At the request of the Federal Trade Commission, a federal court has ordered one of the individuals behind a payday lending scheme to pay $294,536 for illegally trying to garnish borrowers’ wages, and for using other illegal debt-collection practices.
The order bans Joe S. Strom and two companies he controls from the illegal lending and collection practices challenged by the FTC in this case.
The court found that the defendants sought repayment of loans they made by taking money from borrowers’ paychecks. Online loan applicants checked a box indicating their agreement with loan terms, including an inconspicuous “wage assignment” clause providing that their wages would be garnished to cover delinquent loan payments.
The court held that the clause violated the FTC’s Credit Practices Rule, which bans wage assignment clauses in consumer contracts in many cases.
U.S. law allows federal agencies – but not private companies – to require employers to garnish employees’ wages without a court order when the employees owe the government money. The court determined that the defendants misrepresented that they had the same collection rights as the government.
The court also found that the defendants falsely told consumers’ employers that the consumers knew their pay would be garnished and had had an opportunity to dispute the debt, in violation of the Fair Debt Collection Practices Act (FDCPA) and the FTC Act, and that they violated the FDCPA by telling employers and co-workers about consumers’ debts without their consent.
The order prohibits Strom, LoanPointe, LLC and Eastbrook, LLC, also doing business as Ecash and Getecash, from misrepresenting either the available terms, rates, conditions, or amounts of any loans or other extensions of credit; or any other fact that is relevant to a consumer’s decision to obtain credit.