FTC: Two Payday Lenders Illegally Charged Consumers Undisclosed and Inflated Fees
Two payday lenders have settled Federal Trade Commission (FTC) charges that they illegally charged consumers across the country undisclosed and inflated fees. The two companies, Red Cedar Services Inc. and SFS Inc., have each paid $2.2 million and collectively waived $68 million in fees to consumers that were not collected.
Combined with earlier settlements, the FTC has so far recovered about $25.5 million in connection with the case, which involves Red Cedar, SFS, AMG Services, Inc., and MNE Services, Inc., and a number of related entities and individuals. The case also has resulted in an estimated $353 million in waived debt – making this already the largest FTC recovery in a payday lending case, with litigation still continuing against other defendants.
The settlements stem from charges that were filed in federal court nearly four years ago. The complaints allege that the lenders and others misrepresented how much loans would cost consumers. For example, a contract used by Red Cedar, AMG Services and MNE Services stated that a $300 loan would cost $390 to repay, but they charged consumers $975.
The defendants also failed to accurately disclose the annual percentage rate and other loan terms, and made preauthorized debits from consumers' bank accounts a condition of the loans. Red Cedar and SFS operated under the trade names 500 Fast Cash and One Click Cash, respectively.
In May 2014, the federal court found that the defendants' loan documents were deceptive and violated the Truth in Lending Act, as the FTC had charged.
The stipulated final federal court orders for Red Cedar and SFS also prohibit those defendants from misrepresenting the terms of any loan product, including the payment schedule and interest rate, the total amount the consumer will owe, annual percentage rates or finance charges, and any other material facts.