order the company must cease this conduct, pay a civil penalty, and implement a compliance plan to review advertisements.

Education

  • Massachusetts Attorney General Healey announced that her office secured $89,000 in payments to students through a settlement with online for-profit school Flatiron School LLC, which offers coding bootcamps. The settlement resolves allegations that the school used high pressure enrollment methods and failed to provide sufficient disclosures about its bootcamp program.
  • Ohio Attorney General Yost announced that his office received over $250,000 in fines from contractor Miller Builders of Ohio for using foreign steel instead of American steel for eight state-funded Department of Transportation projects.

Financial Services

  • Illinois Attorney General Raoul applauded the Illinois legislature’s passage of his legislation that would protect student loan borrowers from student loan debt relief companies that charge high fees for services they actually cannot provide, such as loan forgiveness and cancellation. Among other things, the new legislation streamlines regulation and prosecution of these scams by allowing the Attorney General’s Office and the Illinois Department of Financial and Professional Regulation to address them on a systemic basis.
  • On April 26, 2021, U.S. District Judge John Tharp Jr. of the Northern District of Illinois rescinded his decision granting class certification and partial summary judgment to Illinois consumers who argued that they received misleading debt collection notices from RGS Financial Inc. The decision finds that new Seventh Circuit rulings have made it clear that confusion is not enough for a Fair Debt Collection Practices Act claim, and consumers must instead show that information actually influenced their actions and led to injury.

FTC

  • Congressional Democrats have produced a bill that would restore the Federal Trade Commission’s power to seek restitution and profit disgorgement by adding these forms of relief to the Federal Trade Commission Act.

Healthcare

  • California Attorney General Bonta announced a $300 million settlement against Indivior plc and Indivior Inc., which resolves claims that they deceptively marketed Suboxone, causing improper use of state Medicaid funds. The settlement will be paid to all 50 states as well as D.C. and Puerto Rico.

Transportation

  • Missouri Attorney General Schmitt led a coalition of 22 attorneys general in a letter opposing the use of the Federal Energy Regulatory Commission’s “Social Cost of Carbon” analysis in certification decisions for interstate natural gas pipeline construction. The coalition is arguing that the Natural Gas Act and the National Environmental Policy Act do not authorize the “Social Cost of Carbon” analysis and that it is speculative.

Wednesday, April 28, 2021:

Consumer Protection

  • Vermont Attorney General Donovan announced a settlement with Strategic IT Partner after receiving reports of scam robocalls to the Vermont Consumer Assistance Program. Under the settlement, the company, which previously routed foreign robocalls, must stop bringing robocalls into the United States from abroad unless it verifies they are legitimate first. The settlement also includes a partially suspended $67,000 payment. In the same press release, Attorney General Donovan also announced the creation of a Robocall Team to assist in combatting scam calls.

Environment

  • Massachusetts Attorney General Healey announced a consent judgment with construction material supply company Aggregate Industries – Northeast Region, Inc., settling allegations that the company violated the Massachusetts Clean Air Act by installing unauthorized equipment to produce crumb rubber asphalt pavement and then failing to properly maintain the equipment, causing harmful emissions and odors. Under the consent judgment the company must pay $1.45 million in penalties, which is partially suspended, as well as comply with injunctive relief.
  • California Attorney General Bonta announced the expansion of the California Department of Justice’s Bureau of Environmental Justice. The expanded Bureau will include 11 attorneys focused on environmental justice in California.

Labor & Employment

  • New York Attorney General James announced the convictions of construction company Premier Builders MN LLC and two of its owners for withholding overtime wages from employees and failing to pay unemployment contributions to the New York State Department of Labor Unemployment Insurance fund since 2013. The defendants must pay $580,000 in restitution, $150,000 of which will go to employees.

Privacy

  • Oregon Attorney General Rosenblum announced that the Oregon House of Representatives passed HB 3284, a bill that will protect personal COVID-19 related health data. It applies to any commercial website, private entity, or contact tracing app that collects, uses, or discloses data about people’s COVID-19 exposure or infection, and it prohibits these entities from collecting, using, or disclosing this data without affirmative consent. It also requires the covered entities to provide a way to revoke consent and to refrain from using the collected information for commercial advertising or marketing algorithms. The bill does not apply to entities that are already covered by health information privacy laws.

 State AG Office News

  • South Carolina Attorney General Wilson announced the creation of the SC Highway Heroes Campaign to combat human trafficking. The Campaign is a collaboration between Attorney General Wilson’s office, the SC Trucking Association, the Office of Highway Safety, the State Transport Police, and the Department of Motor Vehicles. It will offer commercially licensed drivers the opportunity to complete a free online training about stopping human trafficking.

Thursday, April 29, 2021:

Consumer Protection

  • New Jersey Attorney General Grewal announced a settlement with online florist Avas Flowers for allegedly failing to compensate consumers when it delivered flowers that were unlike the arrangements pictured online or were wilted. The settlement requires the company to pay $60,000 and improve its business practices such as by clearly and conspicuously displaying its refund and return policies.

Healthcare

  • North Carolina Attorney General Stein announced a $300,000 settlement resolving allegations that Hanora Medical Center of Fayetteville and a doctor submitted false Medicaid claims for autonomic nervous system testing. This enforcement is part of Attorney General Stein’s You’ve Got Nerve effort to take action against providers who are fraudulently billing Medicaid for this type of testing.

Housing

  • Arizona Attorney General Brnovich announced that his office filed an Arizona Fair Housing Act lawsuit against Brentwood Southern, LLC and Kingsley Management Corporation for allegedly discriminating against individuals with disabilities in housing terms and conditions.

Environment

  • New York Attorney General James announced an agreement to resolve a state and federal action against cement plant Holcim Inc. for leaking toxic pollutants into Hudson River tributaries. Under the agreement Holcim must pay a $850,000 civil penalty and implement measures to prevent violations in the future.
  • West Virginia Attorney General Morrisey led a 19-state coalition in a U.S. Supreme Court petition urging the Court to overturn a District of Columbia Circuit ruling interpreting Section 111 of the Clean Air Act to give the Environmental Protection Agency broad regulatory powers in decarbonization.

State AG Office News

  • California Attorney General Bonta announced the creation of a Diversity, Equity, and Inclusion Council within the California Department of Justice. The new Council will help ensure the DOJ’s work environment will be a model for helping the voices of all Californians to be heard in the work setting.
  • Illinois Attorney General Raoul has notified the public of a ransomware attack compromising the office’s network. The extent of information compromised is still being investigated.

Friday, April 30, 2021:

Housing

  • Connecticut Attorney General Tong warned consumers whose mortgage loans are serviced by the former Nationstar Mortgage, now known as Mr. Cooper, about unauthorized withdrawals triggered by electronic payment vendor ACI Worldwide’s errors. The announcement states that affected consumers should seek reimbursement from Mr. Cooper online and contact the Connecticut Department of Banking or the Office of the Attorney General if they are unable to resolve their concerns.
  • Virginia Attorney General Herring announced a new tool, the “ban the box” hiring policy, to reduce housing discrimination and increase housing stability for those with previous nonviolent convictions, and is encouraging housing providers to adopt it. The policy includes steps such as first considering whether an applicant’s credit and income qualifies them for a rental, then conducting a tailored background screening, and finally allowing an applicant to provide additional information or evidence if an issue arises from the background screening.

 Healthcare

  • California Attorney General Bonta warned consumers in California about sham health insurance plans that certain healthcare sharing ministries offer. According to the alert, healthcare sharing ministries mislead consumers into enrolling in one of these plans as an affordable alternative to Covered California plans, but then these plans are not obligated to cover preexisting conditions or guarantee coverage for medical services or costs.

 Labor

  • Virginia Attorney General Herring applauded legislation enacted into law that allows local public employees to collectively bargain. In connection with the bill’s passage, Attorney General Herring stated, “Now, local public employees have the ability to be recognized as a labor union, allowing themselves to organize and advocate for the benefits they deserve. . .For too long, Virginia’s worker protection laws have been too weak and I will continue this fight to strengthen protections for the people who keep our communities moving forward.”

 Privacy

  • The Florida legislature failed to pass a consumer privacy law when the legislative session ended on April 30, 2021 without legislators reaching an agreement over the law’s private right of action.

Companies who make ambitious marketing claims about purported clean energy efforts may find that they are exposed to litigation under the District of Columbia Consumer Protection Procedures Act (DCCPPA). The DCCPPA is an expansive consumer protection law that confers standing on any person, or nonprofit organization, to sue either on behalf of herself or “in the public interest” for false advertising. A recent DCCPPA lawsuit against energy giant, Exxon Mobil Corporation, serves as the latest example of a swelling risk to corporate defendants who may be subject to suit in the Superior Court of the District of Columbia. Companies should thus carefully advertise their clean energy efforts, or other forward-leaning activities, in a manner that closely and accurately reflects the steps it is taking to achieve those goals.

Continue Reading DC’s Consumer Protection Law Presents Risks for Companies Advertising Clean Energy Efforts: Just Ask Exxon

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AGs have taken. Here are this week’s updates.

Monday, April 19, 2021:

 CFPB

  • The Consumer Financial Protection Bureau (“CFPB”) issued an interim final rule in support of the CDC’s eviction moratorium, requiring debt collectors to provide written notice to tenants of their rights under the moratorium and barring them from misrepresenting tenants’ eligibility for protection from eviction. Those who evict tenants who may have rights without providing notice of the eviction moratorium or who misrepresent tenants’ rights under it may be prosecuted by federal agencies and state attorneys general for violating the Fair Debt Collection Practices Act and are also subject to tenants’ private lawsuits.

Consumer Protection

  • Washington Attorney General Ferguson announced that the Washington Legislature passed the Consumer Protection Improvement Act, a bill requested by the attorney general, which increases the maximum civil penalties for consumer protection violations from $2,000 to $7,500, the first time the penalties have been raised since the law was adopted in 1970. The bill also includes an enhanced penalty of $10,000 for violations that target vulnerable communities.

COVID-19

  • A bipartisan coalition of 42 attorneys general, led by North Carolina Attorney General Stein, Tennessee Attorney General Slatery, and Illinois Attorney General Raoul, sent a letter to online mobile marketplace OfferUp asking it to act to prevent blank or fraudulent COVID-19 vaccine cards from being sold on its platform. Specifically, the coalition is asking OfferUp to monitor its platform for ads selling these fraudulent or blank cards, promptly take down these ads or links, and preserve information about the ads and those selling them.

Healthcare

  • North Carolina Attorney General Stein announced a settlement with a doctor and Angier Pediatric and Adult Medical Center for allegedly submitting false claims to Medicaid for tests that were not medically necessary, had no supporting documentation, and/or were performed in violation of Medicaid rules. The doctor and medical center have agreed to pay $60,000.

Housing

  • New York Attorney General James is defending New York’s rent stabilization laws in the Housing Stability and Tenant Protection Act, amended in 2019, against challenges to their constitutionality in a case that is currently pending on appeal in the Second Circuit.

Price Gouging

  • The California Department of Justice announced a plea agreement with grocery store Apna Bazar for price gouging essential food items, following charges announced in May 2020. The grocery store has pleaded guilty to two counts of price gouging and also agreed to make a $20,000 donation to the Alameda County Community Food Bank. An investigation revealed the grocery store increased prices between 60% and 400% on grocery items such as yellow onions, ginger, green beans, instant noodles, tea, chili peppers, pomegranates and red yams.

Tuesday, April 20, 2021:

Antitrust

  • The New Hampshire Attorney General’s Office announced that the Charitable Trusts Unit and Consumer Protection and Antitrust Bureau completed their reviews of the proposed sale of the assets of LRGHealthcare to Concord Hospital, Inc. The Charitable Trusts Unit will not oppose the transaction at this time, and the Antitrust Bureau filed a proposed Final Judgment on April 20, 2021 containing agreed-upon terms such as protections for addressing demands for unfair payment rates and protections for physicians and clinicians in relation to restrictive covenants.

 COVID-19

  • Minnesota Attorney General Ellison announced that his office settled a lawsuit against St. Patrick’s Tavern & Restaurant for allegedly violating Governor Tim Walz’s executive orders by remaining open for indoor, on-premises food and beverage consumption when it was required to be closed. Under the consent judgment, the restaurant must pay a $15,000 fine and comply with current and future executive orders.

Environment

  • New York Attorney General James announced a $4 million agreement with American Axle & Manufacturing which resolves allegations of hazardous waste disposal and oil spill contamination at the former Tonawanda Forge site.

Healthcare

  • Colorado Attorney General Weiser announced that Rocky Mountain Health Plans, a UnitedHealth Group company, is donating $30 million to increase access to health care in Colorado. The donation includes $25 million to fund STEM education for young women and people of color as well as other programs and $5 million in support of nonprofit organizations that provide youth opportunities and mental health services and support.
  • Georgia Attorney General Carr warned consumers about purchasing over the counter hearing aids, none of which are currently approved by the FDA. According to the press release, since medically approved hearing aids are expensive and not covered by Medicare, some ineffective devices have been offered at lower prices.

 Labor

  • Michigan Attorney General Nessel filed an amicus brief before the Michigan Unemployment Insurance Appeals Commission in support of the claimant, arguing that part-time workers, including those who are disabled, are not excluded from receiving CARES Act funds. Attorney General Nessel is asking the Commission to reverse the decision of an Administrative Law Judge which found that these workers are categorically excluded.

State AG Office News

  • In the criminal trial  State v. Derek Chauvin brought by Minnesota Attorney General Ellison, former police officer Chauvin was found guilty for the murder of George Floyd.

Wednesday, April 21, 2021:

 Cannabis

  • Virginia Attorney General Herring issued a statement applauding marijuana legalization in Virginia, saying, “Today is such an important day on the Commonwealth’s journey to becoming a more equitable place for all Virginians. . .For too long, the Commonwealth’s cannabis policies have disproportionately affected Black Virginians and Virginians of color, saddling them with convictions that could potentially hold them back for the rest of their lives.”

CFPB

  • On April 21, 2021, a Florida federal court entered final judgment for mortgage servicer Owen Financial Corporation in the Consumer Financial Protection Bureau’s (“CFPB”) lawsuit against it. The CFPB previously decided to drop its remaining claims in the lawsuit, and the entry of final judgment will allow it to file an appeal in the Eleventh Circuit.

Consumer Protection

  • Washington D.C. Attorney General Racine filed a lawsuit against baby food manufacturer Beech-Nut Nutrition Company for allegedly misleading consumers about the health and safety of its baby food products and the testing conducted on these products when they actually contained high levels of toxic heavy metals. The lawsuit seeks injunctive relief as well as restitution and civil penalties.

 Federal Matters

  • Reported April 22, 2021: On April 21, 2021, the Senate confirmed Vanita Gupta as associate attorney general, making her the first woman of color to hold this position.

 Financial Services

  • Illinois Attorney General Raoul led a bipartisan coalition of 25 attorneys general in a letter asking Congress to rescind the Office of the Comptroller of the Currency’s True Lender Rule. According to the attorneys general, the rule would allow high-cost “rent-a-bank” lending schemes created to avoid state usury laws, leading to more consumers being charged high interest rates while state litigation against the rule is pending.

 FTC

  • The Federal Trade Commission (“FTC”) and the Illinois Attorney General’s Office announced that consumers who lost money to the Stark Law phantom debt collection scheme will be receiving a total of over $4 million in refunds. The FTC’s and Illinois Attorney General’s lawsuit accuses Stark Law of using a variety of business names to target those who applied for short-term loans and pressuring them into paying debts they did not owe or the defendants did not have the authority to collect.

Thursday, April 22, 2021:

CFPB

  • The Consumer Financial Protection Bureau (“CFPB”) and New York Attorney General James filed a federal complaint to seize a $1.6 million home whose ownership they are alleging was fraudulently transferred by the operator of a debt-collection scheme perpetrated by Northern Resolution Group LLC and Enhanced Acquisitions LLC.

Financial Services

  • On April 21, 2021, an Eleventh Circuit panel found that a consumer may pursue his claims under the Fair Debt Collection Practices Act against debt collection company Preferred Collection and Management Services Inc. for disclosing his personal information to a mail vendor. However, the plaintiff cannot allege that he suffered harm from the disclosure. The case will now return to the Middle District of Florida.

Fraud Scheme

  • North Carolina Attorney General Stein announced that an individual pleaded guilty to a $13 million conspiracy to commit Medicaid fraud and wire fraud, as well as conspiracy to commit money laundering and aggravated identity theft. The individual admitted to conspiring with his wife to defraud the state Medicaid program by billing the government for fictitious home health services and laundering the proceeds into extravagant purchases.

Labor

  • New Jersey Attorney General Grewal announced that the payroll manager of construction company UniMak, LLC pleaded guilty to demanding cash kickbacks from employees and declining to pay them for hours worked to avoid prevailing wage rules on public works projects. The company already entered into a non-prosecution agreement with the Attorney General’s Office, under which it agreed to pay $1 million in restitution to employees.

State AG Office News

  • The California legislature has confirmed Rob Bonta (D) as California’s new attorney general.
  • Illinois Attorney General Raoul applauded the state Senate’s passage of his legislation to expand and strengthen Illinois’ Address Confidentiality Program so that it will now include protections for survivors of human trafficking. The new legislation also prevents participants’ phone numbers and addresses from being disclosed under the Freedom of Information Act, ensures participants are able to obtain a Real ID driver’s license using their substituted address, and clarifies the process for registering to vote.

 Friday, April 23, 2021:

 Environment

  • A coalition of 10 attorneys general is suing the Biden administration over an Executive Order establishing a working group that will calculate the social costs of emissions, with a goal to enact environmental regulations based on the social costs. The attorneys general are arguing that the Order is overreaching and will impose strict regulatory burdens.

 State AG Office News

  • New York Attorney General James led a group of community leaders and local elected officials in a walking tour of Chinatown and encouraged New Yorkers to support Asian-American-owned businesses. Attorney General James then had a community conversation with organization leaders to address the rise in hate crimes.

 

Last week the Supreme Court unanimously held that §13(b) of the Federal Trade Commission Act does not give the Federal Trade Commission the power to seek equitable monetary relief such as disgorgement or restitution. The Court’s opinion in AMG Capital Management LLC v. Federal Trade Commission removes a powerful tool that the FTC has long relied on to pursue monetary relief for consumers in both consumer protection and competition matters.

Continue Reading The Supreme Court Limits FTC’s §13(b) Powers

On April 15, 2021, the FTC filed its first complaint under the COVID-19 Consumer Protection Act (the CCP Act). The complaint, filed in the United States District Court for the Eastern District of Missouri, alleges that an in-state chiropractor and his company violated both the CCP Act and the FTC Act by deceptively marketing Vitamin D and Zinc products to treat COVID-19.

According to the complaint, St. Louis-based Eric A. Nepute and his company, Quickwork LLC, promote scientifically proven representations that the Wellness Warrior products containing Vitamin D and Zinc will provide equal or better protection against COVID-19 than currently available COVID-19 vaccines.  Additionally, Nepute’s videos claimed that “COVID-19 Patients who get enough Vitamin D are 52% less likely to die” and that people who consume enough Vitamin D3 “have a 77% less chance of getting infected in the first place.”

In May 2020, Nepute received a warning letter advising him to review the claims for his products and to cease making representations unsupported by reliable scientific evidence. According to the complaint, despite the warning letter, the defendants “ramped up their unsubstantiated claims regarding Vitamin D and Zinc.” The FTC is now seeking monetary penalties and a preliminary injunction that bars defendants from making health claims unless they are true and can be substantiated by competent and reliable scientific evidence.

The COVID-19 Consumer Protection Act 

Titled the “COVID-19 Consumer Protection Act” (see page 2094 here), the law lasts for the duration of the COVID-19 public health emergency declared pursuant to section 319 of the Public Health Service Act (42 U.S.C. 247d).

The Act makes it unlawful under Section 5 of the Federal Trade Commission Act for any person, partnership, or corporation to engage in a deceptive act or practice in or affecting commerce associated with the treatment, cure, prevention, mitigation, or diagnosis of COVID–19 or a government benefit related to COVID–19. The Act provides that such a violation shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under Sec. 18(a)(1)(B) of the FTC Act enabling the FTC to obtain civil penalties.

The FTC’s Efforts to Enforce the COVID-19 Consumer Protection Act 

The FTC has made it clear by sending hundreds of warning letters during the COVID-19 pandemic that it is closely monitoring deceptive COVID-19 acts and practices. Advertisers cannot make any express or implied claims that their products or services are effective against preventing or curing coronavirus absent competent and reliable scientific evidence. Now, the FTC is armed with the power to seek civil penalties and we should expect additional lawsuits under the CCP Act as  it continues to monitor the marketplace.