The Federal Trade Commission has stopped an operation that targeted payday loan seekers and charged them for worthless programs without their consent. A settlement order requires the defendants to pay more than $9.9 million and bans them from marketing negative-option programs, which charge recurring fees until a consumer cancels.
According to the FTC's complaint, Michael Bruce Moneymaker, Daniel de la Cruz, and their companies obtained consumers' personal information from websites that claimed to match consumers with payday lenders.
Then, without consumers' consent, they enrolled them in negative-option programs that cost an initial fee of up to $49.99, plus weekly or monthly recurring fees of up to $19.98, and did not provide promised refunds. The court subsequently halted the allegedly illegal practices and froze the defendants' assets, pending trial.
The settlement order also bans the defendants from marketing secured loan products, and permanently prohibits them from:
- obtaining consumers' account information from third parties;
- charging consumers without clearly disclosing all material terms before consumers provide account information;
- charging consumers without their consent;
- disclosing consumers' account information for any commercial purpose other than the transaction for which it was obtained;
- failing to disclose clearly the seller's name, a product/service description, the fact that the consumer will be charged and the amount, the terms of any refund or cancellation policy, and all material terms of any loan, credit, or credit improvement product.
In addition, the order bars the defendants from making the following misrepresentations:
- that they will use consumers' authorizations to further consumers' payday loan applications;
- the purpose for which consumers' account information will be used;
- any material aspect of any refund or cancellation policy, including that consumers provided their consent to buy something and would pay, that consumers are entitled to a refund only if they ask for a refund during a trial period, and that the defendants will provide a refund;
- the benefits of a product or service unless substantiated;
- that the consumer has contacted a third-party customer service, call center, or consumer rights organization;
- any affiliation with a bank or bank processing center, or with a customer of a financial institution;
- the status of any user or endorser of a product or service;
- any material terms of a credit-related good or service, or that a loan or credit-related good or service will increase a consumer's credit score or credit worthiness; and
- any other material facts, such as the total costs, the timing or manner of any charge, any restrictions or limitations, or any material aspects of a product's benefits.