Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC action leads to refunds for consumers from marketers of prepaid debit cards, (May 12, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC has obtained over $3.7 million in refunds to consumers whose bank accounts were debited without their consent by online marketers, EDebitPay, LLC, and its owners, Dale Paul Cleveland and William Wilson, the agency announced today. The company offered a line of credit to consumers that in reality was a membership to a website where consumers could buy goods.

In 2007, the FTC filed a complaint in the U.S. District Court for the Central District of California, (FTC v. EDebitPay, LLC, File no. 062-3125), alleging that the defendants made unauthorized debits from consumers’ bank accounts and engaged in deceptive practices. The complaint alleged that the defendants marketed bank-issued prepaid debit cards under a variety of names through web sites and pop-up and e-mail advertisements that directed consumers to sites for the individual cards. They also marketed unrelated short-term loans on web sites and debited, without authorization, an application and processing" fee from consumers’ bank accounts.

In 2008, Cleveland, Wilson, EDebitPay LLC, paid more than $2.2 million to settle the FTC charges. The settlement order permanently barred them from making future misrepresentations or unauthorized debits

In 2011, a federal district court ordered the defendants to pay more than $3.7 million after finding that they were in contempt of court for violating the 2008 court order by selling a bogus "$10,000 credit line," and a "no cost" prepaid debit card with hidden fees, to consumers who were unemployed or had poor credit. After obtaining this judgment, the FTC collected the amount in full. Many affected consumers will receive more than $100; the amounts vary based upon the victim’s loss.

"The FTC strives to return as much money as possible to defrauded consumers," said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. "It is particularly gratifying when we can make consumers whole again."

Companies: EDebitPay, LLC

News: ConsumerProtection FederalTradeCommissionNews