Two payday lending schemes get shut down
Similar schemes that used information collected from people who were seeking payday loans online and took more than $100 million from those victims were shut down by federal authorities, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB) said on Wednesday.
The consumers who were looking for loans, but didn't apply for them, had money drawn from their bank accounts under the pretext that it was payment for the loans, the agencies said. The CFPB filed a lawsuit against those allegedly operating one scheme and received a temporary restraining order halting the operation and freezing its assets, and the FTC did the same.
"These defendants bought consumers' personal information, made unauthorized payday loans, and then helped themselves to consumers' bank accounts without their authorization," Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a statement. "This egregious misuse of consumers' financial information has caused significant injury, especially for consumers already struggling to make ends meet."
The schemes involved buying the victims' financial information from so-called lead generators or data brokers, and then depositing between $200 and $300 into their bank accounts without the consumers' permission. That would then trigger a series of charges every other week of up to $90, the FTC said.
In 15 months, the CFPB said, the operation it shut down dispensed a supposed $97 million in payday loans and collected more than $115 million from consumers. In the FTC case, the scheme involved $28 million in supposed loans resulting in more than $46 million taken from consumers in less than a year.
Victims said they weren't able to get the companies to stop drawing money from their bank accounts and had to resort to closing the accounts or getting their banks to intervene. Harassment often followed, the FTC said.
The payday lending company that ran the alleged scheme shut down by the CFPB was called Hydra Group, with businesses incorporated in New Zealand and St. Kitts and Nevis. "Their maze of businesses and shell companies seems designed to evade effective law enforcement, and includes names like SSM Group, Hydra Financial Limited, and Piggycash Online Holdings," CFPB Director Richard Cordray said in a statement.
The FTC case involved a company called CWB Services and a laundry list of related businesses.
The FTC urges consumers to consider a variety of options, including borrowing from other sources, rather than take a payday loan. These loans allow people typically with poor credit to borrow money by guaranteeing repayment on payday, and they typically come with extremely high interest rates.
