Loan Scam Scrapes $7M From Consumers’ Accounts

The Federal Trade Commission announced this week (Aug. 12) that it has charged a data broker operation with allowing consumers involved in payday loans to be scammed out of more than $7 million.

The FTC alleges that the data broker organization debited consumers’ bank accounts and charged their credit cards without their consent as part of a payday lending scam that involved selling their personal finance information.

The complaint concludes that the data broker enterprise had bought loan applications from companies that operated payday lender sites and then sold the personal financial information. In other cases, some of the data was collected directly from consumers through their own payday loan sites. While those applications should have been passed on to lenders, they were instead sold to companies that ended up scraping at least $7.1 million from those consumers’ accounts.

“Scammers used consumer information they bought from this operation to make millions in unauthorized charges,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Companies that collect people’s sensitive information and give it to scammers can expect to hear from the FTC.”

The FTC claims that the defendants in the case sold applications to Ideal Financial for roughly $.50 a piece, while the going rate for actual payday lenders is at least $100. The data brokers were accused with knowingly conducting this scheme and also with knowing that the account skimming was happening.

The complaint alleges that the defendants helped cover up the fraud with fine-print disclosures. The defendants are Sequoia One LLC, Gen X Marketing Group LLC, Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew, Jr. and Paul T. McDonnell. Three of those (Paul T. McDonnell, Theresa D. Bartholomew and John E. Bartholomew, Jr.) agreed to settle in the case.

According to the FTC: “Under proposed settlement orders, they are prohibited from selling or otherwise benefiting from customers’ personal information. The order against the Bartholomews imposes a $7.1 million judgment that will be suspended upon payment of $15,000. The order against McDonnell imposes a judgment of more than $3.7 million, which will be suspended due to his inability to pay. The full judgments will become due immediately if these defendants are found to have misrepresented their financial condition. Litigation against the other defendants continues.”



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