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Court halts Internet lending practices
- — 24 February, 2009 07:59
A U.S. District Court has ordered seven Internet-based lending operations to halt some of their practices after the U.S. Federal Trade Commission and the state of Nevada complained that the companies failed to disclose key loan terms and used abusive collection tactics.
The companies charged in the complaint by the FTC and Nevada were accused of threatening customers with arrest if they did not repay loans, repeatedly calling customers at work, using profane language, and telling customers' coworkers and bosses of their loan status.
The seven related payday loan companies and their owner have agreed to the court order, announced Monday, pending a trial in which the FTC and Nevada are seeking to permanently bar the companies from future loan violations.
The companies, including Leads Global, Waterfront Investments and ACH Cash, offered loans of US$500 or less within 24 hours of application without requiring a credit check, proof of income or documentation, the FTC said. Also named in the order from the U.S. District Court for the District of Nevada was owner Jim Harris.
The companies told customers 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 said.
The FTC charged the companies with unfair and deceptive collection tactics.
They also allegedly violated the Truth in Lending Act and Regulation Z of the U.S. Federal Reserve Board by failing to make required written disclosures, clearly and conspicuously, before consummating a consumer credit transaction, including finance charges, annual percentage rates and late payment fees, the FTC said.
The court order bars the companies and Harris from deceptive debt-collection practices such as misrepresenting that consumers can be imprisoned for failing to pay debts and that for nonpayment consumers may or will be subject to legal action, such as seizure of property or garnishment of wages. The preliminary injunction also prohibits unfair collection practices such as continuously and repeatedly calling consumers and third parties at consumers' workplaces, using obscene or threatening language toward consumers and third parties, and disclosing the existence of consumers' purported debts to third parties.
The injunction also bars the lending companies and Harris from disclosing or benefitting from customers' personally identifiable or financial information.
Also charged in the FTC's November complaint but not named in the order are four U.K.-based companies operating in the U.S. as Cash Today, Route 66 Funding, Global Financial Services International and Interim Cash, as well as their owners.