(8/3/2011) - Watch out for payday loan operations like those recently
shut down by the Federal Trade Commission.
Online operations that allegedly fleeced payday loan applicants out of money for unsolicited
services are getting a day in district court for their misdeeds.
A Federal Trade Commission complaint charges the operations with debiting
consumers' bank accounts without their permission after consumers visited
websites seeking payday loans.
The FTC's complaint also prompted the U.S. District Court for the Middle
District of Florida to halt online payday loan operations,
including MyPaydayAngel.com and JuniperLoans.com.
The complaint alleges violations of federal trade
regulations and names Direct Benefits Group LLC, also doing business as
Direct Benefits Online and Unified Savings; Voice Net Global LLC, also doing
business as Thrifty Dial; Solid Core Solutions Inc.; WKMS Inc.; Kyle Wood;
and Mark Berry. The court also froze their assets, pending a court
hearing.
Defendants are charged with violating the FTC Act by obtaining consumers'
bank account information and debiting their accounts without their
consent, and for failing to adequately disclose that, in addition to using
consumers' financial information for a payday loan application,
they would use it to charge consumers for enrollment in unrelated programs
and services.
In the process of consumers applying for a payday loan, the websites asked for consumers personal
and financial information, such as Social Security, driver license, and bank
account numbers.
Near the end of the application, the defendants offered unrelated "Direct
Benefits" and "Voice Net," that included programs for food, travel and
merchandise discounts, or for long distance calling and Internet access.
Consumers who clicked to "submit" for the payday loan application were enrolled unwittingly into
the programs, which initially charged their bank accounts up to $59.90 per
month. Later they were charged up to $99.90 a year. Some consumers who
declined the offers were charged for the programs anyway, the FTC
alleges.
As alleged in the complaint, the defendants sent consumers' bank account
information to Landmark Clearing Inc. and other payment processors to
electronically generate remotely created payment orders that debited
consumers' bank accounts.
Consumers typically didn't discover the charges until an unexpected debit
appeared on their bank statement, or when their bank told them their account
was overdrawn. They learned that Direct Benefits or Voice Net received the
payments only after they contacted their bank or saw an online copy of the
payment order.
Payday loan customers who called the
defendants for a refund often got the run-around. Many consumers had to
dispute the transaction or close their bank accounts to get a refund or stop
the defendants from debiting their accounts.
FTC's court complaint is part of its efforts to protect financially
strapped consumers during the economic downturn. The plan is to stop the
illegal practices and make the defendants refund consumers' money.
