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twitterFeds go after seven payday loan companies
Companies accused of ‘abusive’ and ‘deceptive’ collection tactics
Tuesday, Feb. 24, 2009 | 9:20 a.m.
Beyond the Sun
Federal and state regulators have obtained a court order in Nevada barring seven online payday loan companies from engaging in deceptive lending and collection practices, the Federal Trade Commission said Monday.
U.S. District Judge Brian Sandoval signed the order Jan. 5 at the request of the FTC and the Nevada Attorney General's Bureau of Consumer protection.
The payday loan companies were accused in a November 2008 lawsuit of operating as part of an international Internet payday lending operation that failed to disclose key loan terms and used abusive and deceptive collection tactics in violation of federal and state laws. The U.S.-based companies and their principal agreed to the court order, which will remain in effect pending trial, the FTC said. The FTC and the state are seeking to permanently bar the defendants from future violations and want an order requiring them to give up the money they obtained using the allegedly illegal collection tactics.
The complaint said the companies offered loans of $500 or less within 24 hours without requiring a credit check, proof of income or other documentation. Consumers were told that they qualified for a loan that had to be repaid by their next payday with a fee ranging from $35 to $80, and that if the loan was not repaid by then, it would be extended automatically for an extra fee that would be debited from the consumer’s bank account "until the loan is repaid."
The FTC and the state allege the companies violated the law by using unfair and deceptive collection tactics, including falsely threatening consumers with arrest or imprisonment, falsely claiming that consumers are legally obligated to pay the debts, threatening to take legal action they cannot take, repeatedly calling consumers at work and using abusive and profane language; and disclosing consumers’ purported debts to co-workers, employers and other third parties. They also allegedly violated the U.S. Truth in Lending Act and federal Regulation Z by failing to make required written disclosures about key terms including the amount financed, itemization of the amount financed, the finance charge, the annual percentage rate, the payment schedule, the total number of payments and any late payment fees.
The order also prohibits the defendants from violating the laws of the state by making loans from Nevada or identifying Nevada as the source of a loan or as their principal place of business, unless they are properly licensed; and by failing to provide notice and disclosure of all facts as required by state law, including failing to disclose the location, physical address, and non-toll-free telephone number of all of their locations.
"After paying substantial sums of money to defendants — sometimes hundreds of dollars above the loan amounts — many consumers concluded, in the absence of written loan terms, that they had more than repaid their loans," the lawsuit alleged. "Many consumers terminated defendants' access to their bank accounts, often by closing those accounts and usually after having paid defendants substantial sums of money.
"Once consumers close their bank accounts, they face defendants' campaign of deceptive and abusive collection tactics aimed at regaining access to those consumers' bank accounts. Defendants falsely represented to consumers that they have a legal obligation to repay the loans, even though many consumers have no such obligation, because defendants' payday loans do not comply with the payday lending laws of those consumers' states or because defendants are not licensed to make consumer loans in those states.''
The defendants named in the court order are Leads Global Inc., Waterfront Investments Inc., ACH Cash Inc., HBS Services Inc., Lotus Leads Inc., First4Leads Inc., Rovinge International Inc. and Nevada businessman Jim Harris, whom the plaintiffs say is an officer with or is involved with all of those companies.
Also charged in the complaint but not named in the order are four United Kingdom-based companies operating in the United States as Cash Today, Route 66 Funding, Global Financial Services International Ltd., Interim Cash Ltd. and their principals, Aaron Gershfield and Ivor Gershfield.
In court papers, attorneys for Harris said he will file his response to the complaint by March 1 and that progress is being made to resolve and settle the complaint. He is represented by attorneys Daniel Bogden and Pat Lundvall of the law firm McDonald Carano Wilson.
Discussion: 16 comments so far…
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These payday loan places are simply a nice way of saying LOAN SHARK!! These companies DON'T provide any services, they simply leech off and abuse the most vulnerable in society.
My flavor of conservatism does not consider pay day loan companies, furniture rental companies, credit card companies, gambling companies and lending institutions, especially banks that have the right to print money, as valid forms of capitalism.
These entities are predator types by nature.
If they are allowed to exist then the government needs to keep an extra eye close on them with tons of restrictions.
They should also be heavily taxed.
DesertKayaker -- Did you see anything here that showed these "sharks" forcing anyone to borrow from them? I didn't either.
How fast one cries "victim" after getting what he wants and the debt becomes due.
jfnance32 -- They ARE heavily taxed. It's called bonding and insurance. One of the reasons the interest rates are so high is the costs of business being passed on to the borrowers.
You guys also forget there have been Constitutional prohibitions from the beginning forbidding any law being passed "impairing the obligation of contracts." Yet as this article shows these forbidden laws were passed anyway, and the courts don't seem to mind, either. It appears their oaths don't mean anything in these kinds of cases, either.
So who's doing the illegal activity now?
Since it's a safe assumption all these borrowers were legally competent to enter into those contracts, I have no pity for them at all.
Can we all say together "caveat emptor, stupid"?
I agree with you killerB that we should allow consumers to be stupid to a certain degree.
Gambling, most credit card companies, furniture rentals and payday loan companies would be out of business if they did not have an ample supply of stupid consumers.
I would prefer that we outlaw these entities.
But that probably will not happen.
So they should be closely watched by the government with tons of regulations.
Since they are predator businesses, therefore they should pay higher taxes because of that.
Dear "Angry" -- As long as you stoop to calling another commentor a crude name like that nothing you say here is worth even common courtesy.
You can just keep mooing on with the rest of the herd.
Well. Mr. Nance. Let's start to add up ALL the people you say are "STUPID".
Anyone who gambles.
Credit Card Users.
Furniture rental store customers.
Payday loan customers.
Liberals.
Taxes, and those who support them, in any form.
Anyone who supports President Obama.
Anyone who disagrees with Governor Gibbons.
GREEDY Teachers.
GREEDY Government workers.
Unions.
Barbara Buckley.
Harry Reid.
Jim Rogers.
Those who oppose Yucca.
STUPID.
Yes, people who pile up debt on credit cards at over 20 percent interest rate are not that smart.
People who rent furniture and pay 4 to 6 times the value of furniture are not that smart.
Yes people who pay fees and interest that is near amount to to 20% to 40% of the payday loan are not that smart.
Liberals in general have questionable intelligence and common sense.
I do not think that I have call those others groups as dumb but you are free to do so if you want to.
As opposed to the execs at Citibank, Bank of America, Lehman Brothers, Bear-Stearns, Enron and all the others who thought they were they "Smartest Guys in the Room".
It has been said that you can not con an honest person. I would expand this to mean you can not con a person who is honest with themselves.
The ultimate blame for the housing bubble has to lie with people who were too stupid to realize that they could not afford the home loan, that borrowing more and more to furnish or fixup a home is bad, that having 10 maxed-out credit cards is just plain idiotic.
Anyone falling prey to these "lenders" was probably looking to get more crap they didn't need or get money to pay for crap they didn't need that was bought on credit to start with.
Now if we could only get the government to understand you can't borrow money to repay debt!
DCThomas, I agree with what you are saying.
All those MBA's, Masters, and PH'ds that run those mega financial institutions showed how dumb they really are.
It was so crazy to give an ARM to people that could had risky credit and high loan payment to income percentage and with zero or low down payment.
We are about to reward both the stupid or cheating borrowers and the stupid or greedy lenders with taxpayer cash.
Hey, how about rewarding those who are not dumb or who did cheat on filling out a loan application?
you tell em', nance. dumb cheaters. losers.
Only conservative republicans deserve money.
stupid & greedy liberals.
hmmph.
They are no different than Credit Card Companies.
Bring back "Usury" Laws.
Some jurisdictions impose strict usury limits, limiting the nominal annual percentage rate (APR)
10% Max.
Then you will see these seedy "Loan Shacks" close up (Dishonest Profit )
These people are being charged with fraud, not usury. Protection from that sort of thing is one of the functions of government.
The only way to reach the much-hyped triple digit APR is to take out one advance and continue to renew the same advance every two weeks for an entire year. State laws and industry best practices do not allow this to happen. Believe it or not, payday advance compares favorably to many consumer alternatives, even when expressed as annual percentage rates for two-week terms: $100 payday advance with $15 fee is 391% APR.; $100 bounced check with $55.59 NSF/merchant fee is 1449% APR; $100 credit card balance with $37 late fee is 965% APR; a $100 utility bill with $46.16 late/reconnect fees is 1203% APR; a $100 off-shore Internet payday advance with $25 fee is 651.79% APR; $29 overdraft protection fee on $100 is 755%.
Furthermore, we at CFSA have worked with policymakers in 35 states to provide responsible regulation that protects consumers and their access to credit. In addition, CFSA members must abide by a set of Best Practices , including the requirement to offer an extended payment plan at no charge to customers who cannot pay back the loan when due.
Let's also not foget that there is a certain degree of person responsibility involved in managing one's finances. All we can do is educate and advise customers about product with the utmost transparency so they know exactly what they're getting. This service is not for those people who voluntarily choose to live beyone their means.