FTC Shuts Down Payday Lending Scam

PayDay Loan Caveat Emptor! The Federal Trade Commission has stopped a particularly vicious payday lending scheme. 

“At the Federal Trade Commission’s request, a U.S. district court in Missouri has temporarily halted an online payday lending scheme that allegedly bilked consumers out of tens of millions of dollars by trapping them into loans they never authorized and then using the supposed “loans” as a pretext to take money from their bank accounts.”

And how did this less than lovely scheme work?  The FTC explains:

“In its complaint, the FTC alleges that Timothy Coppinger, Frampton (Ted) Rowland III, and a web 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. Often, the scheme targeted consumers who had previously submitted their personal financial information – including their bank account numbers –to a website that offered payday loans.

After depositing money into consumers’ accounts without their permission, the defendants withdrew bi-weekly reoccurring “finance charges” of up to $90, without any of the payments going toward reducing the loan’s principal, the FTC alleged. The defendants then contacted the consumers by phone and email, telling them that they had agreed to, and were obligated to pay for, the “loan” they never requested and misrepresented the true costs of the purported loans. In doing so, the agency alleged, they often provided consumers with fake applications, electronic transfer authorizations, or other loan documents purporting to show the consumers had authorized the loan.”

Individuals who closed their bank accounts to make the unauthorized deductions stop found themselves harassed for payments. In the process the scammers offered up faked loan authorization papers, equally fake electronic transfer authorizations, and other official looking paper designed to convince the victims they had no choice but to pay.   The FTC reports that during one 11 month period (2012 – 2013) the scam artists issued $28 million in payday “loans” to consumers and in return took in more than $46.5 million from the consumers’ bank accounts.

The FTC won the temporary restraining order against the scammers this month, and is currently seeking a permanent injunction against the individuals and corporations involved in the scheme.

Score at least one victory for the Good Guys.

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