A group of Internet payday lending companies that allegedly threatened customers who didn't make payments with arrest and called customers at work and swore at them has agreed to pay US$1 million to settle charges from the U.S. Federal Trade Commission and the state of Nevada.
The FTC, in a November complaint in U.S. District Court for the District of Nevada, charged the companies with using unfair and deceptive collection tactics.
The companies told consumers that the loans had to be repaid by their next payday with a fee ranging from US$35 to $80, or the loans would be extended automatically for an extra fee debited from consumers' bank accounts until the loans were repaid, the FTC said. Some customers voicing complaints on Internet sites have reported being charged hundreds of dollars in late fees for a small loan.
The payday loan companies falsely threatened consumers with arrest, falsely claimed that consumers were legally obligated to pay the debts, threatened to take legal action they could not take, repeatedly called consumers at work using abusive and profane language, and improperly disclosed consumers' purported debts to third parties, the FTC said Monday.
The companies also allegedly failed to make required written disclosures to consumers, such as the amount financed, the annual percentage rate, payment schedule, total number of payments, and any late payment fees, in violation of the U.S. Truth in Lending Act, the FTC said.
The settlement order, approved last week, requires the defendants to pay $970,125 to the FTC and $29,875 to the state of Nevada. The order prohibits them from falsely claiming that consumers may be arrested or imprisoned for failing to pay debts, that they are legally obligated to pay the full amount of a purported debt, and that for nonpayment they are subject to lawsuit, seizure of property, or garnishment of wages.
The defendants also are barred from repeatedly calling consumers' work places, using obscene or threatening language toward consumers and third parties, and disclosing the existence of consumers' purported debts to third parties.
The order also includes provisions relating to alleged violations of Nevada law. The order prohibits the defendants from violating Nevada state consumer protection law when conducting business from the state or when selling goods or services to Nevada residents, including failing to be properly licensed, failing to provide notice and disclosure of all material facts, and failing to comply with any state or federal law in selling goods or services.
The settling corporate defendants are Cash Today and The Heathmill Village, both registered in the U.K.; The Harris Holdings, registered in Guernsey; Leads Global. Waterfront Investments, ACH Cash, HBS Services, Rovinge International, and two dissolved companies. Each were doing business as Cash Today, Route 66 Funding, Global Financial Services International, Interim Cash, and Big-Int.
The settling individual defendants are Aaron Gershfield and Ivor Gershfield. A phone call Monday to Route 66 Funding went unanswered.