Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC gets TRO against payday lender, (Sep 18, 2014)

By Katalina M. Bianco, J.D.

The FTC has temporarily stopped an alleged online payday lending scheme that the Commission says duped consumers to the tune of tens of millions of dollars. At the FTC’s request, a U.S. District Court in Missouri imposed a temporary restraining order (TRO) that appoints a receiver to take over the payday operation run by a group of companies under the umbrella of CWB Services, LLC, a limited liability company based in Missouri (FTC v. CWB Services, LLC, FTC File No. 132 3184, Civil Action No. 4:14-cv-00783-DW).

“These defendants bought consumers’ personal information, made unauthorized payday loans, and then helped themselves to consumers’ bank accounts without their authorization,” said Jessica Rich, Director of the FTC Bureau of Consumer Protection.

FTC charges. According to the FTC, the lenders issued $28 million in payday “loans” to consumers, and, in return, extracted more than $46.5 million from their bank accounts over an 11-month period between 2012 and 2013. The FTC specifically alleges that Timothy Coppinger, Frampton (Ted) Rowland III, and a group of companies they owned or operated, used personal financial information bought from third-party lead generators or data brokers to make unauthorized deposits of between $200 and $300 into consumers’ bank accounts.

The defendants deposited money into consumers’ accounts without their permission and withdrew bi-weekly reoccurring “finance charges” of up to $90, without any of the payments going toward reducing the loan’s principal, the FTC charged. Then the lenders phoned and emailed the consumers and informed them that they had agreed to, and were obligated to pay for, the “loan” they never requested. Defendants misrepresented the true costs of the “loans,” often using fake applications, electronic transfer authorizations, or other loan documents falsely showing consumer authorization.

In many cases, when consumers closed their bank accounts to stop the unauthorized debits, the defendants sold the “loan” to debt buyers who then harassed consumers for payment, according to the FTC.

FTC filings. To immediately halt the defendants’ activities, the FTC sought an ex parteTRO and filed suggestions in support of the TRO. The TRO was filed to enjoin the defendants’ illegal practices, freeze their assets, appoint a temporary receiver over the corporate entities, provide the FTC and the receiver with immediate access to the defendants’ business premises, and authorize limited expedited discovery.

The TRO, as well as the FTC’s complaint, charges defendants with violations of: the Federal Trade Commission Act (15 U.S.C. § 53(b)); Truth in Lending Act (15 U.S.C. §§ 1601-1666j) and Regulation Z (12 C.F.R. § 1026); and Electronic Fund Transfer Act (15 U.S.C. §§ 1693-1693r) and Regulation E (12 C.F.R. § 1005.10). The alleged violations are in connection with the offering or extension of credit in the form of high-fee, short-term “payday” loans, and the marketing, servicing and collection of those loans. “Payday loans” are defined in the filings as short-term, high-fee, unsecured loans, often made to consumers to provide funds in anticipation of an upcoming paycheck.

The FTC said that its actions are necessary to prevent continued harm to consumers and halt further unjust enrichment by the defendants.

Companies: CWB Services, LLC

News: ConsumerProtection FederalTradeCommissionNews