Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC charges data brokers with selling financial information to firm making unauthorized debits, charges, (Aug 12, 2015)

By Michael Menzhuber, J.D., LL.M.

The FTC has charged a data broker operation with illegally selling payday loan applicants’ financial information to an operation that allegedly took millions of dollars from consumers by debiting their bank accounts and charging their credit cards without their consent, the agency announced today. The defendants in the data broker operation are Sequoia One LLC, Gen X Marketing Group LLC, Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew, Jr., and Paul T. McDonnell (FTC v. Sequoia One, LLC, August 7, 2015).

According to the FTC complaint, the data broker enterprise: (1) bought loan applications from the operators of payday loan websites and got others directly from consumers via their own payday loan website; (2) sold the application information to companies like Ideal Financial Solutions Inc., which purchased the financial account information for more than 500,000 consumers from the defendants and raided their accounts for at least $7.1 million; (3) knew that Ideal Financial was making unauthorized bank account debits and credit card charges; and (4) helped to hide Ideal Financial’s fraud by using fine-print disclosures on their websites as well as other misleading tactics to avoid alerting banks to the fraudulent activity.

Three of the defendants—Paul T. McDonnell, Theresa D. Bartholomew, and John E. Bartholomew, Jr.—have agreed to settle the FTC charges. Under proposed settlement orders, they are prohibited from selling or otherwise benefitting from customers’ personal information. The order against the Bartholomews imposes a $7.1 million judgment that will be suspended upon payment of $15,000. The order against McDonnell imposes a judgment of more than $3.7 million, which will be suspended due to his inability to pay. The full judgments will become due immediately if these defendants are found to have misrepresented their financial condition. Litigation against the other defendants continues.

The documents were filed in the U.S. District Court for the District of Nevada. The proposed final orders are subject to court approval.

The case is No. 2:15-cv-01512.

Companies: Sequoia One LLC; Gen X Marketing Group LLC

News: ConsumerProtection FederalTradeCommissionNews