Payday lenders must forgive $285M in charges
It's the Federal Trade Commission's largest recovery of money from payday lenders: Two companies settled allegations that they duped consumers and must drop $285 million in charges and pay another $21 million, the agency said on Friday.
AMG Services and MNE Services were accused of misleading borrowers about how much the loans would cost. Consumers, for example, were told that a $300 loan would cost $390 to repay but were actually charged $975, the FTC said.
"The settlement requires these companies to turn over millions of dollars that they took from financially-distressed consumers, and waive hundreds of millions in other charges," Jessica Rich, director of the FTC's Bureau of Consumer Protection said in a statement. "It should be self-evident that payday lenders may not describe their loans as having a certain cost and then turn around and charge consumers substantially more."
In addition to being accused of duping consumers, the companies were charged with violating the Truth in Lending Act. The law requires the accurate disclosure of the the annual percentage rate and other terms of the loans.
MNE Services operated under the following names: Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services, and Star Cash Processing. AMG was the loan servicer.
Payday lending, which is aimed at those who can least afford the often onerous terms, may soon face regulation from the federal government for the first time. The industry has a poor reputation for trapping desperate-for-cash consumers in a repetitive cycle of borrowing with loan terms that often exceed 200 percent interest.
