Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) issued a supervisory highlights report identifying legal violations identified by the CFPB’s examinations in the first half of 2021. The report also highlights prior CFPB supervisory findings that led to public enforcement actions in the first half of 2021. CFPB examiners often find problems during supervisory examinations that are resolved without an enforcement action. The report discusses violations found in areas such as auto loan servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination and servicing, private student loan origination, payday lending, and student loan servicing.

The CFPB announced that LendUp Loans has agreed to halt making any new loans and collecting on certain outstanding loans and pay a $100,000 civil penalty. The settlement resolves a lawsuit alleging that LendUp continued to engage in illegal and deceptive marketing in violation of a 2016 CFPB order. LendUp allegedly misrepresented the benefits of repeatedly borrowing from the company by advertising that borrowers who climbed the LendUp Ladder would gain access to larger loans at lower rates when, in fact, that was not true for tens of thousands of consumers.

Federal Communications Commission

The Federal Communications Commission (FCC) has shortened the STIR/SHAKEN caller ID authentication framework implementation deadline for certain small voice service providers. Large carriers are currently required to implement STIR/SHAKEN in the Internet Protocol (IP) portions of their networks. The FCC granted small voice service providers with 100,000 or fewer subscriber lines an extension until June 30, 2023. Such providers that are not facilities-based will now be required to implement STIR/SHAKEN in the IP portions of their networks no later than June 30, 2022. Voice service providers suspected of originating illegal robocalls will also be required to implement STIR/SHAKEN within 90 days of an Enforcement Bureau determination following a summary process.

The FCC entered into $40.5 million settlement with telecommunications relay services (TRS) provider Sorenson Communications, LLC and CaptionCall, LLC, its wholly-owned subsidiary, to resolve investigations into CaptionCall’s practices as a provider of Internet Protocol Captioned Telephone Service, an internet-based form of TRS. In addition to paying a $12.5 million civil penalty, CaptionCall will reimburse $28 million to the TRS Fund, and has agreed to enter into a compliance plan. The FCC’s investigation found that the company offered and provided incentives, including monetary contest awards and free meals, to Hearing Health Professionals for referring users to CaptionCall IP CTS and improperly claimed reimbursement for related costs.

The FCC settled investigations of four companies regarding non-compliance with 911 rules. Alleged violations by the companies included failing to deliver 911 calls, failure to deliver number and location information, and failure to notify 911 call centers during outages. AT&T, CenturyLink (now Lumen Technologies), Intrado, and Verizon have agreed to make a settlement payment and implement a compliance plan to ensure adherence to the 911 rules. The combined settlement payments total more than $6 million.

The FCC submitted its Traced Act Annual Report for 2021 to Congress. The report contains information about informal complaints the agency has received per calendar year since 2016 and details about FCC enforcement actions taken during the prior year. The report lists complaints alleging total of 214,583 violations through November 30, 2021. One complaint may allege multiple violations. The total number of alleged violations received in complaints for 2020 was 212,400.

Federal Trade Commission

The Federal Trade Commission (FTC) initiated a rulemaking to address a sharp spike in business and government impersonation fraud. The advanced notice of proposed rulemaking (ANPR) reports that 1.3 million impersonation scams resulting in $922 million in losses were reported from January 1, 2017-September 30, 2021. A potential rule resulting from the regulatory proceeding could allow the FTC to obtain restitution for consumers who fall victim to such scams that might otherwise not be available following the Supreme Court’s ruling in AMG Capital Management LLC v. FTC. Public comments on the ANPR are due on or before February 22, 2022.

The FTC obtained a ban on negative option marketing and $21 million for consumers deceived by background report provider MyLife.com and CEO Jeffrey Tinsley. The FTC’s July 2020 complaint alleged that, in many instances, consumers who searched the MyLife.com website for an individual’s background report were shown search results that implied, often falsely, that the subject of a search may have records of criminal or sexual offenses. The records could be viewed only by purchasing a MyLife subscription which automatically renewed without prior disclosure of terms. Refund and cancellation terms were also allegedly misrepresented.

A new FTC data spotlight shows that in the first nine months of 2021, consumers reported losing $148 million in scams where gift cards were used as the form of payment. That amount is more than was reported in all of 2020. The FTC has resources for consumers, including information on how to contact gift card companies to try to stop payments to scammers at ftc.gov/giftcards. The agency also has information for gift card retailers, including materials that can be posted in stores and used to train employees at ftc.gov/StopGiftCardScams.

U.S. Department of Justice

The U.S. Department of Justice (DOJ), FBI, U.S. Postal Inspection Service and five other federal law enforcement agencies announced the completion of the fourth annual Money Mule Initiative. The initiative targeted networks of individuals and international fraudsters to block them from obtaining proceeds of fraud schemes. U.S. law enforcement took action to address 4,750 money mules in the fourth quarter of 2021 with enforcement actions being taken in every state. Agencies are also conducting outreach to educate the public about how fraudsters use money mules and how to avoid unknowingly assisting fraud by receiving and transferring money.

DOJ and the Internal Revenue Service (IRS) announced a court awarded more than $8 million in civil penalties against the promoter of a tax shelter scheme involving improper deductions for donating unwanted timeshares. Montana-based attorney James Tarpey formed Project Philanthropy, Inc. d/b/a Donate for Cause (DFC) and obtained at least $19 million from consumers for whom he performed appraisals of timeshares that were donated to DFC for tax avoidance purposes.

DOJ obtained a consent decree requiring New Jersey defendants to stop distributing unapproved ‘Nano Silver’ products touted as a treatment for COVID-19. Defendants Natural Solutions Foundation, along with trustees Ralph Fucetola and Dr. Rima Laibow, also agreed to recall the products and destroy any products in their possession.

In Other Federal News

The Consumer Product Safety Commission (CPSC) announced the launch of a new online tool for businesses to report hazards. Use of the tool will be required effective January 31, 2022, in order for businesses to participate in the CPSC’s Fast Track Program which allows businesses to quickly implement a corrective action plan, with CPSC approval, including removal of hazardous products from the marketplace and voluntary product recalls.

The Securities and Exchange Commission (SEC) announced that J.P. Morgan Securities LLC (JPMS), agreed to pay a $125 million penalty related to failures to maintain and preserve written communications made over personal devices by the firm and its employees. JPMS admitted the facts set forth in the SEC’s order and acknowledged that its conduct from at least January 2018 through November 2020 violated the federal securities laws and agreed to implement improvements to its compliance policies and procedures.

The SEC announced that Nikola Corporation has agreed to pay $125 million to settle charges that it defrauded investors by misleading them about its products, technical advancements, and commercial prospects in electric vehicle manufacturing. The settlement follows parallel civil and criminal fraud cases filed against Trevor Milton, the company’s founder and former Chief Executive Officer and Executive Chairman. The cases against Milton are pending.

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