[author: Jackie Odum]
On February 11, 2021, the Federal Trade Commission (FTC) announced a $114 million settlement with the owners and operators of an alleged tribal payday lending scheme. The settlement resolves allegations concerning defendants’ purported violations of the unfair or deceptive practice provisions (UDAP) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 45(a), the Telemarketing and Consumer Fraud and Abuse Prevention Act (Telemarketing Act), 15 U.S.C. §§ 6101-6108, the FTC’s Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310, the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601-1666j, the Electronic Funds Transfer Act (EFTA), 15 U.S.C. §§ 1693-1693r, and its implementing regulation E, 12 C.F.R. Part 1005.
In the complaint, the FTC alleged that the payday lenders operated a fraudulent scheme that involved using deceptive marketing to convince consumers that their loans would be repaid in a fixed number of payments. Instead, the payday lenders allegedly continued to withdraw funds from consumers’ bank accounts long after their loans had been repaid. The FTC further alleged that these illegal withdrawals stopped only when consumers closed out their bank accounts or found some other way to cut off payments.
The settlement provides that the payday lenders pay more than $114 million—part of which will be suspended due to inability to pay. As part of the settlement, the payday lenders must forgive any outstanding consumer loans. Moreover, the payday lenders are permanently banned from the industry.