Tags: payday | loan | predatory | allegations

Feds Accuse Payday Lenders of Taking Money From Consumers

Wednesday, 17 Sep 2014 12:23 PM

Two federal agencies on Wednesday took legal action against two different payday lending operations, in both cases alleging that lenders took money from unwitting consumers, as part of an ongoing crackdown on the industry.

A federal court in Missouri issued a restraining order on an online payday scheme that allegedly trapped consumers in unauthorized loans and took money out of their bank accounts, the U.S. Federal Trade Commission said on Wednesday.

Between 2012 and 2013, the lenders made unauthorized deposits into consumers' bank accounts, in the guise of loans, and then began to withdraw recurring finance charges that exceeded the amount of the supposed loans, according to the FTC.

The group issued $28 million in supposed loans and extracted $46.5 million from consumers' bank accounts, the agency said.

The case names as defendants 12 companies and two individuals who are the owners. The lenders include iCWB Services, Orion Services, Sand Point Capital and Basseterre Capital.

Also on Wednesday, the Consumer Financial Protection Bureau announced a lawsuit against online payday lender Hydra Group, which allegedly was running a similar scam.

The company made $97 million in payday loans and collected $115 million from consumers in return, the CFPB said.

"The utter disregard for the law shown by the Hydra Group and the men controlling it is shocking, and we are taking decisive action to prevent any more consumers from being harmed," the bureau's director, Richard Cordray, said in announcing the action.

The defendants could not immediately be reached for comment.

Regulators have been keeping a close eye on the payday loan industry, in which borrowers take out small loans that usually must be paid back when they receive their next paycheck.

Consumer advocates say these high-interest loans can trap primarily low-income borrowers in a cycle of mounting debt. They are concerned in particular about online lenders, which they say sometimes skirt state laws for payday loans.

In July the CFPB ordered payday lender ACE Cash Express to pay $10 million to settle accusations that it had used unfair debt collection practices such as threatening to sue borrowers to pressure them into taking out new loans.

© 2017 Thomson/Reuters. All rights reserved.

 
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Two federal agencies on Wednesday took legal action against two different payday lending operations, in both cases alleging that lenders took money from unwitting consumers, as part of an ongoing crackdown on the industry.
payday, loan, predatory, allegations
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2014-23-17
Wednesday, 17 Sep 2014 12:23 PM
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