The State AG Report Weekly Update April 27, 2017

by Cozen O'Connor
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Breaking News

Cozen O’Connor’s State AG Practice Co-Chair Lori Kalani Interviews Massachusetts Attorney General

  • Cozen O’Connor’s State Attorneys General Practice Co-Chair Lori Kalani recently interviewed Massachusetts AG Maura Healey.
  • The interview focused on AG Healey’s career path to her current position as the AG of Massachusetts, her history of tackling controversial and challenging topics, and the role state AGs have in serving as a check on the Trump Administration.
  • A full transcript of the interview, which was featured in the publication Corporate Counsel, is available here.

Consumer Financial Protection Bureau

CFPB and Florida Attorney General Take Action Against Mortgage Loan Servicer Over Alleged Misconduct 

  • Florida AG Pam Bondi and the Consumer Financial Protection Bureau (“CFPB”) filed separate complaints against mortgage loan servicer Ocwen Financial Corporation and its subsidiaries (collectively “Ocwen”) over allegedly violating the Consumer Finance Protection Act, the Fair Debt Collection Practice Act, the Real Estate Settlement Procedures Act, and other federal and state laws.
  • According to the Florida AG and CFPB complaints, Ocwen allegedly serviced loans using a records system that contained errors, foreclosed on homeowners based on these errors, enrolled and charged borrowers for add-on products without their consent, failed to adequately investigate and respond to consumer complaints, and failed to provide complete and accurate loan information to new mortgage servicers, among other things.
  • AG Bondi’s suit seeks financial and other relief for harmed borrowers and an order barring Ocwen from servicing loans that violate federal or state laws. The CFPB lawsuit seeks to permanently enjoin Ocwen from committing future violations of mortgage servicing laws, provide relief to affected consumers, impose civil penalties, and pay attorneys’ fees.

CFPB Takes Action Against Auto Lender For Allegedly Violating Consent Order

  • The CFPB issued a consent order against auto lender Security National Automotive Acceptance Company (“SNAAC”) for allegedly violating a 2015 CFPB consent order, which required the company to pay $2.28 million in consumer redress and a $1 million civil penalty for allegedly engaging in illegal debt collection practices.
  • According to the 2017 consent order, SNAAC allegedly violated the 2015 consent order by failing to provide consumers more than $1 million in refunds and credits and failing to submit a redress plan required by the 2015 consent order.
  • Under the terms of the 2017 consent order, SNAAC must comply with the 2015 consent order and pay $795,000 in redress to affected consumers, $75,000 to cover the CFPB’s cost of distributing these payments, and $1.25 million to the CFPB Civil Penalty Fund.

Consumer Protection

New York Attorney General Settles with 104 Auto Dealerships Over Alleged Recall Disclosure Violations

  • New York AG Eric Schneiderman reached a settlement with 104 auto dealerships across the state for allegedly selling vehicles to consumers without disclosing that the vehicles were under recall for unaddressed safety concerns in violation of federal law.
  • According to the AG’s office, the auto dealers allegedly failed to provide consumers with advance notice of existing and unrepaired safety recalls, such as unintended acceleration, airbag problems, and other vehicle issues.
  • Under the terms of the settlement, the auto dealers must alert consumers that their vehicles may be subject to a recall, disclose recall information on advertisements, provide prospective purchasers with a copy of recall status reports, inform consumers how to check the recall status of a vehicle, and pay a fine of $1,000, among other things.

Pennsylvania Attorney General Settles with Athletic Shirt Manufacturer Over Allegedly Misleading Business Practices

  • Pennsylvania AG Josh Shapiro reached a settlement with athletic shirt manufacturer Radiate Athletics and its founder (collectively “Radiate”) over allegations that Radiate violated the state’s Unfair Trade Practices and Consumer Protection Law after it failed to deliver apparel to consumers.
  • According to the AG’s office, Radiate allegedly raised more than $579,000 using the crowdfunding site Kickstarter based on the promise to create athletic shirts that changed color in response to body heat, but allegedly failed to deliver the shirts or delivered defective shirts to consumers.
  • Under the terms of the settlement, Radiate is required to deliver shirts to the consumers who paid but did not receive them, pay $2,400 in restitution to consumers who received defective shirts, and pay $10,000 in civil penalties to the state, among other things.

 Medicaid Fraud

California Attorney General, DOJ, and Whistleblowers Settle with Pharmacy Chain Over Alleged False Billing Practices

  • California AG Xavier Becerra’s Bureau of Medicaid Fraud and Elder Abuse, the Department of Justice, and two whistleblowers reached a settlement with pharmacy chain Walgreens over allegations that it allegedly knowingly submitted claims for reimbursement of certain prescription drugs under California’s Medicaid program, Medi-Cal, that were not properly supported by diagnosis and documentation requirements in violation of the federal False Claims Act and state law.
  • According to the AG’s office, Walgreens allegedly billed Medi-Cal for prescriptions based on claims it had complied with diagnosis-related requirements for the dispensing of prescription drugs, and in some instances, dispensed drugs for non-approved diagnoses. The allegations stem from two qui tam, or whistleblower, suits alleging violations of the False Claims Act.
  • Under the terms of the settlement, Walgreens must pay $9.8 million to settle the allegations, with $2.3 million going to the whistleblowers who filed the qui tam lawsuits.

State v. Federal

Massachusetts and Illinois Attorneys General Lead Coalition Regarding Student Loan Protection Rollback

  • Massachusetts AG Maura Healey and Illinois AG Lisa Madigan were joined by 19 AGs and the Executive Director of the Office of Consumer Protection of Hawaii in sending a letter to U.S. Secretary of Education Betsy DeVos in opposition to the Department of Education’s decision to rollback student loan borrower protections.
  • In the letter, the AGs and the Executive Director raise concerns over the recent rollback of Obama Administration guidance, which they argue provided assistance to borrowers in obtaining accurate information about their loans and repayment options, ensured consistency of services provided, increased servicer accountability, and enhanced transparency.
  • In their letter, the AGs and the Executive Director write that the rollback of the Obama Administration guidance could leave student loan borrowers vulnerable to the poor practices and abuse that the guidance was intended to prevent.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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