United States: The State AG Report Weekly Update August 15, 2019

Last Updated: August 20 2019
Article by Lori Kalani and Bernard Nash

Charities

4 Attorneys General Settle with Military Charity Over Alleged Deceptive Practices

  • Four AGs, led by Virginia AG Mark Herring, reached a settlement with Hearts 2 Heroes Inc., d/b/a Active Duty Support Services Inc. and its owners over allegations that the for-profit company deceptively misused funds donated to support servicemembers in violation of state consumer protection and charities laws.
  • According to the AGs, Hearts 2 Heroes allegedly made door-to-door sales of care packages to be sent to servicemembers overseas yet delivered some packages only to domestic military bases; misrepresented that it is a charity and donations are tax deductible when neither are true; misrepresented that company staff were veterans or volunteers; and allowed staff to misappropriate cash donations for personal use.
  • Under the terms of the settlement, the owners of Hearts 2 Heroes are enjoined from engaging in charitable solicitations or working for a charitable organization, the company must be dissolved, the owners and company must pay $10,000 in civil penalties, and the company must pay $286,959 in restitution, which is suspended upon compliance with the agreement.

Consumer Financial Protection Bureau

CFPB Reaches Settlement with Lender for For-Profit Education Company

  • The Consumer Financial Protection Bureau ("CFPB") reached a settlement with ITT Educational Services, Inc. ("ITT") over allegations that it engaged in unfair and abusive lending practices in violation of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010.
  • According to the CFPB, ITT, among other things, allegedly created private loan programs for students of ITT Technical Institute and improperly induced students to take out additional private loans without understanding the terms and conditions and who could not afford the loans, resulting in high default rates.
  • Under the terms of the proposed stipulated judgment and order, ITT is enjoined from offering or providing student loans and must pay $60 million in equitable monetary relief to the CFPB, among other things.

Consumer Protection

Massachusetts Attorney General Settles with Student Loan Debt Relief Service Over Alleged Misrepresentations

  • Massachusetts AG Maura Healey reached a settlement with student loan debt relief service Equitable Acceptance Corporation ("EAC") over allegations the company made misrepresentations regarding its financing products and services in violation of the state Consumer Protection Act and Truth in Lending Act.
  • According to the AG's office, EAC allegedly operated as an unlicensed finance company; provided high-interest loans to student borrowers to finance EAC's debt relief and document preparation services, which amounted to submitting forms for borrowers; and misrepresented or failed to disclose loan terms and costs.
  • According to the AG's office, under the terms of the consent judgment, EAC is prohibited from selling student loan debt relief services in the state and must pay $100,000 in restitution and provide $340,000 in loan relief to student borrowers.

Data Privacy & Security

Massachusetts Attorney General Settles with Online Retailer Over Alleged Data Breach

  • Massachusetts AG Maura Healey reached a settlement with online retailer Bombas LLC over allegations that it failed to comply with the Massachusetts Data Security Regulations.
  • According to the AG's office, Bombas allegedly did not have a written information security program ("WISP") that included reasonable safeguards over consumers' credit card information, resulting in a data breach facilitated by malicious code installed on Bombas' online shopping cart feature that compromised customers' sensitive personal information, including names, addresses, and credit card numbers.
  • According to the AG's office, under the terms of the settlement, Bombas will come into compliance with the law, implement and maintain a WISP, and undergo annual third-party data security and compliance audits.

E-Cigarettes

Bipartisan Coalition of 43 Attorneys General Issues Letter to Video Streaming Industry Urging Protection of Young Viewers from Tobacco

  • A bipartisan coalition of 43 AGs organized by the National Association of Attorney General ("NAAG") and led by California AG Xavier Becerra and Nebraska AG Doug Peterson issued a letter to CEOs of various video streaming services urging the industry to adopt business practices that protect young viewers from tobacco imagery in video content.
  • In the letter, the AGs note, among other things, that the U.S. Surgeon General has found causation between tobacco imagery in video streaming and smoking among young people, particularly e-cigarettes, and that a high percentage of top-ranked shows on popular streaming services contained tobacco imagery as compared to broadcast and cable content.
  • The AGs urge the streaming companies to eliminate or exclude tobacco imagery from future original streamed content for young viewers; only "recommend" tobacco-free content for young or family audiences; improve or offer effective parental controls; and stream anti-smoking and/or anti-vaping content prior to content containing tobacco imagery, among other things.

FDA Issues Warning Letters to E-Liquid and Hookah Tobacco Companies Over Alleged Failure to Obtain Premarket Authorization

  • The U.S. Food and Drug Administration ("FDA") issued warning letters to Mighty Vapors LLC d/b/a Ovo Manufacturing & Distributing, Liquid Labs USA LLC d/b/a Likido Labs USA, V8P Juice International LLC, and Hookah Imports Inc. over allegations that they have marketed e-liquid and hookah tobacco products without premarket authorization in violation of the Food, Drug, and Cosmetic Act ("FDCA").
  • In the letters, the FDA warns the companies that, without premarket authorization from the FDA, their tobacco products are considered to be adulterated and/or misbranded and may not be legally marketed.
  • The letters instruct the companies to address the violations and notify the FDA of specific actions taken within 15 days of receipt of the letter.
  • As previously reported, the FDA and the Federal Trade Commission ("FTC") issued warning letters to flavored e-liquid manufacturers and marketers in June 2019 over alleged marketing disclosure violations of the FDCA and the FTC Act.

Labor & Employment

Washington Attorney General Reaches Agreements with Four More Franchisors to Eliminate "No-Poach" Provisions

  • Washington AG Bob Ferguson reached a settlement with franchisors Aarons, Inc., H&R Block Tax Services LLC, Mio Sushi International, Inc., and The UPS Store Inc. to eliminate "no-poach" provisions in their franchise contracts.
  • According to the AG's office, the franchisors utilized provisions in their contracts with franchise owners that prohibited employees from moving among stores within the same corporate chain.
  • Each of the franchisors signed an assurance of discontinuance requiring that they cease enforcing the no-poach provisions currently in their franchise contracts and remove such provisions from current and future franchise contracts.
  • As previously reported, AG Ferguson reached similar agreements with franchisors in February 2019, November 2018, and May 2019, filed a lawsuit against a fast food franchisor in October 2018 over its alleged use of no-poach provisions, and reached settlements with fast food franchisors in July 2018, August 2018, and September 2018 to resolve investigations regarding their uses of no-poach provisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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