A duo of payday lenders have settled charges from the Federal Trade Commission (FTC) that they charged consumers in the United States for fees that had remained undisclosed and inflated, the FTC reported on Tuesday (Jan. 5).
The two firms named in the release — Red Cedar Services Inc. and SFS Inc. — each paid $2.2 million. Both firms also waived $68 million in fees that were not, in fact, collected.
The FTC said that the settlements with the two firms are tied to suits the agency filed in federal court nearly four years ago, in April 2012. The suits contended that the two companies misrepresented the true cost of their loans to consumers, in violation of the FTC Act.
[bctt tweet="The FTC said that the settlements with the two firms are tied to suits the agency filed in federal court nearly four years ago."]
The latest settlement announcement comes as the FTC said it has recovered, in total, more than $25 million in the case, which also involves AMG Services and MNE Services. The total waived debt amount comes to $353 million. That’s the largest FTC recovery in the payday lending segment. Litigation is still ongoing against the other, aforementioned defendants, said the FTC.
In one stated example, the firms said that — through a contract signed by borrowers — a $300 loan would cost $390 but instead came out to $975. Elsewhere, lenders did not disclose annual percentage rates, which violates the Truth in Lending Act. The firms also made debits from consumer accounts on a preauthorized basis, which violated the Electronic Funds Transfer Act.
A federal court, in May 2015, ruled that the loan documents violated the Truth in Lending Act. Orders from that court said that the defendants had to refrain from misrepresenting loan terms, schedules and interest rates in any document, in violation of the previously stated acts.