The United States District Court for the District of South Dakota Central Division entered a final order and judgment approving a settlement between the FTC and a payday lender, in which the company agreed to pay civil money penalties for alleged unfair and deceptive acts and practices in violation of the FTC Act, the FTC’s Credit Practices and the Electronic Fund Transfer Act. According to the FTC, the payday lender’s wage garnishment practices (1) did not meet the requirements of the Credit Practices Rule, which required that wage assignment clauses be revocable, a payroll deduction or preauthorized payment plan made at the time of the transaction, or applicable only to wages or other earnings already earned at the time of assignment and (2) violated the EFTA and Regulation E by conditioning the extension of credit on repayment by means of preauthorized electronic funds transfers. Consequently, the payday lender was alleged to have violated Section 5 of the FTC Act for making misrepresentations or deceptive omissions, for including in its communications with consumers and their employers that it was legally authorized to garnish wages. The FTC also alleged that the payday lender attempted to manipulate the legal system by forcing consumers to appear in a tribunal court that did not have jurisdiction over the debt collection cases. In addition to the civil money penalty, the terms of the settlement require that the payday lender surrender profits and bars the payday lender from suing any consumer in the course of collecting a debt, except where such suit is a counterclaim. This continues a trend by the FTC, CFPB and state regulators to target the practices of payday lenders.
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