GNYADA July 2015 Newsletter

9 NY AG Charges Dealers Selling Credit Repair Services Credit Forget It Shut Down

The New York Attorney General’s Office has obtained a consent order permanently shutting down the credit repair service, Credit Forget It, Inc . AG Eric Schneiderman has taken the position that selling such credit repair products violates state laws. His office has also charged dealers who sold this product to be in violation themselves. Attorney General Settles with Large Dealer Group The AG’s investigation into dealer- ships selling Credit Forget It products has led to costly settlements with numerous dealers, mostly in the metro New York region; it appears the AG will bring lawsuits against at Department for alleged violations of the Office of Foreign Assets Control (OFAC) rules. While the size of this penalty is significant, the relatively small number of violations that gen- erated the fine is also worth mention- ing; over four years, there were 486 problematic transactions. Treasury alleges that up until 2013 PayPal did not implement adequate screening technology and procedures to block prohibited transactions. When PayPal eventually did start screening properly, it identified potential matches for OFAC’s List of Specially Designated Nationals (SDN List); however, they continued to process the transactions of these 10 PayPal, Inc. has agreed to pay $7,658,300 to the Treasury

least eleven additional dealers for violating New York General Business Law (GBL) relating to the sale of credit services. One dealership group named in the AG’s press release will pay more than $13.5 million to approximately 15,000 consumers for failing to disclose the addition of fees to retail contracts and leases in viola- tion of the GBL. New York State Law Under State law, only certain types of nonprofits and licensed attorneys can charge or collect any fee prior to per- forming those services. Federal Law The Credit Repair Organizations Act OFAC found PayPal’s conduct “egre- gious” and initially assessed liability at more than $17 million. That deter- mination was made, in part, because PayPal’s supervisors and managers supposedly knew of the deficient processes and did not correct them. Takeaway for dealers OFAC compliance is not optional – if your screening program is not robust, you could face severe penalties. It is worth noting that most OFAC enforcement actions in the past have involved banks. This incident could signal that Treasury will start looking at other industries. Now is the time to make sure your OFAC compliance program is bulletproof. individuals, whom the US blocks doing business with.

similarly prohibits advance fees and requires specific disclosures. It also requires a three-day right-of-cancella- tion window. Takeaway for dealers The Attorney General continues to actively investigate the auto indus- try’s sales practices, targeting decep- tive advertising and after-market sales. Dealers should review all after- market products offered, and the sales practices used when selling all items, making sure all proper disclosures are made to consumers. Further, dealers should stop selling any credit repair programs and products.

PayPal Charged $7.6 Million for OFAC Violations

For more details on the Treasury Department’s OFAC rules, visit www.gnyada.com/files/pages/deal- ers/OFAC.pdf . This item is intended as information only; for specific advice, contact your attorney. This article was provided by Stuart A. Rosenthal, Esq. He can be reached at 914.205.7700 or Stuart@Rosenthal.Lawyer.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • July 2015 5