Scherzer Blog

Identity theft remains on top of FTC’s national complaints list

Identity theft continues to top the FTC’s national ranking of consumer complaints, with American consumers reported as losing over $1.6 billion to overall fraud in 2013, according to its annual report released last month. The FTC received more than two million complaints overall, of which 290,056 or 14%, involved identity theft. Thirty percent of these were tax or wage-related, which continues to be the largest category within identity theft complaints. Debt collection followed identity theft with 204,644 or 10% of total complaints, and banking and lending was number three with 152,707 or 7%.

Florida was noted as the state with the highest per capita rate of reported identity theft and fraud complaints, followed by Georgia and California for identity theft complaints, and Nevada and Georgia for fraud and other complaints.

March 28th, 2014|Educational Series, Fraud|

Accuracy issues top credit reporting complaints

The Consumer Financial Protection Bureau (CFPB) last month released its report regarding approximately 31,000 complaints filed between October 22, 2012 and February 1, 2014, by consumers frustrated with credit reporting companies. The majority of the complaints pertained to accuracy and completeness of credit reports.

March 28th, 2014|Educational Series, Fraud|

Another lawsuit reminds employers about FCRA disclosure/authorization requirements

A recently filed class action NDC Ca. No. (4:14-cv-00592-DMR, 2-7-14) is a reminder to employers that under the Fair Credit Reporting Act (the “FCRA”) their disclosure and authorization form to the applicant/employee for obtaining a background check must be in a standalone document, and cannot contain confusing or extraneous information. The lawsuit alleges that the defendant employer used an invalid form to obtain consent to conduct background checks, that it relied on an authorization that was included alongside several other consent paragraphs in an online employment application, and that the consent form contained a release of liability related to obtaining the background check. Two published court decisions already ruled that including a liability waiver constitutes a technical violation under the FCRA. (WD Pa. 2013, No. 2:08-cv-01730-MRH, and Dist. Md., 2012, No. 8:11-cv-01823-DKC.)

March 28th, 2014|Judgment, Lawsuit|

SEC defines “compensated solicitor” and “participation” under bad actor Rule 506(d)

As we reported previously, on September 23, 2013, new Rules 506(d) and (e) of Regulation D under the Securities Act and changes to Form D (“Bad Actor Rules”) went into effect, making all Rule 506 offerings subject to certain disqualification, disclosure and certification requirements.

In this blog, we want to bring to your attention the SEC’s compliance and disclosure interpretations (“C&DIs”) issued December 4, 2013, which, among other provisions, define what constitutes a “compensated solicitor” and “participation” in an offering, in case the SEC’s expanded guidance warrants an assessment of your particular services, especially if you are a professional advisor.

The CD&Is define “compensated solicitors” as “all persons who have been or will be paid, directly or indirectly, remuneration for solicitation of purchasers, regardless of whether they are, or are required to be, registered under Exchange Act Section 15(a)(1) or are associated persons of registered broker-dealers.”

According to the CD&Is, “participation in an offering is not limited to the solicitation of investors, and includes involvement in due diligence activities or the preparation of offering materials (including analyst reports used to solicit investors), providing structuring or other advice to the issuer in connection with the offering, and communicating with the issuer, prospective investors or other participants about the offering. To constitute ‘participation,’ such activities must be more than transitory or incidental–administrative functions, such as opening brokerage accounts, wiring funds, and bookkeeping activities, would generally not be deemed to be deemed as ‘participating’ in the offering.”

January 23rd, 2014|Dodd-Frank, Educational Series|

Proposed bill would establish standards for national data security

The bill, introduced in the Senate on January 15, 2014 and cited as the Data Security Act of 2014, would require entities such as financial institutions, retailers, and federal agencies to better safeguard sensitive information, investigate security breaches, and notify consumers when there is a substantial risk of identity theft or account fraud. The new requirements would apply to businesses that take credit or debit card information, data brokers that compile private information, and government agencies that possess nonpublic personal information.

January 23rd, 2014|Legislation|

Justice Department collected more than $8 billion in civil and criminal cases in 2013

Attorney General Eric Holder announced on January 9, 2014 that the Justice Department collected at least $8 billion in civil and criminal actions in the fiscal year ending Sept. 30, 2013. The statistics indicate that in FY 2013, approximately $5.9 billion was collected by the department’s litigating divisions and the U.S. Attorneys’ offices in individually and jointly handled civil actions. The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered money lost to fraud or other misconduct and collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights or environmental laws.

January 23rd, 2014|Judgment|

FFIEC finalizes guidance for social media risk management

The Federal Financial Institutions Examination Council (FFIEC) released on December 11, 2013 final guidance on the applicability of consumer protection and compliance laws, regulations, and policies to activities conducted via social media by banks, savings associations, and credit unions, as well as nonbank entities supervised by the Consumer Financial Protection Bureau. The guidance provides considerations that financial institutions may find useful in performing risk assessments and developing and evaluating policies and procedures regarding social media.

January 17th, 2014|Social Media|

Proposed Regulation A rules have bad actor disqualification similar to Rule 506(d)

On December 2, 2013, the U.S. District Court for the Western District of Pennsylvania ruled that a combined disclosure and authorization form that contained a liability waiver which the employer gave to a group of former job applicants violates the Fair Credit Reporting Act (the “FCRA.”) The court determined that a significant portion of the 1,800 individuals in this class action are entitled to willful damages under the FCRA and could each receive the greater of his/her actual damages or $1,000 plus attorneys’ fees.

This is a second published decision to hold that liability waivers invalidate the disclosure requirements under the FCRA. The first ruling rendered in January 2012 in the U.S. District Court in Maryland found that “both the statutory text and FTC advisory opinions indicate that an employer violates the FCRA by including a liability release in a disclosure document.” Thus far, only the U.S. District Court for the Western District of North Carolina disagreed, deciding in August 2012 that the liability waiver included in the defendant employer’s combined disclosure and authorization form was kept sufficiently distinct from the disclosure language so as not to render it ineffective.

January 17th, 2014|Dodd-Frank, Employment Decisions|

Proposed federal bill bans credit checks in employment decisions

Introduced by Senator Elizabeth Warren (D-Mass) on December 17, 2013, the “Equal Employment for All Act” (S. 1837), would amend the Fair Credit Reporting Act to prohibit employers from requiring or suggesting that applicants disclose their credit history, from procuring a consumer or investigative report, and from disqualifying employees based on a poor credit rating, or information on a consumer’s creditworthiness, standing or capacity. Positions that require a national security clearance or “when otherwise required by law” are exempt from the prohibition. Ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington) already have enacted legislation that limits the use of credit reports for employment purposes.

January 17th, 2014|Employment Decisions, Legislation|

New law bans California employers from asking about dismissed criminal records

Effective January 1, 2014, SB 530, will ban most California employers from asking employees or applicants about arrests that did not result in conviction (except for arrests for which the individual is still awaiting trial) or about participation in a pretrial or post trial diversion program. Generally, the new law prohibits most employers from asking applicants to disclose, or use as a factor in employment decisions, any information concerning a conviction that has been judicially dismissed or ordered sealed.

December 10th, 2013|Employment Decisions, Legislation|