Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Payday lenders partially settle FTC charges after magistrate finds American Indian tribes are subject to the FTC Act, (Jul 23, 2013)

By Tobias J. Gillett, J.D., LL.M.

Following a magistrate judge’s report finding that certain payday lenders remain subject to federal law even though they were chartered by American Indian tribes, the lenders have agreed to a partial settlement of the FTC’s claims that they violated the FTC Act, the Truth in Lending Act (TILA), and the Electronic Fund Transfer Act (EFTA) during their lending activities (FTC v. AMG Services, Inc., FTC File No. 112 3024, Case No. 2:12-cv-00536).

On July 16, U.S Magistrate Judge V. Cam Ferenbach issued an Order and Report & Recommendations finding that the FTC Act is a statute “of general applicability” that is silent as to its applicability to Indian tribes, and that such statutes “are presumed to apply with equal force to Indians.” Although a “genuine issue” of material fact remained regarding whether the payday lenders were “for profit corporations” as defined in the FTC Act, the court found that the FTC could enforce both the TILA and the EFTA “without regard for any jurisdictional limitations contained in the FTC Act.” The Magistrate Judge’s report will be subject to review by U.S. District Judge Gloria M. Navarro.

According to the FTC’s complaint, filed in the federal district court in Las Vegas, AMG Services, Inc., three other Internet-based lending companies, six related companies, and six individuals violated the FTC Act by misrepresenting the amount of fees they would charge and by falsely threatening in collection calls to consumers that the consumers could be arrested, prosecuted, or imprisoned for failing to pay a debt, or that the defendants would file lawsuits against the consumers. The complaint also asserted that the defendants violated the TILA and its implementing Regulation Z by failing to adequately disclose in writing the finance charge, the annual percentage rate, the payment schedule, and the total of payments. Finally, the FTC alleged that the defendants violated the EFTA and Regulation E by conditioning the extension of credit on recurring preauthorized electronic fund transfers.

The proposed partial settlement order would prohibit the settling defendants from misrepresenting that consumers can be arrested or imprisoned for failing to pay the defendants, that the defendants will take formal legal action against the consumers, and any other material facts in connection with their collection calls. The order would also bar the defendants from conditioning the extension of credit on preauthorized electronic fund transfers. The agreement is subject to court approval.

The FTC continues to litigate other charges against the defendants, including its claims that the defendants deceived consumers by charging undisclosed charges and inflated fees. The FTC has pursued enforcement actions against a number of payday lenders, including some that have aligned themselves with Indian tribes.

Companies: AMG Services Inc.

News: ConsumerProtection FederalTradeCommissionNews