Welcome to Wiley’s update on recent developments and next steps in consumer protection at the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC). In this newsletter, we analyze recent regulatory announcements, recap key enforcement actions, and forecast upcoming deadlines and events. We also include links to our articles, blogs and webinars with more analysis in these areas. We understand that staying on top of the rapidly changing regulatory landscape is more important than ever for companies looking to deliver new and revolutionary technologies.
The FTC reports an increase in cryptocurrency scams. At May 17, the FTC issued a Spotlight on consumer protection focused on an increase in cryptocurrency investment scams. Specifically, consumers have reported losing over $ 80 million as a result of these scams since October 2020. Of the 7,000 consumer reports, the median reported loss was $ 1,900, and that amount represents an increase of 1000% of losses declared compared to the previous year. Additionally, consumers aged 20 to 49 were more than five times more likely to report losing money to a cryptocurrency investment scam than older groups, and their losses were higher. high, with consumers aged 20 to 49 reporting a median loss of $ 3,250.
Important enforcement measures
CFPB issues consent order against auto lender for alleged illegal LDW practices. At May 21, the CFPB issued a consent order against 3rd Generation, Inc., doing business as California Auto Finance (California Auto), for allegedly charging illegal interest for late payments on its Loss Damage Waiver (LDW) product without the knowledge of customers. An LDW is a product that covers the cancellation of the customer’s debt in the event of the total loss of the vehicle or the cost of a repair. The CFPB specifically alleges that California Auto violated the Consumer Financial Protection Act (CFPA) by charging 5,800 customer accounts a total of $ 565,813 interest on late payment related to LDW fees, without disclosing that the LDW fees are added to the principal balance of the underlying loan, amortized and subject to interest charges. In addition to reimbursing consumers for illegal interest charges, the CFPB consent order requires California Auto to pay a civil fine of $ 50,000.
The FTC files a complaint against an Internet service provider for misrepresenting broadband speeds. At May 19, the FTC and law enforcement agencies in Arizona, Indiana, Michigan, North Carolina, Wisconsin and California sued Frontier Communications (Frontier) for allegedly providing services Internet to consumers at speeds lower than promised. In addition, the FTC complaint alleges that Frontier charged consumers for more expensive and faster services than those provided. The FTC’s allegations relate to Frontier’s digital subscriber line internet service and involve alleged violations of FTC law and various state laws.
FTC bans student loan debt relief operators from providing debt relief services At May 17, the FTC ad a settlement with Student Advocates Team, LLC, Progress Advocates Group, LLC, Student Advocates Group, LLC and Assurance Solutions Services, LLC. In a 2019 complaint, the FTC alleged that the Student Advocates Team and other defendants charged illegal upfront fees that consumers believed applied to their student loan payments and falsely promised that their services would permanently reduce or eliminate student loan payments. consumers. The settlement orders prohibit the defendants from providing debt relief services and include a monetary judgment in excess of $ 24.5 million.
CFPB takes action against the debt settlement company for charging allegedly illegal fees. At May 17, the CFPB asked the U.S. District Court for the District of Massachusetts for a final judgment that would require DMB Financial, LLC (DMB) to pay consumers at least $ 5.4 million for allegedly charging consumers illicit charges and failing to provide the required disclosures to consumers under the Telemarketing Sales Rule (TSR) and the CFPA. According to the CFPB of December 2020 complaint, DMB allegedly violated the TSR by charging consumers a fee before they made a payment to a creditor under a settlement agreement. Further, the CFPB alleged that DMB violated the CFPA by failing to disclose the amount a consumer must save before making a settlement offer, as well as the time it would take to make a settlement offer. the proposed order would impose, among other things, a judgment of 7.7 million dollars against DMB.
FTC initiates enforcement action against the CBD Marketer. At May 17, the FTC ad law enforcement action against Kushly Industries LLC (Kushly) for allegedly making false or misleading claims regarding cannabidiol (CBD) products. According to the FTC complaint, Kushly allegedly made false or unsubstantiated claims that their CBD products could treat or cure acne, psoriasis, cancer, and multiple sclerosis. The FTC proposed administrative order would require Kushly to pay $ 30,583.14, which is the amount consumers paid Kushly for products sold using allegedly deceptive marketing.
Deadlines and upcoming events for comments
The FTC is asking for comment on digital “dark patterns.” Bids are due May 29 on FTC request for comments on “digital dark patterns,” which is a term used to describe a range of potentially deceptive user interface designs on websites and apps. Specifically, the FTC is seeking comments on several topics that were discussed during its April 29 event – Highlighting Dark Patterns: An FTC Workshop. This workshop examined the ways in which user interfaces can have the intended or unintended effects of obscuring, subverting or compromising the autonomy or decision-making of consumers. The workshop examined how dark patterns differ from sales tactics used by physical stores; whether certain consumer groups are unfairly targeted; and whether there are additional rules or standards needed to protect consumers.
The CFPB is seeking comments on the use of AI by financial institutions. Comments are due 1st of July (expanded from June 1) on a Information request published collectively by the CFPB; the Board of Governors of the Federal Reserve’s Office of Consumer Financial Protection; the Federal Deposit Insurance Corporation; the National Credit Union Administration; and the Office of the Comptroller of the Currency. The five branches, which coordinate regularly to offer interagency advice, collect insights into the use of artificial intelligence (AI) by financial institutions for fraud prevention, service personalization, credit underwriting and a number of other operations. Among other things, the information request solicits feedback to understand the use of AI; appropriate governance and risk management controls on AI; and the challenges of developing and managing AI.