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Contributing Editors: Grace Garver, Hannah Land, Keturah Taylor, Emily Yu

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Digest 4.18.2019 The State AG Report Weekly Update

Consumer Protection

California Attorney General Settles With Auto Rental Company for Allegedly Overcharging Consumers for Vehicle Repairs

  • California AG Xavier Becerra reached a settlement with auto rental company Advantage Opco, LLC d/b/a Advantage Rent A Car and its affiliate E-Z Rent-A-Car LLC (collectively, “Advantage”) to resolve allegations that it overcharged consumers for rental vehicle repairs in violation of the state’s Unfair Competition Law.
  • According to the complaint, Advantage allegedly charged consumers for rental vehicle repairs based on third-party estimates that were higher than the actual cost of repair and did not account for discounts, failed to disclose material damage to rental cars at the time of the rental, and failed to include certain required language in damage waiver contracts with consumers.
  • Under the terms of the stipulated final judgment, Advantage must pay $3.3 million in civil penalties, $300,000 in investigative costs, and an anticipated $426,686 in refunds to consumers, and revise their business practices to comply with applicable law.

Pennsylvania Attorney General Settles With Auto Dealership Over Allegedly Deceptive Warranty Sales

  • Pennsylvania AG Josh Shapiro reached a settlement with auto dealership Paxton Associates, Inc. d/b/a Faulkner Honda (“Faulkner Honda”) to resolve allegations that it sold deceptive warranty add-on products in violation of the state’s Unfair Trade Practices and Consumer Protection Law and automotive industry trade practices regulations.
  • According to the assurance of voluntary compliance (“AVC”), Faulkner Honda allegedly sold consumers who purchased or leased new vehicles, which came with manufacturers’ warranties, its own new vehicle coverage warranty—an add-on product—which did not provide coverage beyond what was already offered under the manufacturers’ warranties and also falsely advertised that its warranties added value.
  • Under the terms of the AVC, Faulkner Honda must pay $5,000 in penalties and $5,000 in costs, cease misrepresenting the value added by its warranty and selling its warranty to consumers who lease vehicles for terms and miles equal to or less than the manufacturer’s warranty, and disclose to consumers that the vehicles they are purchasing come with a manufacturer’s warranty.

Financial Industry

Maryland Attorney General Sues Title Lender Over Allegedly Predatory Lending Practices

  • Maryland AG Brian Frosh filed a lawsuit against lender Cash-N-Go, Inc., Cash-N-Go Pawnbrokers LLC, Cash-N-Go Pawnbrokers, Inc., related entities, and the companies’ owner (collectively, “Cash-N-Go”) for allegedly issuing vehicle title loans with illegally high interest rates and operating without a license in violation of the state’s Consumer Protection Act, Consumer Loan Law, Interest and Usury Law, and installment loan licensing provisions.
  • According to the complaint, Cash-N-Go allegedly issued title loans to consumers with annual interest rates of 360%—over ten times higher than the maximum rate allowed under state law—and without the required license from the Maryland Commissioner of Financial Regulation, and repossessed and resold the vehicles of consumers who defaulted on such loans without providing written notice, among other things.
  • The complaint seeks injunctive relief, restitution, damages, civil penalties, and costs.

New Jersey Attorney General Proposes Rule Regulating Financial Services Professionals

  • New Jersey AG Gurbir Grewal and the New Jersey Bureau of Securities proposed a rule establishing a uniform fiduciary standard for financial services professionals.
  • The proposed rule, reported at 51 N.J.R. 493(a), would require registered financial services professionals to place their customers’ interests above their own when recommending securities or providing investment advice, and would classify conduct falling short of this standard as a “dishonest and unethical practice,” among other things.
  • Comments regarding the proposed rule must be submitted to the Division of Consumer Affairs, within the AG’s office, by June 14, 2019.

Federal Trade Commission Settles With Online Lender Over Allegedly Deceptive Loan Servicing Practices

  • The Federal Trade Commission (“FTC”) reached a settlement with online lending company Avant, LLC to resolve allegations that it employed deceptive loan servicing practices in violation of the FTC Act, Telemarketing and Consumer Fraud and Abuse Prevention Act, and Electronic Fund Transfer Act.
  • According to the complaint, Avant allegedly misrepresented its credit and debit card payment acceptance policy, misrepresented loan payoff amounts, failed to timely apply payments made by check, collected or attempted to collect additional payments from consumers who had paid off their loans, charged unauthorized payments, collected payments via methods prohibited by telemarketing regulations, and conditioned the extension of credit on consumers’ authorization of recurring electronic fund transfers, among other things.
  • Under the terms of the stipulated order, Avant must pay $3.85 million to the FTC for consumer restitution and revise its business practices to comply with the law.

False Claims Act

California Attorney General Sponsors Legislation to Expand State False Claims Act

  • California AG Xavier Becerra has sponsored legislation that would “strengthen” the California False Claims Act (“CFCA”).
  • The proposed legislation, AB 1270, would allow the AG and other state prosecuting authorities to investigate and prosecute tax fraud as false claims under the CFCA, and provide whistleblowers greater protections from retaliation for reporting fraud.
  • The bill was passed by the Assembly Committee on Judiciary and is currently pending in the Assembly Committee on Appropriations.

Gaming/Gambling

U.S. Department of Justice Issues Memorandum Stating Nonenforcement of Wire Act Against State Lotteries; Court Denies Motion to Dismiss New Hampshire Lawsuit Challenging Prior Wire Act Opinion

  • The U.S. Department of Justice (“DOJ”) issued a memorandum to United States Attorneys, Assistant Attorneys General, and the Director of the Federal Bureau of Investigation on April 8, 2019 directing DOJ attorneys to refrain from applying the Wire Act to state lotteries and their vendors until the DOJ concludes its review of whether the Act applies to state lotteries.
  • In related litigation brought by the New Hampshire Lottery Commission against the DOJ challenging the DOJ’s January 2019 opinion stating that the gambling prohibitions contained in the Wire Act are not limited to sports gambling, New Hampshire v. Barr, No. 1:19-cv-00163-PB, the U.S. District Court for the District of New Hampshire denied the DOJ’s motion to dismiss for lack of jurisdiction “to the extent it relies exclusively on the” April 8, 2019 memorandum.
  • As previously reported, 14 states filed amicus briefs in the New Hampshire case urging the court to grant the plaintiffs’ motion for a declaratory judgment that the Wire Act does not apply to state-conducted lotteries and seeking a permanent injunction against enforcement of the January 2019 DOJ opinion.

Health Care

Tennessee Attorney General Sues Health Care Clinic Operator Over Alleged Medicaid Fraud

  • Tennessee AG Herbert Slatery filed a lawsuit against health care clinic operator ProHealth Rural Services, Inc. and its president and CEO (collectively, “ProHealth”) over allegations that its billing practices violated the state’s Medicaid False Claims Act.
  • According to the complaint, ProHealth allegedly submitted invoices with inflated numbers of Medicaid patient visits to the state, causing overpayment of reimbursements from TennCare—the state’s Medicaid system—to ProHealth.
  • The complaint seeks over $18 million in damages and $440,000 in fines, among other things.

State AGs in the News

21 Attorneys General Issue Statement Supporting District of Columbia Statehood