FTC Charges Payday Debt Relief Company with Violating Federal Laws

FTC Charges Payday Debt Relief Company with Violating Federal Laws
Image: Pixabay
February 24, 2015

The Federal Trade Commission (FTC) has filed a complaint in district court against a company that claimed it could provide debt relief, but failed to provide its advertised services.

According to the complaint, Payday Support Center targeted consumers with outstanding payday loans and claimed that they could help resolve those debts by negotiating new terms with the original lenders. Borrowers paid fees to the company, while the original lenders continued to try to collect on the debts.

Starting in August 2012, Payday Support Center used internet and radio advertisements and telemarketing to target consumsers who own multiple debts on payday loans, which are typically short-term loans with high interest rates. The FTC alleges that the company lured customers into enrolling in their financial hardship program by claiming that they will negotiate with the lenders to reduce the borrowers' payments and eliminate their debt. They advised borrowers to stop making direct payments to their lenders and to pay the company instead, promising that within four to six months the loans would be paid off. These bi-weekly payments are typically between $98 and $160.

In reality the company provided little or no debt relief services for their clients, and their limited actions did not generally eliminate or even reduce most clients' payday loans. While the company send validation form letters to some lenders, the lenders typically have ignored these letters and continued their collection efforts.

Based on this conduct, the FTC has charged the defendants with violating the FTC Act, which prohibits deceptive acts and practices, and the agency's Telemarketing Sales Rule, which prohibits abusive and deceptive telemarketing practices.