The Federal Trade Commission yesterday announced a settlement with the owners and operators of a “vast payday lending” scheme that overcharged consumers by millions of dollars which will see all of the outstanding debts be forgiven and deemed paid in full while also banning the defendants from the lending industry.
The settlement also includes a judgment of $114 million, which is being partially suspended due to the defendants’ inability to pay.
“These defendants hoodwinked people in financial need by charging much more than promised for payday loans,” said Daniel Kaufman, Acting Director of the FTC’s Bureau of Consumer Protection, in a statement. “We expect payday lenders to not only honor the terms of their deal, but also to refrain from making a never-ending series of unexpected withdrawals from customers’ bank accounts, as these companies did.”
The defendants — Lead Express, Camel Coins, Sea Mirror, Naito Corp., Kotobuki Marketing, Ebisu Marketing, Hotei Marketing, Daikoku Marketing, La Posta Tribal Lending Enterprise, Takehisa Naito, and Keishi Ikeda — were accused of using deceptive marketing tactics to convince consumers that their loans would be repaid after a pre-determine number of payments. But the defendants instead withdrew money from consumers’ bank accounts and applied those funds to the loans’ finance charges. They “bled consumers dry” by withdrawing money every two weeks “in perpetuity,” said Andrew Smith, who was Director of the FTC’s Bureau of Consumer Protection at the time the suit was announced last May.
Loans made by the company prior to it being shut down will be considered paid in full if the original amount of the loan and one finance charge have been paid. The defendants are also prohibited from making any misrepresentations related to collecting on any debt — such as that consumers can be arrested or prosecuted for failing to pay a debt or that formal legal action will be taken — and are prohibited from making unauthorized withdrawals from bank accounts.
Rather then repay the $114 million judgment, the FTC will instead empty the bank accounts of the defendants, which were frozen when the FTC filed its lawsuit last May.