Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC obtains restraining order, assets freeze against payday loan operation, (Sep 4, 2013)

By Peter Reap, J.D., LL.M.

The federal district court in Chicago halted, on August 29, an operation that promised to help consumers get payday loans by granting the FTC”s request for a temporary restraining order and asset freeze against defendants Sean C. Mulrooney and Odafe Stephen Ogaga and five companies they controlled. Instead of loans, the defendants used consumers” personal financial information to debit their bank accounts in increments of $30 without their authorization, the FTC alleged. Consumer losses from the operation were alleged to have exceeded $5 million and funded the purchase of exotic luxury cars for the individual defendants.

Claiming to be affiliated with a network of 120 potential payday lenders, the defendants misrepresented that 80 percent of applicants got loans in as soon as one hour, according to the FTC. The court order freezes the defendants” assets to preserve the possibility of providing redress to consumers.

“Repeatedly, we”ve seen situations where consumers provide sensitive financial information when inquiring about a payday loan online, and that information falls into the wrong hands,” said Jessica Rich, Director of the FTC”s Bureau of Consumer Protection. “The FTC is committed to shutting down these fraudulent operations.”

According to the agency”s complaint, the defendants violated the Federal Trade Commission Act by using unfair billing practices and by misrepresenting that they would help consumers find a payday loan and use their personal and financial information to get the loan. The complaint also alleges that the defendants untruthfully claim four of five consumers who applied were approved for a payday loan. The defendants controlled used websites with the names Vantage Funding, Ideal Advance, Loan Assistance Company, Palm Loan Advances, Loan Tree Advances, Pacific Advances, and Your Loan Funding to collect consumers” names, Social Security numbers, bank routing numbers, and bank account numbers, which allowed them to access consumers” checking accounts.

Once consumers discovered the unauthorized $30 drafts on their bank accounts, the complaint contends, many obtained copies of the demand drafts from their banks. The demand drafts have the appearance of conventional checks, except that they are not drafted, signed, or authorized by the consumers from whose accounts they are drawn. The signature line on the drafts indicate that they are authorized by the consumers, stating: “NO SIGNATURE REQUIRED. This payment has been authorized by your depositor.” The consumer”s name is typed below this statement. Because the consumers are not expecting these withdrawals, they often cause the accounts to be overdrawn, resulting in overdraft fees.

The defendants obtained other consumers” financial information by paying more than $500,000 to third parties, and debited those consumers” accounts without authorization as well, according to documents filed with the court. In all, the defendants victimized tens of thousands of consumers. Many of the victims were in difficult financial straits to begin with, and as an added insult, often began receiving harassing telemarketing and debt collection calls shortly after the defendants made their unauthorized withdrawals, according to the FTC. Consumers who complained to the defendants” Philippines-based customer service agents were frequently offered refunds and $100 gasoline vouchers that never materialized, according to the FTC.

Mulrooney and Ogaga apparently used proceeds from their allegedly illegal scheme to finance a lavish lifestyle, the FTC reported. Mulrooney is the registered owner of a 2012 Maserati GranTurismo, while Ogaga owns a 2011 Rolls Royce Ghost and a 2006 Ferrari 430, according to documents filed with the court.

The FTC”s complaint in Federal Trade Commission v. Caprice Marketing LLC, Case No. 1-13-cv-06072, was filed August 27, 2013.

News: ConsumerProtection FederalTradeCommissionNews