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The Federal Trade Commission has charged a payday loan operation with illegally trying to garnish borrowers’ wages and using other illegal debt-collection practices. The FTC seeks to stop these practices and require the operators to surrender improperly collected money so it can be used for consumer refunds.

According to the FTC’s complaint, the operators do business as Ecash and GeteCash, offering loans of up to $1,000 to be repaid from a borrower’s upcoming paycheck. They require online loan applicants to check a box indicating their agreement with loan terms. These terms include an inconspicuous statement consumers often don’t see, which states that their wages will be garnished to cover delinquent loan payments. The statement allegedly attempts to circumvent federal requirements, including a debtor’s right to revoke a garnishment agreement.

U.S. law allows federal agencies to require employers to garnish employees’ wages without a court order when the employees owe the government money. According to the complaint, in letters to employers, GeteCash tries to pass itself off as having the same collection rights as the government. The FTC’s complaint also alleges that GeteCash falsely stated that consumers knew their pay would be garnished and had an opportunity to dispute the debt. In addition, GeteCash allegedly violated the law when it told employers and co-workers about consumers’ debt without their consent.

The FTC alleges that, in carrying out their scheme, the operators violated the FTC Act, the Fair Debt Collection Practices Act, and the Credit Practices Rule. The defendants are Eastbrook LLC, also doing business as Ecash and GeteCash; LoanPointe LLC; Joe S. Strom; Benjamin J. Lonsdale; James C. Endicott; and Mark S. Lofgren. Eastbrook, LoanPointe, and Strom have agreed to a preliminary injunction barring them from further unlawful practices.

The Commission vote to file the complaint was 4-0. It was filed in the U.S. District Court for the District of Utah, Central Division on March 15, 2010.

The FTC would like to acknowledge the assistance of the Financial Management Service of the U.S. Department of the Treasury and the Idaho Department of Finance.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. 102-3021)
(GeteCash)