by Broderick Perkins
(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.
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