Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—MDFla: Factual Issues Surrounding Enrollment in Payday Loan Service, Discount Clubs Preclude Summary Judgment in FTC Suit, (Nov 8, 2012)

By E. Darius Sturmer, J.D.

The FTC was not entitled to summary judgment on claims that an online payday loan referral business, a membership discount club business, their principal, and several other affiliated entities and individuals had engaged in unfair billing practices and unlawfully failed to disclose material information on websites that they operated, the federal district court in Orlando, Florida, has ruled (FTC v. Direct Benefits Group, LLC, November 7, 2012, Antoon, J.)

The defendants’ operation was halted, and their assets frozen, pursuant to an ex partetemporary restraining order entered in July 2011.

According to the court, however, numerous factual issues remained for trial. Among these were disputes as to the content and operation of the defendants’ websites and whether consumers could enroll in the defendants’ membership discount club businesses without taking affirmative steps to do so. In addition, the matter of the appropriate amount, if any, of monetary relief for the alleged misconduct was a hotly-contested matter between the parties that could not be resolved on the summary judgment record.

The FTC offered evidence of numerous consumer complaints made to Better Business Bureaus throughout the United States, state attorneys general, the Commission itself, and an unrelated company with a similar name regarding the defendants’ discount program enrollment. Moreover, it was undisputed that the defendants had received complaints directly by email and telephone, and that the defendants’ programs had a 70% return rate.

For their part, the defendants maintained that the consumers who were enrolled in their programs without realizing it had simply not read the instructions and disclosures on the websites. The defendants claimed that no consumer could be enrolled in the programs without affirmatively checking a box or clicking an “okay” button in response to a directive. Thus, “consumers could have avoided enrollment if they had paid attention.” This was supported, in the defendants’ view, by the fact that most of the payday loan applicants who used the referral service website did not enroll in the discount programs. Additionally, the defendants disputed the significance of, and inferences to be drawn from, their return rates, and argued that the FTC was using an incorrect comparator return rate.

Notwithstanding that the FTC’s evidence was substantial, the court concluded that, at this stage in the litigation, it was unable to conclusively determine whether the FTC was entitled to summary judgment. The case therefore remained set for a bench trial, which is scheduled to commence on November 27.

The case is No. 6:11-cv-1186-Orl-28TBS.

Harold E. Kirtz for the FTC. Richard A. Schonfeld (Chesnoff & Schonfeld) for Direct Benefits Group, LLC.

Cases: Antitrust ConsumerProtection FloridaNews