Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Massive payday loan fraud scheme stopped by FTC action, (Jul 7, 2015)

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

The operators of a payday lending scheme, which allegedly bilked millions of dollars from consumers by obligating them into loans they never authorized, will be banned from the consumer lending business under settlements with the FTC, the agency announced today (FTC v. CWB Services, LLC, File no. 132-3184).

In September 2014, the FTC filed a complaint, alleging that Timothy A. Coppinger and Frampton T. Rowland III and their respective companies targeted online payday loan applicants and, using information from lead generators and data brokers: (1) deposited money into those applicants’ bank accounts without their permission; (2) withdrew reoccurring “finance” charges without any of the payments going to pay down the principal owed; and (3) told the consumers they had agreed to, and were obligated to pay for, the unauthorized “loans.” To support their claims, the defendants allegedly provided consumers with fake loan applications or other loan documents purportedly showing that consumers had authorized the loans. If consumers closed their bank accounts to stop the unauthorized debits, the defendants often sold the “loans” to debt buyers who then harassed consumers for payment.

The defendants also allegedly misrepresented the loans’ costs, even to consumers who wanted the loans. The loan documents misstated the loan’s finance charge, annual percentage rate, payment schedule, and total number of payments, while burying the loans’ true costs in fine print. The defendants allegedly violated the FTC Act, the Truth in Lending Act, and the Electronic Funds Transfer Act.

Under the proposed settlement orders, Coppinger and Rowland are banned from: (1) any aspect of the consumer lending business, including collecting payments, communicating about loans, and selling debt; (2) making material misrepresentations about any good or service; (3) debiting or billing consumers or making electronic fund transfers without their consent; (4) reporting such consumer debts to any credit reporting agency; and (5) selling or otherwise benefiting from customers’ personal information. The settlement orders also extinguish any consumer debt the defendants are owed.

The settlement orders also impose consumer redress judgments of approximately $32 million and $22 million against Coppinger and his companies and Rowland and his companies, respectively. The judgments against Coppinger and Rowland will be suspended upon surrender of certain assets. In each case, the full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The Commission vote approving the proposed stipulated final orders was 5-0. The documents were filed in the U.S. District Court for the Western District of Missouri.

News: ConsumerProtection FederalTradeCommissionNews