Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—D. Nev.: Financial scammers found liable for unfair billing practices, (Jul 2, 2015)

By Jody Coultas, J.D.

The federal district court in Las Vegas found Ideal Financial Solutions, Inc. (IFS) and its executives violated Section 5 of the FTC Act by debiting consumers’ bank accounts and billing their credit cards without consent (FTC v. Ideal Financial Solutions, Inc., June 29, 2015, Dorsey, J.).

The FTC alleged that, between 2009 and 2013, IFS purchased information on at least 2.2 million consumers from data brokers and used it to make millions of dollars in unauthorized debits and charges for purported financial products that the consumers never purchased. Much of the consumer information used by IFS was from payday loan applications submitted by consumers to LeapLab, LLC.

Previously, the court temporarily halted IFS’s operation, froze the defendants’ assets, and appointed a receiver to control the business pending trial.

Section 5 of the FTC Act prohibits unfair acts or practices in or affecting commerce. An unfair practice is one that is likely to cause a substantial, unavoidable injury to consumers. Deceptive practices may be inferred from the presence of high cancellation, refund, and chargeback rates.

There was more than sufficient evidence to find that IFS engaged in unfair and deceptive practices not outweighed by countervailing benefits to consumers, according to the court. Unauthorized billing is an unfair practice under the FTC Act, and causes substantial injury to consumers even when the amount is small. The FTC presented evidence that over $10 million was charged to over a million customers. Those customers could not have avoided the injury, having only learned of the charges after the money was taken from their accounts. Many customers also never received a refund, while others suffered due to overdraft fees.

The court also found overwhelming evidence that IFS made false and material misrepresentations to customers. IFS customer service representatives falsely told consumers that they had authorized the charges, knowing this to be false.

None of the individual defendants were able to show they could not be held liable for the FTC Act violations, according to the court.

However, the FTC was unable to show it was entitled to summary judgment on the issue of damages and injunctive relief, according to the court. The amount of monetary liability had yet to be sufficiently established. The court also did not have sufficient information to determine the total magnitude of the defendants’ actions to construct an appropriate remedy.

The case is No. 2:13-cv-00143-JAD-GWF.

Attorneys: Megan Bartley for FTC.

Companies: Ideal Financial Solutions, Inc.; LeapLab, LLC

Cases: ConsumerProtection FederalTradeCommissionNews NevadaNews