Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC sues to stop debt relief scheme targeting payday loan debtors, (Feb 24, 2015)

By Dan Selcke, J.D.

The FTC has filed a complaint against several individuals and organizations that, together, allegedly run an operation that misleadingly promises to resolve payday loan debts owed by consumers, the agency announced today.

The corporate defendants include PSC Administrative, LLC, formerly known as Payday Support Center, and Coastal Acquisitions, LLC, doing business as Infinity Client Solutions. The complaint also names Jared Irby and Richard Hughes, both individually and as officers of PSC Administrative.

According to the FTC’s complaint, the defendants reached out to consumers who owed multiple debts on payday loans, which are typically short-term loans with high interest rates, through Internet and radio advertisements, as well as through telemarketing efforts.

The advertisements advised customers that they only needed two or more payday loans to qualify for assistance, and assured them that, “We’ll even help you with your internet payday loans…” even if they had bad credit or were behind in collections. Telemarketers, meanwhile, told consumers that they had been confirmed to enroll in a special “financial hardship program” that would “get rid of,” “pay off,” or “take care of” all of their payday loan debt. As part of the program, the defendants required customers to make bi-weekly payments between $98.00 and $160.00.

Once the consumers signed up for the program, however, the defendants did little more than occasionally send “validation” form letters to some lenders, most of which were ignored, the FTC charged. Because the defendants advised the consumers to pay money to them instead of their lenders, the consumers were often left in more dire financial situations than when they started, according to the agency. Based on this conduct, the FTC charged the defendants with violating the FTC Act, which prohibits deceptive acts and practices, and the agency’s Telemarketing Sales Rule, which prohibits abusive and deceptive telemarketing practices.

“The defendants promised to help people struggling to make payments on their payday loans,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Instead, they took the money and ran, leaving their customers deeper in debt.”

The complaint is seeking an injunction to stop the defendants from engaging in their purportedly illegal conduct and a monetary judgment to provide refunds to defrauded consumers.

News: ConsumerProtection FederalTradeCommissionNews