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Predatory Lender Offered Internet Service As A Perk

May 24, 2006
Texas Attorney General Greg Abbott has obtained an asset freeze and sued a predatory "payday" lending company that has offices strategically located near military bases to allow it to exploit those serving the country.

The company, Texas Advance Internet, tried to disguise its loan-sharking operation by offering on-premise Internet service as a benefit, but deceived unwitting consumers by forcing them into harmful loan contacts it was not licensed to provide, according to the attorney general.

The lawsuit says the company, also known as Advance Internet, and owner John A. Gill Jr. violated Texas finance laws and the Texas Deceptive Trade Practices Act (DTPA) by duping consumers into usurious schemes that set interest rates as high as 782 percent on short-term cash advance loans.

"These unlicensed practices are outrageous and are deliberately designed to target military families with extremely high-interest loans, putting consumers into a never-ending cycle of debt," said Abbott.

"Consumers have a right to do business with honest loan companies without the double-talk, so in this case, we will ask the court to order restitution for all Texans who were harmed by this subterfuge."

Abbott’s suit alleges numerous violations of the finance laws of Texas, which require proper licensing and regard usurious interest contracts such as these as null and void.

Consumers who signed Texas Advance Internet’s "Internet Computer Access Rebate Purchase Application and Contract" were seeking a short-term cash infusion, but set themselves up to be defrauded.

For example, a consumer would receive an instant $100 cash "rebate" for signing up for "Internet access," but the company would withdraw $30 from the consumer’s bank account every two weeks for up to a year until the $100 is repaid.

If the consumer was able to repay the $100 early, the company tried to disguise the loan repayment as a "termination fee" equal to the original $100 cash "rebate" for the Internet service. Company employees interviewed by investigators acknowledged the "Internet access" benefit was a sham.

In addition, consumers were unaware that by signing the contract they were agreeing to a "waiver of jury trial and arbitration" before receiving the initial $100 loan. The company claimed this released it from liability, removed the threat of possible class actions and allowed it to enforce debt collection.

In addition to restitution for harmed consumers, the Attorney General’s suit requests penalties of up to $20,000 per violation of the DTPA, $10,000 per violation of the Texas Finance Code, the immediate halt of these usurious loans and collections, as well as all deceptive advertising for "rebates."

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