Articles Posted in (FACTA) Fair and Accurate Credit Transactions Act

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The government sometimes imposes sanctions on certain imports for the sake of fair competition on behalf of domestic producers, among other reasons. When companies choose to ignore those sanctions, they could find themselves held accountable, not only by the government, but also by the domestic producers who were harmed by the illegal imports.

The “Honeygate” investigation, led by the U.S. Immigration and Customs Enforcement investigative arm of the U.S. Department of Homeland Security is one such case. The investigation resulted in a series of seizures of illegally imported honey, criminal charges, and massive fines. The United States District of Illinois filed criminal charges against two of the country’s largest industrial honey suppliers, Groeb Farms, Inc. and Honey Solutions. The two companies entered into Deferred Prosecution Agreements with the government and confessed to knowingly facilitating the importation, purchase, and sale of the mislabeled Chinese honey in order to avoid the U.S.-imposed antidumping duties.

The United States government had imposed antidumping duties on Chinese honey because they found that the honey was sold at such a low price as to interfere with the sale of domestically-produced honey.

To avoid the United States’s antidumping duties, the honey distributors engaged in a massive conspiracy involving transshipping Chinese honey through other countries, disguising the honey’s origin, and then illegally importing the Chinese honey into the United States in order to avoid paying the U.S. dumping duties.

Three domestic honey producers, Adee Honey Farms, Bill Rhodes Honey Company, LLC, and Hackenberg Apiaries, have now filed a class action complaint in the U.S. District Court for the Northern District of Illinois. In addition to the three named plaintiffs, the class action asserts claims on behalf of a nationwide class consisting of all individuals and entities “with commercial beekeeping operations (300 or more hives) that produced and sold honey in the United States during the period from 2001 to the present.”

The lawsuit is building on the Honeygate investigation in its attempt to obtain compensation for the financial losses suffered by the domestic honey producers as a result of Groeb’s and Honey Solutions’s conduct. The class-action alleges that, by intentionally participating in the purchase, packaging, distributing, and sale of the Chinese honey, the two companies deceived consumers and purchasers.

The lawsuit alleges that consumers were deceived because the Chinese honey has allegedly been found to be “heavily adulterated, containing inexpensive sweeteners and sometimes blended with high fructose corn syrup and other additives, despite the fact that importers, in league with [Groeb and Honey Solutions], represent that it is pure honey.”
James J. Pizzirusso one of the attorneys representing the domestic honey producers, states that the domestic honey industry, which is “critically important to agriculture, has suffered losses at the hands of these fraudulent suppliers.”

Adam J. Levitt, another attorney for the plaintiffs, said “It is important that American beekeepers and honey producers get to play on a level playing field”.

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The Consumer Law and Policy Blog has “reported many times on the error-prone credit reporting industry and the industry’s violations of the Fair Credit Reporting Act. Go, for example, here, here, and here.”
Today, the Federal Trade Commission issues a eight-year study of the industry showing that up to 40 million Americans have a mistake on their credit report. Twenty million have serious mistakes. Last night, 60 Minutes aired a report on the FTC’s study and its “own investigation of the credit reporting industry [that] shows that … mistakes can be nearly impossible to get removed from your [credit] record.”

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As Illinois consumer protection attorneys, we were pleased to see that an Illinois federal court has allowed a couple to continue a claim against their bank over a complex billing dispute. David Johnson’s Digital Media Lawyer Blog reported Sept. 2 on the case brought by Marsha and Michael Shames-Yeakel, a couple from Indiana who had $26,500 stolen from their home equity line of credit. Citizens Financial Bank held them liable for the loss, but they refused to pay. In response, the bank reported the “bad debt” to credit bureaus and threatened to repossess their home. The Shames-Yeakels sued Citizens. Shames-Yeakel v. Citizens Financial Bank, U.S.D.C., Northern District of Illinois, Case No. 07-c-5387.

According to a ruling posted by Wired (PDF), the Shames-Yeakels run an accounting and computer programming business out of their home. They had a business checking account as well as personal accounts and a home equity line of credit with Citizens, where they were customers for nearly 30 years. The HELOC was connected to their business checking account, but the four advances they took paid for personal expenses or expenses that mixed personal and business use, such as a new roof for their home, which includes their home office. In early 2007, an unknown person gained access to the HELOC and transferred the $26,500 to their business checking account, then eventually to a bank in Austria. They were unable to have the money returned, and Citizens held the Shames-Yeakels liable for the loss.

The Shames-Yeakels complained to Citizens, but to no avail; the bank pointed to language releasing it from liability in their online banking agreement. They also complained to the federal Office of Thrift Supervision, which said Citizens’ actions were legal. The Electronic Funds Transfer Act doesn’t protect HELOCs, it said, and the Truth in Lending Act covers only personal, not business, accounts. It found that the HELOC was a business account because it was linked to a business checking account. The Shames-Yeakels sued Citizens for violations of the Truth in Lending Act, the Fair Credit Reporting Act, the Electronic Funds Transfer Act, the Indiana Uniform Consumer Credit Code and common-law negligence and breach of contract.

Citizens then moved for summary judgment, the basis for the ruling at hand. U.S. District Judge Rebecca Pallmeyer granted summary judgment on the count relying on the Electronic Funds Transfer Act and restricted plaintiffs’ use of the Fair Credit Reporting Act. However, she denied it as to negligence and the Truth in Lending Act. The Digital Media Lawyer Blog, and Wired, focused on the negligence claim, which argued that the bank provided inadequate online security. Citizens employed a widely used contractor named Fiserv to protect its accounts with a simple username and password. The Shames-Yeakels argued that Citizens should have used a multi-layered security system using a “token” that provides additional verification. They also cited security experts suggesting such a system as early as 2005 and said Citizens failed to warn them of known security risks.

In her analysis, the judge started by reminding readers that summary judgment seeks only to decide whether there’s a genuine issue of material facts at hand. In the case of the negligence claim, she found that there was. In Indiana and many other states, courts have found that banks have a duty to protect customers’ confidential information. “If this duty … is to have any weight in the age of online banking,” she wrote, “then banks must certainly employ sufficient security measures to protect their customers’ online accounts.” She found the evidence presented about multi-layered security measures, and reports warning Citizens to use these measures, sufficient to require a trial, but warned the plaintiffs not to make arguments relying on the discarded causes of action.

The judge also rejected Citizens’ arguments for summary judgment on the TILA claim, which was based on their claim that the HELOC was for business purposes. Noting that caselaw requires judges to look at the substance rather than the form of transactions, she found that “Plaintiffs’ use of their home equity line of credit appears overwhelmingly personal in nature.” This is enough to survive summary judgment and require a proper trial, she found. She also found partially for the Shames-Yeakes on their Fair Credit Reporting Act claim. Because Citizens reported the debt as delinquent but failed to note that the debt was disputed, it may have violated the FCRA. However, she rejected the couple’s argument that Citizens failed to make reasonable investigations of their credit reporting disputes, and granted summary judgment on that claim only.

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One of the best websites to learn about consumer law issues and to find lawyers who focus on consumer rights issues is the website of the National Association of Consumer Advocates.

The website contains numerous links to sections on Auto Fraud, Lemon Law, Predatory Lending Practices, Credit Reporting Problems and Debt Collection Abuse.

Class action lawsuits our firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. DiTommaso-Lubin is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from corporate misdeeds.

Our Naperville, Wheaton, Oak Brook, and Chicago consumer attorneys provide assistance in consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases we have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Chicago area consumer protection lawyers here who can assist in lemon law, unfair debt collection, junk fax, prerecorded telephone solicitations, and other consumer, consumer fraud or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

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The National Consumers League’s Fraud Center is one of the best informational websites on the internet to learn about consumer rights and protection issues. Informed consumers are best armed to protect themselves from consumer scams and consumer frauds. The website contains sections for Telemarketing Fraud, Internet Fraud, Scams Against Businesses, Scams Against Elderly, Counterfeit Drugs, and a Fraud News section.

DiTommaso-Lubin is a private consumer rights law firm who associates with other law firms around the country that can help you recover funds lost due to fraud against brick and mortar companies in the United States with assets. All too often with many internet and telemarketing frauds this may not be possible as the scam artists may be overseas, hard to locate or without assets.

Class action lawsuits our firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. DiTommaso-Lubin is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from corporate misdeeds.

Our Naperville, Waukegan, Wilmette, Wheaton, Oak Brook, and Chicago consumer attorneys provide assistance in consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases we have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Chicago area consumer protection lawyers here who can assist in lemon law, unfair debt collection, junk fax, prerecorded telephone solicitations, and other consumer, consumer fraud or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

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Since the Fair and Accurate Credit Transactions Act took full effect in 2006, businesses have seen a rapid growth in class-action lawsuits over credit card numbers printed on receipts. FACTA, which was intended to help prevent identity theft, requires businesses that accept credit cards to hide all but the last five digits of the card number on receipts, and not to print the expiration date at all.

Businesses that failed to meet those requirements in time were hit with hundreds of class actions within the first year of the law’s effective date in December of 2006. Restaurants, at which consumers regularly and normally leave credit card receipts, have been an especially frequent defendant. The actions allege that businesses in violation of FACTA are willfully disregarding the law because they had several years to comply, and ask for up to $1,000 for each violation. Federal appeals courts split on the matter of whether a business’s unintentional failure to comply with FACTA was “willful,” but the U.S. Supreme Court decided in 2007’s Geico v. Edo, 551 U.S. __ (2007), an appeal from the Ninth U.S. Circuit Court of Appeals, that a willful violation may be “reckless disregard” for the law as well as a knowing or intentional violation.

Senator Charles Schumer of New York introduced legislation on May 6, 2008 that would end liability for businesses that print expiration dates but comply with the requirement to shorten credit card numbers. The proposed Credit and Debit Card Receipt Clarification Act of 2008 would declare any business that printed the expiration date but not the entire number to be “not in willful noncompliance” with FACTA. It would apply to any unresolved lawsuit, regardless of when that lawsuit was filed.