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Editor-in-Chief: Christopher Allen
Contributing Editors: Grace Garver, Hannah Land, Keturah Taylor, Emily Yu

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Digest 2.14.2019 The State AG Report Weekly Update

Cozen in the News

Cozen O’Connor’s State Attorneys General Practice Co-Chairs Discuss Attorney General Enforcement Trends and Predictions for 2019

  • Lori Kalani and Bernie Nash, Co-Chairs of Cozen O’Connor’s State Attorneys General Practice, recently discussed trends and predictions for state AG enforcement in 2019 with Law.com.
  • Nash and Kalani predicted more AG scrutiny of the health care, telecommunications, and energy industries, and noted data privacy, antitrust, and labor as areas of enforcement to watch in 2019.
  • Nash and Kalani also highlighted the political context of AG enforcement priorities and increasing enforcement in industries where federal agencies have rolled back protections.

Consumer Financial Protection Bureau

Coalition of 22 Attorneys General Oppose CFPB Proposed Policies on No-Action Letters and Product Sandbox

  • A coalition of 22 Democratic AGs, led by New York AG Letitia James, submitted a comment to the Consumer Financial Protection Bureau (“CFPB”) in response to the CFPB’s Proposed Policy on No-Action Letters (“NALs”) and Proposed Product Sandbox.
  • The Proposed Policy on NALs—informal agency guidance stating that the agency does not intend to bring an enforcement proceeding against a specific party—would amend the process by which NALs are issued, expand the types and duration of statutory and/or regulatory relief available, and allow NALs to also protect certain third parties, among other things.
  • The Proposed Product Sandbox would provide similar no-action relief as the Proposed Policy on NALs for two-year periods during which applicants would commit to share data concerning the products or services offered through the Product Sandbox with the CFPB, among other things.
  • In the comment, the AGs warn that the Proposed Policy on NALs would make NALs indefinitely binding on the CFPB, provide for protections against regulation of unfair and deceptive acts and practices, and empower third-party trade associations to invoke NALs for blanket relief on behalf of entire industries. The AGs further warn that the Proposed Product Sandbox provides overly-expansive protections to regulated entities, and that enacting either proposed policy without engaging in formal rulemaking procedures violates the Administrative Procedure Act, among other things.
  • The AGs urge the CFPB not to revise the current NAL policy and not to establish a Product Sandbox.

CFPB Proposes Rulemaking on Payday Lending

  • The Consumer Financial Protection Bureau (“CFPB”) issued two Notices of Proposed Rulemaking (“NPRMs”) that would rescind certain provisions and delay the compliance date of its 2017 Final Rule Governing Payday, Vehicle Title, and Certain High-Cost Installment Loans (“Final Rule”) from the original deadline of August 19, 2019 to November 19, 2020.
  • According to the NPRMs, rescission and delay are warranted because the CFPB had insufficient evidence and legal support for the Final Rule’s requirement that providers of certain balloon-payment loans—including payday and vehicle title loans—make certain underwriting determinations before issuing the loans, and the Final Rule may reduce competition and access to credit in certain states.
  • The deadlines for submitting comments in response to the delay and rescission NPRMs are March 16, 2019 and May 15, 2019, respectively.

Consumer Protection

Connecticut Attorney General Supports Bill Prohibiting Deceptive Advertising by Limited Services Pregnancy Centers

  • Connecticut AG William Tong testified before the state legislature’s Joint Committee on Public Health in support of a bill that would prohibit deceptive advertising by limited services pregnancy centers—facilities that do not provide abortion or emergency contraception services.
  • The bill, H.B. 7070, would prohibit false and misleading advertising by limited services pregnancy centers and provide for enforcement by the AG. Specifically, AG Tong testified that the bill would reduce financial costs incurred by the state when pregnant women are misled by pregnancy centers and delayed in seeking other services to terminate a pregnancy, would not limit the pregnancy centers’ free speech rights, and would fill a possible gap in the AG’s enforcement powers under the state’s Unfair Trade Practices Act, which may not apply to limited services pregnancy centers if they do not provide products and services in the stream of “trade or commerce.”
  • The bill is currently pending in the state legislature’s Joint Committee on Public Health.

Pennsylvania Attorney General Sues Communications Company Over Alleged Failure to Deliver Promised Incentive Items to Consumers

  • Pennsylvania AG Josh Shapiro filed a lawsuit against Verizon Communications Inc. (“Verizon”) for allegedly failing to deliver promised incentive items to consumers in violation of the state’s Unfair Trade Practices and Consumer Protection Law.
  • According to the complaint, Verizon allegedly offered free Amazon Echo devices and Amazon Prime memberships as incentive items to consumers for enrolling in certain two-year contracts, but did not deliver the incentive items when consumers attempted to redeem them and did not correct the redemption issues for over a month.
  • The complaint seeks restitution to consumers, declaratory and injunctive relief, civil penalties, disgorgement, and investigation and litigation costs.

Financial Industry

Coalition of 31 Attorneys General Send Letter to FTC on Identity Theft Detection Rules

  • A coalition of 31 AGs, led by Oregon AG Ellen Rosenblum, submitted a comment to the Federal Trade Commission (“FTC”) in response to its request for public comment on whether it should modify certain provisions of its Identity Theft Rules, referred to as the Red Flags Rule and Card Issuers Rule (collectively, “Rules”), which require financial institutions and some creditors to take certain steps to detect signs of identity theft affecting their customers.
  • In the comment, the AGs argue that there is a continued need for the Rules and that repealing the Rules would leave consumers—especially those in states that have not enacted more stringent data privacy and security laws—more vulnerable to identity theft.
  • The AGs urge the FTC to modify the Rules to notify cardholders of changes of email addresses, cell phone numbers, and other means of communication that may have been brought about by identity thieves; encourage more modern forms of authentication, such as multi-factor authentication; and provide examples of new ways that identity thieves may use stolen information or impersonate consumers.
  • As previously reported, the FTC requested comments on whether it should modify its Red Flags Rule and Card Issuers Rule in December 2018.

New Jersey Attorney General Settles with Online Brokerage Firm Over Allegedly Allowing Fraud to be Perpetrated on Online Trading Platform

  • New Jersey AG Gurbir Grewal reached a settlement with online brokerage firm Interactive Brokers, LLC to resolve allegations that it failed to reasonably supervise its trading platform in violation of the state’s Uniform Securities Law (“USL”).
  • According to the consent order, Interactive Brokers allegedly violated the USL by allowing an individual previously convicted of financial felonies to use its trading platform in a scheme to defraud consumers, which could have been avoided by conducting a search standard in the commodities industry that would have revealed the individual’s criminal history and permanent ban from participating in the industry’s self-regulatory organization.
  • Under the terms of the consent order, Interactive Brokers must pay a $100,000 civil penalty and revise its client account opening policies and procedures, among other things.