Black Flag: Payday Scheme Charged by FTC
Today, the Federal Trade Commission (FTC) announced it would charge a payday lending group with using “inflated fees” and making illegal threats when its customers were unable to pay. The action is part of a large-scale campaign against outfits that target low-income and financially-strapped consumers.
Payday lenders have for years circumvented state laws by becoming affiliated with Native American tribes, which are often exempt from such statutes. The FTC, however, is claiming that the tribes are not exempt from adhering to laws at the federal level, making tribal affiliation for payday lenders moot.
In September of last year, CBS News ran a story about how these payday lenders – specifically the ones being charged in this case – were getting around the law and making big money off financially vulnerable populations.
Their joint investigation with the Center for Public Integrity eventually lead them to Scott Tucker, owner of 500 Fast Cash and other companies being charged. According to the FTC, Tucker “allegedly transferred more than $40 million collected from the consumers” to fund his auto racing team.
Tucker, his brother Blaine, four internet-based lending companies, seven related companies and four other individuals are being charged. Here are some of the complaints, again from the FTC press release:
- Over the past five years, the defendants’ deceptive practices yielded more than 7,500 complaints.
- In “many cases,” the sky-high fees left customers with debts more than triple the amount of the loan.
- Customers were told they would be charged a one-time fee plus the amount borrowed, but the companies allegedly made “multiple withdrawals from borrowers’ bank accounts and assessed a new finance fee each time, without disclosing the true costs of the loan.”
As you know, the cost of these loans can be devastating to the financial and personal lives of the families we serve. Outrageous fees aside, customers should be able to understand the fees they’ll be paying on a short-term loan.
As the FTC continues in its “continuing crackdown on scams that target consumers in financial distress,” let’s hope some payday lenders will think twice before employing the same unfair practices.
By Dan Fair, Manager of Communications & Member Relations