A district court judge temporarily halted an online payday lender that a federal agency believes was running an illegal cash-grab scam.
The Consumer Financial Protection Bureau (CFPB) lawsuit alleges that Hydra Group uses personal information it purchases online to illegally deposit payday loans and withdraw fees without consent. The company then uses falsified loan documents to claim the customers had agreed to the loan.
Additionally, the lawsuit states that the defendants operate the business through a maze of corporate entities created to evade regulatory oversight. Their collection of roughly 20 businesses includes SSM Group, Hydra Financial Limited Funds, PCMO Services, and Piggycash Online Holdings. The entities are based in Kansas City, Mo., but many of them are incorporated offshore, in New Zealand or the Commonwealth of St. Kitts and Nevis.
After a consumer submits sensitive, personal information to online lead generators, those generators sell the information to payday loan firms. Hydra Group bought and used this information to deposit payday loans, usually $200 or $300 and then withdraws $60 to $90 finances charges from the account every two weeks. Some scam victims were forced to get stop-payment orders or close their bank accounts to put an end to the debits.
The CFPB complaint also alleges that the company didn't disclose the loan terms to customers and when it did, it used misleading and inaccurate statements. Hydra Group also created bogus loan documents, which representatives used when consumers or banks inquired about the charges. When customers were able to stop the payments, Hydra Group sold the fictions debt to third party debt collectors.
While the case is ongoing, the court issued a temporary stop to the business and froze the defendants' assets.