Two payday lending companies have settled Federal Trade Commission charges that they violated the law by charging consumers undisclosed and inflated fees. Under the proposed settlement, AMG Services, Inc. and MNE Services, Inc. will pay $21 million – the largest FTC recovery in a payday lending case – and will waive another $285 million in charges that were assessed but not collected.
“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,” said Jessica Rich, Director of the Bureau of Consumer Protection. “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.”
The FTC filed its complaint in federal district court in Nevada against AMG and MNE Services and several other co-defendants, in April 2012, alleging that the defendants violated the FTC Act by misrepresenting to consumers how much loans would cost them. For example, the defendants’ contract stated that a $300 loan would cost $390 to repay, but the defendants then charged consumers $975 to repay the loan.
The FTC also charged the defendants with violating the Truth in Lending Act (TILA) by failing to accurately disclose the annual percentage rate and other loan terms and making preauthorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act (EFTA). MNE Services lent to consumers under the trade names Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services, and Star Cash Processing. AMG serviced the loans.
In May 2014, a U.S. district court judge held that the defendants’ loan documents were deceptive and violated TILA, as the FTC had charged in its complaint.
In addition to the $21 million payment and estimated $285 million in waived charges, the settlement also contains broad prohibitions barring the defendants from misrepresenting the terms of any loan product, including the loan’s payment schedule, the total amount the consumer will owe, the interest rate, annual percentage rates or finance charges, and any other material facts. The settlement order prohibits the defendants from violating TILA and EFTA.
The Commission vote approving the proposed stipulated final order was 5-0. It was filed in the U.S. Court for the District of Nevada on January 15, 2015. The FTC’s action remains in litigation as to defendants SFS, Inc., Red Cedar Services, Inc., AMG Capital Management, LLC, Level 5 Motorsports, LLC, LeadFlash Consulting, LLC, Black Creek Capital Corporation, Broadmoor Capital Partners, LLC, Scott A. Tucker, the estate of Blaine A. Tucker, Don E. Brady, and Robert D. Campbell, and relief defendants Park 269, LLC and Kim C. Tucker.
NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.
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