FTC ANNOUNCES $21 MILLION PAYOUT FROM ONLINE PAYDAY LENDING COMPANIES

FROM:  U.S. FEDERAL TRADE COMMISSION 
 Online Payday Lending Companies to Pay $21 Million to Settle Federal Trade Commission Charges that They Deceived Consumers Nationwide
Lender Will Waive $285 Million in Other Charges

Two payday lending companies have settled Federal Trade Commission charges that they violated the law by charging consumers undisclosed and inflated fees. Under the proposed settlement, AMG Services, Inc. and MNE Services, Inc. will pay $21 million – the largest FTC recovery in a payday lending case – and will waive another $285 million in charges that were assessed but not collected.

“The settlement requires these companies to turn over millions of dollars that they took from financially-distressed consumers, and waive hundreds of millions in other charges,” said Jessica Rich, Director of the Bureau of Consumer Protection. “It should be self-evident that payday lenders may not describe their loans as having a certain cost and then turn around and charge consumers substantially more.”

The FTC filed its complaint in federal district court in Nevada against AMG and MNE Services and several other co-defendants, in April 2012, alleging that the defendants violated the FTC Act by misrepresenting to consumers how much loans would cost them. For example, the defendants’ contract stated that a $300 loan would cost $390 to repay, but the defendants then charged consumers $975 to repay the loan.

The FTC also charged the defendants with violating the Truth in Lending Act (TILA) by failing to accurately disclose the annual percentage rate and other loan terms and making preauthorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act (EFTA). MNE Services lent to consumers under the trade names Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services, and Star Cash Processing. AMG serviced the loans.

In May 2014, a U.S. district court judge held that the defendants’ loan documents were deceptive and violated TILA, as the FTC had charged in its complaint.

In addition to the $21 million payment and estimated $285 million in waived charges, the settlement also contains broad prohibitions barring the defendants from misrepresenting the terms of any loan product, including the loan’s payment schedule, the total amount the consumer will owe, the interest rate, annual percentage rates or finance charges, and any other material facts. The settlement order prohibits the defendants from violating TILA and EFTA.

The Commission vote approving the proposed stipulated final order was 5-0. It was filed in the U.S. Court for the District of Nevada on January 15, 2015. The FTC’s action remains in litigation as to defendants SFS, Inc., Red Cedar Services, Inc., AMG Capital Management, LLC, Level 5 Motorsports, LLC, LeadFlash Consulting, LLC, Black Creek Capital Corporation, Broadmoor Capital Partners, LLC, Scott A. Tucker, the estate of Blaine A. Tucker, Don E. Brady, and Robert D. Campbell, and relief defendants Park 269, LLC and Kim C. Tucker.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

DEBT COLLECTOR PERMANENTLY BANNED FROM BUSINESS FOR ALLEGED ACTS OF DECEPTION, FALSE THREATS, INSULTS AND UNAUTHORIZED FEES

FROM:  FEDERAL TRADE COMMISSION FTC 

FTC Puts Texas-based Operation Permanently Out of the Debt Collection Business After It Allegedly Used Deception, Insults, and False Threats against Consumers

Operation also Charged Unauthorized Fees; Owner Will Surrender His Assets

The owner of a Houston-based debt collection operation that the FTC charged used insults, lies, and false threats of imprisonment to collect on payday loans will surrender his assets, estimated to be worth $550,000, to pay restitution to consumers who were charged unauthorized fees. All the defendants will be permanently banned from debt collection under a settlement with the Federal Trade Commission.

In 2013, at the request of the FTC, a U.S. district court shut down Goldman Schwartz, Inc., froze its assets, and appointed a receiver to take control of the business while the case was in litigation. The debt collection operation did business nationwide, collecting primarily on payday loans. In some cases it owned the debt, and in others, it acted as a third-party collector. The operation was charged with multiple violations of both the FTC Act and the Fair Debt Collection Practices Act.

“Debt collectors who harass consumers, make false threats, and charge bogus fees are violating federal law and will be held accountable,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

The defendants  were charged with making false threats that consumers would be arrested and jailed, and that their children would be taken into custody; falsely claiming to be attorneys or to work hand-in-hand with local sheriff’s offices; disclosing debts to consumers’ employers and military superiors; and collecting bogus late fees and attorneys’ fees, according to the complaint.

The defendants also harassed and abused consumers by using obscene language and by calling repeatedly and at odd hours early in the morning or late at night, and failed to inform consumers of their rights to dispute the debts, have the debts verified, and obtain the names of the original creditors, the complaint alleged.

The settlement resolves FTC allegations against company owner Gerald Wright, company managers Starlette Foster and Jennifer Zamora, and several corporate defendants. The settlement requires Wright to surrender his assets, estimated at $550,000, which include funds from personal and business accounts and proceeds from the sale of realty. The remainder of a $1.4 million judgment against Wright is suspended based on inability to pay. The judgment against Foster and Zamora also is suspended due to their inability to pay. If it is later determined that the financial information the defendants provided the FTC was false, the full amount of the judgment will become due.

The monetary judgment will be used to pay restitution to consumers who were charged unauthorized late fees and attorneys’ fees, often in the hundreds of dollars. The defendants privately referred to these bogus fees as “Juice,” and used them to inflate the cost to consumers who wished to settle their debts, the complaint alleged.

Also under the order, the defendants are prohibited from misrepresenting the characteristics of any financial product or service.

As part of its continuing crackdown on scams that target consumers in financial distress, the complaint named as defendants Goldman, Schwartz Inc, doing business as Goldman, Schwartz, Lieberman & Stein; Debtcom, Inc., doing business as Cole, Tanner, & Wright; Harris County Check Recovery Inc.; and The G. Wright Group Inc., doing business as The Wright Group. Under the terms of the order, these companies will be dissolved.

For consumer information about dealing with debt collectors, see Debt Collection.

The Commission vote approving the proposed consent decree was 5-0. It is subject to court approval. The FTC filed the proposed consent decree in the U.S. District Court for the Southern District of Texas, Houston Division on May 19, 2014.

NOTE: Consent decrees have the force of law when approved and signed by the District Court judge.