State AG Updates: Data Privacy & Security; Artificial Intelligence; Predatory & Deceptive Real Estate Practices; Consumer Protection; Opioid Epidemic; and Federal Regulations

At a Glance

• Data Privacy & Security: Doordash pays a civil penalty under the California Consumer Privacy Act. The Connecticut AG’s Office released its first report on the Connecticut Data Privacy Act.
• Artificial Intelligence: The FCC issued a declaratory ruling confirming that robocalls made with AI-generated voices will be deemed “artificial” under the Telephone Consumer Protection Act (TCPA), and confirmed that the TCPA does not provide a “carve out” for any AI technology that purports to provide the equivalent of a live agent.
• Predatory & Deceptive Real Estate Practices: The Georgia AG announced a lawsuit against MV Realty, for allegedly unlawful predatory financial arrangements for homeowners. The Connecticut AG announced an investigation of EasyKnock over allegedly deceptive home sale-leaseback deals.
• Consumer Protection: A coalition of eight AGs filed motions against a co-owner of a Texas-based telemarketer, for allegedly violating court-issued permanent robocall and telemarketing bans. Student loan servicer, Nelnet, Inc., will pay $1.8 million in a settlement with the Massachusetts AG to resolve allegations that it failed to appropriately communicate with borrowers about renewing income-driven repayment plans.
• Opioid Epidemic: The Kentucky AG filed a lawsuit against Kroger for working with a manufacturer to promote opioids and improperly normalize their widespread use.
• Federal Regulations: A bipartisan group of 19 AGs wrote supporting the FTC’s proposed Trade Regulation Rule on Unfair or Deceptive Fees in the consumer marketplace. A coalition of 15 Republican AGs wrote opposing a proposed EPA regulation that would require replacement of lead pipes. Two competing partisan coalitions of AGs have filed comment letters on EPA’s proposed rule impacting meat and poultry processors.

Data Privacy & Security

DoorDash to Pay a $375,000 Civil Penalty Under the CCPA for Participation in Marketing Collective

Clarifying that California considers participation in a marketing cooperative to be a “sale” under the California Consumer Privacy Act (CCPA), California Attorney General Rob Bonta announced that the AG’s office has resolved an investigation into allegations that DoorDash violated the CCPA as well as the California Online Privacy Protection Act (CalOPPA). Specifically, DoorDash allegedly participated in a marketing cooperative in which businesses pooled personal information of their customers in exchange for the opportunity to advertise to one another’s customers. Because the AG considers such an exchange to be a “sale,” the failure to disclose and offer California consumers an opportunity to opt out constitutes a CCPA violation. Although the CCPA’s right to cure violations had not sunset, the AG took the position that DoorDash would not be permitted an opportunity to cure, alleging that DoorDash could not determine downstream receipt of the data and therefore would not be able to cure the harm to consumers.

DoorDash will pay a $375,000 penalty and be required to comply with injunctive terms that include annual reports to the AG.

The AG’s press release is here.

Connecticut AG Releases Data Privacy Enforcement Report

Connecticut Attorney General William Tong’s office released its first report on the Connecticut Data Privacy Act (CTDPA), which went into effect on July 1, 2023. Since the CTDPA took effect, the AG has issued over a dozen cure notices and numerous information requests. Specifically, the AG reviewed a number of companies’ privacy policies across industries and concluded that many suffer from missing, inadequate or confusing consumer rights disclosures and/or from missing, inactive or burdensome mechanisms to exercise CTDPA rights such as opting out of targeted advertising. The Attorney General also reported having received over 30 consumer complaints relating to consumers’ ability to exercise rights granted under the CTDPA, in particular the right to delete data. The report also signaled that a key enforcement priority will be the protection of the personal data of children and teens.

Attorney General Tong’s report also suggests further strengthening the CTDPA by removing certain entity-level exemptions, by introducing “one-stop shop” data deletion similar to California’s provisions for data brokers, by expanding the definition of “biometric data,” and by providing consumers with a “right to know” that third-parties have received their data similar to that offered by Oregon or Delaware.

A copy of the report is available here.

Artificial Intelligence

Regulation of AI-Generated Voices and AI Agents

The FCC issued a declaratory ruling confirming that robocalls made with AI-generated voices will be deemed “artificial” under the Telephone Consumer Protection Act (TCPA), and confirmed that the TCPA does not provide a “carve out” for any AI technology that purports to provide the equivalent of a live agent. There, the TCPA’s requirement for prior written consent will apply to such AI agents. A coalition of 26 state AGs led by Pennsylvania Attorney General Michelle Henry submitted a comment letter in response to the FCC’s November 2023 notice of inquiry, which had sought input into whether AI technologies could potentially “minimize the nuisances associated with the use of artificial or prerecorded voice messages by acting as the functional equivalent to calls with live agents.” The AGs’ letter strongly opposed any possibility that AI agents could ever serve as the functional equivalent of a live agent and/or permit marketers to place outbound calls without prior written consent. Of particular concern to both the state attorneys general and the FCC is the potential for voice-cloning technology to deceive consumers by replicating the voices of familiar celebrities, politicians and even trusted persons such as family members. The FCC’s notice of inquiry had also broached whether AI pattern-recognition technology might be a tool for law enforcement to recognize illegal robocalls before they are able to reach consumers.

A copy of the FCC’s declaratory ruling is here. The FCC announcement may be found here. The reply comments of the state AGs are here.

In other activity, Washington passed legislation sponsored by Attorney General Bob Ferguson to create an Artificial Intelligence Task Force, joining Colorado, Illinois, Massachusetts, Vermont and Virginia in creating a commission to study AI. At least 18 states have enacted legislation regulating some uses of AI, and 12 others have proposed legislation.

Predatory & Deceptive Real Estate Practices

Georgia AG Files Suit Against MV Realty

Georgia Attorney General Chris Carr announced a lawsuit against MV Realty and affiliates, alleging that the companies use unlawful and deceptive means to induce homeowners to agree to long-term predatory financial arrangements. Specifically, the AG alleges that a widely advertised “Homeowner Benefit Program” promised consumers that they could retain an upfront cash payment in exchange for using the companies’ services, but that consumers were not advised that they were actually agreeing to a long-term contract that would require them to pay a minimum of 3% of the value of their homes if they were sold, transferred or went into foreclosure during the 40-year contract term. MV Realty allegedly recorded a lien on the real property of each of the 3,300 enrollees, which the AG alleged would amount to at least 10 times the value of the upfront, “no-strings attached” payment. The complaint asserts that these alleged practices violate multiple sections of the Georgia Fair Business Practices Act, and seeks a civil penalty of $5,000 per violation and up to $10,000 for each violation committed against an elderly consumer, restitution to consumers and permanent injunctive relief.

A copy of the AG’s press release is here. A copy of the complaint is here.

Connecticut AG Investigating EasyKnock Over Allegedly Deceptive Home Sale-Leaseback Deals

Connecticut AG William Tong announced an investigation of New York-based EasyKnock over allegedly deceptive home sale-leaseback deals. In addition to issuing a civil investigative demand, the AG has asked any affected consumers to contact the AG’s office and file a complaint. EasyKnock allegedly purchases homes at under-market prices and then leases the homes back to the seller. The AG asserts that these practices may be illegal because the company uses language such as “convert your equity into cash,” which may be deceiving homeowners who are looking for traditional home equity loans. Consumers who enter into an EasyKnock agreement allegedly are subject to steep rent increases that potentially force them out of their homes.

AG Tong’s office is also investigating MV Realty for the same practices that are the subject of Georgia AG Carr’s complaint described above. In addition, AG Tong has proposed legislation targeting multiyear listing deals such as those at issue in the MV Realty investigation.

A copy of the AG’s press release is here. The civil investigative demand is here.

Consumer Protection

Coalition of Eight AGs Pursue Further Enforcement Action Against Alleged Robocaller After Violating Permanent Bans

The AGs of Arkansas, Indiana, Michigan, Missouri, North Carolina, North Dakota, Ohio and Texas filed a motion to show cause for civil contempt, and a motion to modify the stipulated order in the Southern District of Texas against a co-owner of a Texas-based telemarketer, Rising Eagle Capital Group LLC and JSquared Telecom LLC, alleging the co-owner violated permanent robocall and telemarketing bans issued by the court in March 2023.

The co-owner was banned from making robocalls or engaging in telemarketing as part of the prior stipulated judgment shutting down the robocall operation. Despite this permanent injunction, the state AGs allege that the co-owner continued to make deceptive and abusive robocalls and helped others make these calls. It includes allegations that the co-owner used aliases and falsified business records filed in various states and with the Federal Communications Commission, and set up several new businesses through which he engaged in telemarketing and facilitated robocalls. As a result of the violations of the court’s bans on robocalling and telemarketing, the seven-state coalition is asking the court to further ban the co-owner from engaging in all telephone-related services, to dissolve his existing telephone service companies, and pay a $122,339,320 judgment.

A copy of the motion is available here.

Massachusetts AG Settles With Student Loan Servicer, Nelnet, Over Renewal Notices

Nelnet, Inc., one of the nation’s largest federal student loan servicers, will pay $1.8 million in a settlement with the Massachusetts Attorney General to resolve allegations that the company failed to appropriately communicate with borrowers about renewing income-driven repayment (IDR) plans that provide access to affordable payments. Following an investigation into notifications sent by Nelnet to borrowers, the Massachusetts AG’s office announced the settlement in January 2024. The allegations in the settlement agreement include that Nelnet failed to send required notices to borrowers about renewing IDR plans or otherwise sent notices that failed to meet certain federal regulatory notice requirements between 2013 and 2017 in violation of Massachusetts’ Consumer Protection Law (Mass. Gen. Laws, Chapter 93A). The federal regulations at issue required that Nelnet provide borrowers with at least 60 days’ notice of their deadline to recertify an IDR plan, and explain the consequences if the borrower’s recertification is not received, including the resulting higher monthly payment amount.

In announcing the settlement, the Massachusetts Attorney General made clear that her office will continue to prioritize student loan debt and holding service providers accountable for their obligations to borrowers.

A copy of the press release is available here, and the settlement agreement is available here.

Opioid Epidemic

Kentucky AG Brings Recent Opioid Epidemic Lawsuit Against Kroger

On February 12, 2024, the Kentucky AG filed one of the latest lawsuits related to the opioid epidemic against the Kroger Company and its affiliates. The complaint alleges that between 2006 and 2019 Kroger and its more than 100 pharmacies in the Commonwealth were responsible for over 11% of all opioid pills dispensed in Kentucky. More specifically, the lawsuit alleges: (1) Kroger stores in Kentucky bought over 4 billion morphine milligram equivalents (MMEs) of opioids from 2006 to 2014, and (2) distributed more than 190 million dosage units of hydrocodone products to its stores in Kentucky during that same time period.

The Kentucky AG’s complaint, which was filed in Bullitt Circuit Court, brings claims under the Kentucky Consumer Protection Act (KRS 367.110 et seq.) and as a continuing public nuisance. It further alleges that Kroger: (1) failed to implement any effective monitoring program to stop suspicious opioid orders, (2) failed to protect against diversion at its retail pharmacies, and (3) worked with a manufacturer to promote opioids and improperly normalize their widespread use. The lawsuit seeks declaratory and injunctive relief, civil penalties, costs and fees, and prejudgment interest, among other relief.

Read the entire complaint here.

Federal Regulations

Bipartisan Group of 19 AGs Wrote a Comment Letter Supporting the FTC’s Proposed Rule on Hidden and Junk Fees

A bipartisan group of 19 AGs, led by Pennsylvania AG Michelle A. Henry, wrote a letter in support of the Federal Trade Commission’s proposed Trade Regulation Rule on Unfair or Deceptive Fees, and commended the FTC for its comprehensive review of the use of unfair or deceptive fees in the consumer marketplace. In announcing the comment letter, the Pennsylvania AG noted the FTC’s proposed rule addresses:

• Prohibiting “bait and switch” advertising by requiring businesses, from the outset, to clearly and conspicuously disclose the total price, inclusive of any mandatory fees
• Requiring businesses to more prominently display the total price when pricing information is advertised
• Prohibiting businesses from misrepresenting the nature and purpose of any fee
• Requiring businesses to clearly and conspicuously disclose the nature and purpose of certain fees (such as shipping charges and optional fees) before the consumer consents to pay

The letter specifically expresses concern with misrepresenting the total cost by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees. The AGs further note in the letter that hidden fees are “a prevalent problem” in many industries, including residential leasing, payday lending, internet applications, online shopping, automobile rentals, event ticket sellers, carpet cleaners, dietary supplement sellers, moving companies, gyms, hotels and other short-term lodging providers, travel companies, outlet stores, and online auctions. In addition to expressing support for the FTC’s proposed rule, the AGs highlight their enforcement efforts in protecting consumers from deceptive fee practices in the letter. Lastly, the AGs comment in support of the proposed rule’s provision that expressly preserves the states’ ability to enact greater protections than those afforded by the FTC’s proposed rule.

A copy of the letter can be found here.

Fifteen Republican AGs Oppose EPA’s Proposed Rule Concerning Replacement of Lead Pipes

A coalition of 15 Republican AGs, led by Kansas AG Kris Kobach, wrote a letter in February 2024 in opposition to a proposed regulation from the Environmental Protection Agency that would require the replacement of millions of lead pipes around the country. The AGs signing the letter are from Kansas, Arkansas, Florida, Georgia, Iowa, Idaho, Louisiana, Mississippi, Montana, Nebraska, South Carolina, South Dakota, Texas, Utah and Wyoming. The AGs contend that EPA’s proposed rule at issue, the National Primary Drinking Water Regulations for Lead and Copper: Improvements, 88 Fed. Reg. 84878 (December 6, 2023), would require that every state, public water system and even individual homeowner replace their lead pipes within the next 10 years with very few exceptions. The proposed rule requires a “rolling average” of 10% replacement every year.

The letter identifies three reasons the AGs contend the EPA’s proposed rule is unlawful: (1) it implicates the major questions doctrine, (2) it violates the Commerce Clause, and (3) it is arbitrary and capricious. In part, the AGs point to the cost the states, public water systems and individual households will incur without resulting in any measured benefit, that the EPA lacks clear congressional authorization, and the proposed rule does not adequately explain why it is departing from past practice. The AGs note that using the EPA’s estimates, the proposed rule is expected to cost $28 to $47 billion in compliance costs — while other estimates predict the cost is likely to exceed $60 billion. The AGs also argue the new rule is unnecessary because the EPA’s prior rule, the 2021 Lead and Copper Rule Revisions, already requires pipe replacement if the amount of lead reached a certain threshold and set a reasonable timeline for such replacement. This 2021 rule has not yet taken effect, but the AGs contend states had already taken measures to comply. Ultimately, the letter asks the EPA to change course and withdraw the new proposed rule.

To read the letter, click here.

AGs File Competing Comment Letters on EPA’s Proposed Rule Impacting Meat and Poultry Products

Republican AGs in 27 states submitted a comment letter asking the Environmental Protection Agency to withdraw a proposed rule that they contend would cost states and meat and poultry processors millions of dollars. At the same time, a group of six Democratic AGs submitted a letter in support of the proposed rule, and also arguing the regulations do not go far enough. The competing letters address the EPA’s proposed Clean Water Act (CWA) Effluent Limitations Guidelines and Standards for the Meat and Poultry Products Point Source Category, which would extend the EPA’s authority to regulate meat and poultry facilities’ indirect discharge of wastewater, in addition to regulating direct discharge.

The Republican AGs argue that the proposed rule’s pretreatment standards exceed EPA’s statutory authority under the CWA, and that the proposed rule underestimates the burdens of compliance and may have substantial economic impacts. The AGs joining the letter are from the states of Kansas, Arkansas, Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.

The letter from Democratic AGs in support of the EPA’s proposed rule argues that the EPA should revise the existing effluent limitation guidelines and standards, which the AGs contend are outdated and have not been updated for 20 years. However, the AGs are concerned that the rule does not go far enough to meet the requirements of the Clean Water Act and urge further action by the EPA. The letter also notes that EPA failed to consider its own detailed environmental justice analysis and applicable executive orders, which give further support for the additional measures they prefer. The AGs joining the letter are from the states of California, Wisconsin, Maryland, New Jersey, New York and Oregon.

The letter from Republican AGs can be found here, and the Democratic AGs’ letter can be found here.