As much of a problem as payday lenders can be, there are worse things — such as companies that tell consumers who are over their heads in payday loans that they’ll solve the problem, then take the consumers’ money and abandon them to the lenders’ collection efforts.
That’s what the Federal Trade Commission is accusing two Alabama companies of doing, according to a lawsuit the FTC filed in federal court last week.
The lawsuit charges Payday Support Center and Infinity Client Solutions and two of their executives, Jared Irby and Richard Hughes, with violating the FTC Act’s ban on deceptive acts and practices, and with violating the Telemarketing Sales Rule, which prohibits abusive and deceptive telemarketing. The lawsuit seeks to stop the illegal activities and get refunds for victimized customers.
According to the FTC’s complaint, the two companies used radio ads, the Internet and telemarketing to target consumers who owed debt on multiple payday loans, then told the consumers they would negotiate to get payments reduced and eliminate the debt. They also allegedly told the indebted consumers to stop making direct payments to their lenders and pay money to the “debt relief” companies instead, promising the loans would be paid off in four to six months.
“The defendants promised to help people struggling to make payments on their payday loans. Instead, they took the money and ran, leaving their customers deeper in debt,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in a prepared statement.
The two companies allegedly told financially distressed consumers they qualified for a special “financial hardship program,” and that the companies would negotiate “interest free” payment on the loans through the program, which required the consumers to make biweekly payments to the companies instead of the lenders, typically between $98 and $160.
But the FTC’s complaint alleges that the companies provided little or no debt relief services, and lenders typically continued their collection efforts, leaving the consumers deeper in financial trouble after paying hundreds of dollars in “debt relief” fees.