Federal Trade Commission Fines Payday Lending Company for Alleged Deception

Feb 2, 2016 by

Federal Trade Commission Fines Payday Lending Company for Alleged Deception

Companies and individuals that provide financial services to the people of this country – whether big banks or individually owned lending shops – owe it to consumers to be transparent in all of their dealings. We all know, however, that this is not always the case. There are always lenders that will be deceptive. It can be a big bank or the smallest of title loan companies, and the deception can be purposeful or possibly an oversight. The thing is, though, that the Federal Trade Commission (FTC), and other government watchdog groups are making it their collective mission to crack down on deceptive financial practices. Sure, it does seem to happen to alternative financial providers more often than big banks, but it happens nonetheless.

To illustrate this point, the FTC recently settled charges against two different payday lending companies. These charges allege that the lenders charged consumers illegally via inflated and sometimes undisclosed loan fees. The two companies are SFS Inc. and Red Cedar Services Inc. Each company had to pay $2.2 million. By doing so, they were allowed to jointly wave an estimated $68 million in fees to people that did not get collected.

These charges, when totaled up with some previous settlements, add up to a whopping $25 million that the FTC has collected related to this particular case against Red Cedar, AMG Services Inc. and SFS, along with various related lending operations. The case also allowed for about $353 million dollars in debt to be waived. The combined efforts have made this the largest recovery that the FTC has pulled of so far. And there is still pending litigation against some other defendants that will likely bring the total higher.

The Director of the Bureau of Consumer Protection, when asked about payday lending practices, said, “Payday lenders need to be honest about the terms of the loans they offer. These lenders charged borrowers more than they said they would. As a result of the FTC’s case, they are paying a steep price for their deception.”

The charges that kicked all of this off date back to April of 2012. These charges, which were filed in federal court, allege that the lending companies made misrepresentations about how much it would cost consumers to borrow money. This is considered to be a direct violation of the FTC Act. An example from this case was a time when Red Cedar, MNE Services and AMG Services used a contract which told the borrower they would have to pay $309 for a $300 loan. However, the borrower ended up being charged $975.

The defendants have also been accused of failing to disclose the actual annual percentage rates of the loans, along with other terms. This is being handled as a violation of the Truth in Lending Act. To make matters worse for the lending companies, they made preauthorized debits from the bank accounts of borrowers. This is a violation of the Electronic Funds Transfer Act. SFS and Red Cedar operated as lending companies under the names One Click Cash and 500 Fast Cash.

Lending Companies Should Keep These Kinds of Cases in Mind!

This case, like many others that the FTC and CFPB have been behind recently, should serve as a stern warning to lenders that there is always someone looking out for deceptive financial practices. The majority of payday lending companies out there make it a point to be straight with consumers. But it appears that those who don’t will have a heck of a lot of explaining to do; along with a lot of money to cough up.

Leave a Reply

Your email address will not be published. Required fields are marked *

* Copy This Password *

* Type Or Paste Password Here *