Recently in government regulation Category

Under new regulations adopted by the Federal Trade Commission today, for-profit debt settlement companies will no longer be allowed to collect fees for their services until they have settled some or all of a consumer's debt.  The new regulations will help curb deceptive and abusive practices in debt relief services sold through telemarketing, according to Consumers Union, the nonprofit publisher of Consumer Reports. 

"Most debt settlement companies charge big fees up front even though most consumers don't get the help they expect," said Lauren Bowne, Staff Attorney for Consumers Union's Defend Your Dollars campaign (www.DefendYourDollars.org)  "These new rules will help protect consumers who are already drowning in debt from being ripped off by debt settlement companies that fail to provide any relief.  But more needs to be done to ensure that the amount of fees charged for debt settlement services are fair."  

Most debt settlement companies market their services through Internet, television, or radio advertising.  The advertisements typically promise to substantially reduce debt and urge consumers to call a toll-free number to find out more.  Once the consumer signs up, the debt settlement company takes its fees over the first half of the contract period.  The FTC reports that nearly two-thirds of consumers who enroll in debt relief services, most of which pay an advance fee, end up dropping out of the programs within the first three years without getting the help they paid to receive.    

Debt settlement companies usually advise consumers to stop paying their creditors and to instead set up a special account to build savings that will be used in the future to negotiate a settlement.  As the consumer deposits savings into the account, the debt settlement company withdraws money to cover its fees even though it hasn't reached a settlement with creditors.  By stopping payments to creditors, the consumer ends up with a worse credit score, additional penalty fees and more interest charges.  

While debt settlement companies claim they settle millions of dollars in debt for consumers, they have not revealed how much debt remains unsettled.  The Better Business Bureau announced that it would stop calling debt settlement services "inherently problematic" if a company could show that it met several conditions, key among them that at least one half of its customers saved as much money as was paid in fees.  The GAO reported in April 2010 that two debt settlement trade associations called that standard "unrealistic."

The FTC's new regulation banning advance fees will go into effect on October 27, 2010 and takes a key step forward by addressing the timing of the fees.  Under the new rules, a debt settlement company will earn fees when it reaches a settlement on at least one of the consumer's debts that the consumer agrees to in writing.  Fees cannot be collected until the consumer has made at least one payment to the creditor as a result of the negotiated agreement.  

Fees can be held in a dedicated account before that time but all unearned fees must be returned to the consumer if he or she decides that the debt settlement program is not working out or cancels the program.  Debt settlement firms can only require a dedicated account under certain conditions, including that the account must be set up and maintained by the consumer at an insured financial institution.  The consumer will be entitled to earn interest on the account and can withdraw the funds at any time without penalty.  

Beginning on September 27, 2010, the FTC rule requires that debt settlement companies make certain pre-contract disclosures, including how long it will take to get results and how much it will cost.  The new rules cover calls consumers make to debt settlement firms in response to advertising as well as telemarketing calls made by firms.  However, the FTC's new regulation does not apply to in-person sales or to Internet-only sales, so Congress or the states will have to act to apply the new rules to those debt settlement contracts.  

"The FTC regulations will ensure that debt settlement companies will only get paid if they help consumers but it doesn't stop them from charging outrageously high fees," said Bowne.  "Now it's up to state lawmakers or Congress to cap debt settlement fees to a reasonable percentage of the actual savings for consumers."  

Two federal bills (S. 3264 and HR 5387) have been introduced in Congress to limit debt settlement fees to a one-time $50 fee and five percent of the savings from each final settlement.

A federal grand jury in Las Vegas today returned indictments against 10 Nevada-certified emissions testers for falsifying vehicle emissions test reports, the Justice Department announced.

Each defendant faces one felony Clean Air Act count for falsifying reports between November 2007 and May 2009. The number of falsifications varied by defendant, with some defendants having falsified approximately 250 records, while others falsified more than double that figure. One defendant is alleged to have falsified over 700 reports.

The individuals indicted include:

Eduardo Franco, 30

Alexander Wayne Worster, 27

William Joseph McCown, 48

Joseph DeMatteo, 52

David Eugene Nelson, 46

Louis Engene Demeo, 50

Adolpho Silva-Contreras, 47

Peter Escudero, 47

Wadji Waked, 24

Gary Smith, 47

Escudero resides in Pahrump, Nev. All other individuals are from Clark County, Nev.

The 10 defendants are alleged to have engaged in a practice known as "clean scanning" vehicles. The scheme involved entering the Vehicle Identification Number (VIN) for a vehicle that would not pass the emissions test into the computerized system, then connecting a different vehicle the testers knew would pass the test. These falsifications were allegedly performed for anywhere from $10 to $100 over and above the usual emissions testing fee.

The U.S. Environmental Protection Agency (EPA), under the Clean Air Act, requires the state of Nevada to conduct vehicle emissions testing in certain areas because the areas exceed national standards for carbon monoxide and ozone. Las Vegas is currently required to perform emissions testing.

To obtain a registration renewal, vehicle owners bring the vehicles to a licensed inspection station for testing. The emissions inspector logs into a computer to activate the system by using a unique password issued to the emissions inspector. The emissions inspector manually inputs the vehicle's VIN to identify the tested vehicle, then connects the vehicle for model year 1996 and later to an onboard diagnostics port connected to an analyzer. The analyzer downloads data from the vehicle's computer, analyzes the data and provides a "pass" or "fail" result. The pass or fail result and vehicle identification data are reported on the Vehicle Inspection Report. It is a crime to knowingly alter or conceal any record or other document required to be maintained by the Clean Air Act.

"Falsifications of vehicle emissions testing, such as those alleged in the indictments unsealed today, are serious matters and we intend to use all of our enforcement tools to stop this harmful practice. These actions undermine a system that is designed to reduce air pollutants including smog and provide better air quality for the citizens of Nevada," said Ignacia S. Moreno, Assistant Attorney General for the Justice Department's Environment and Natural Resources Division.

"The residents of Nevada deserve to know that the vast majority of licensed vehicle emission inspectors are not corrupt and are not circumventing emission testing procedures," said U.S. Attorney Bogden. "These indictments should serve as a clear warning to offenders that the Department of Justice will prosecute you if you make fraudulent statements and reports concerning compliance with the federal Clean Air Act."

"Lying about car emissions means dirtier air, which is especially of concern in areas like Las Vegas that are already experiencing air quality problems," said Cynthia Giles, Assistant Administrator for Enforcement and Compliance Assurance at EPA. "We will take aggressive action to ensure communities have clean air."

The maximum penalty for the felony violations contained in the indictments includes up to two years in prison and a fine of up to $250,000.

An indictment is merely an accusation, and a defendant is presumed innocent unless and until proven guilty in a court of law.

The case was investigated by the EPA, Criminal Investigation Division; and the Nevada Department of Motor Vehicles Compliance Enforcement Division. The case is being prosecuted by the U.S. Attorney's Office for the District of Nevada and the Justice Department's Environmental Crimes Section.

The government has filed two lawsuits against the Union Pacific Railroad Company for allegedly failing to prevent the use of its rail cars to smuggle large quantities of narcotics into the United States, the Justice Department announced today. The complaints, filed in San Diego and Houston, seek more than $37 million in monetary penalties. The government alleges the rail cars were brought across the border at the ports of entry at Calexico, Calif., and Brownsville, Texas.

According to the complaints, Union Pacific Railroad, the largest provider of rail transportation services in North America, has substantial Mexico rail operations, serving border gateways in California, Arizona and Texas. It is alleged in the complaints that Union Pacific has a substantial ownership-interest in the privatized Mexican railroad company Ferrocarril Mexicano (FM). Union Pacific also partners with FM to offer Union Pacific's customers the ability to move merchandise north- and south-bound between Mexico and the United States.

In accordance with Title 19, United States Code, Section 1584, the owner or person in charge of a vehicle bound to the United States is required to submit to Department of Homeland Security, Customs and Border Protection (CBP), a manifest that accurately identifies all merchandise on board the vehicle. A violation of this section mandates the imposition of civil monetary penalties.

"It is imperative for transportation providers to be vigilant in determining the nature of cargo they bring into the United States from other countries," said Michael F. Hertz, Acting Assistant Attorney General for the Justice Department's Civil Division. "These laws were established to protect the American people."

The complaint, filed in the Southern District of California, alleges that on 37 separate occasions, from November 2001 to October 2006, after Union Pacific submitted its manifests, CBP officials found a total of over 4,000 pounds of marijuana on Union Pacific rail cars north-bound from Mexico for travel throughout the United States. According to the complaint, CBP imposed mandatory monetary penalties of $33,595,112 for Union Pacific's violations but to date, Union Pacific has failed and refused to pay the civil penalties.

The government's complaint filed in the Southern District of Texas alleges that on June 16, 2003, Union Pacific submitted a manifest to CBP for entry at the Port of Entry at Brownsville, Texas. According to the government complaint, the railroad manifest indicated that the rail cars were empty. However, the suit states that CBP officials, during a routine inspection, found a total of 99 packages containing 117 kilograms of cocaine within a false wall on the bottom side of the rail car. The suit, filed in the Southern District of Texas, seeks $4,128,000.

"Railroad companies and other freight carriers must take seriously their obligations under the law to take appropriate action to prevent the use of their vehicles to smuggle narcotics and other contraband into the United States," said Karen P. Hewitt, U.S. Attorney for the Southern District of California. "This civil complaint marks an important step toward addressing the repeated failure of the largest railroad company in North America to prevent rail cars bound for travel throughout the United States from being used to smuggle significant amounts of narcotics."

"Along with the profits of doing an international transportation business comes the legal obligation to ensure contraband is not also brought into our country," said Tim Johnson, Acting U.S. Attorney for the Southern District of Texas. "The consequences of failing to meet that obligation are what this suit is all about."

"Securing the nation's rail system against the threat of cross border smuggling requires the compliance and cooperation of the rail industry," said Jayson P. Ahern, Acting Commissioner of U.S. Customs and Border Protection, Department of Homeland Security. "Failure to comply with reasonable security measures leads to vulnerabilities that are simply unacceptable when considering the consequences of illegal cross border activity."

The case is being handled in San Diego by Assistant U.S. Attorneys Joseph P. Price, Jr., and Joseph J. Purcell; in Houston by Assistant U.S. Attorney Nancy L. Masso; in Washington by Civil Division Trial Attorneys, David S. Silverbrand and Lauren A. Weeman; and with the assistance of Shelby L. Stuntz and Julie Koller, Attorneys, Department of Homeland Security, Customs and Border Protection.

SOURCE U.S. Department of Justice