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In a case filed by the Federal Trade Commission and the State of Nevada, a federal court has ordered a halt to certain practices by seven U.S.-based companies and an individual operating as part of an international Internet payday lending operation. They were charged with failing to disclose key loan terms and using abusive and deceptive collection tactics in violation of federal and state laws. The U.S.-based companies and their principal agreed to the court order, which will remain in effect pending trial. The FTC and Nevada seek to permanently bar the defendants from future violations and make them give up the money they obtained using the allegedly illegal collection tactics.

According to the FTC’s complaint, the companies offered loans of $500 or less within 24 hours without requiring a credit check, proof of income, or documentation. Consumers were told that they qualified for a loan that had to be repaid by their next payday with a fee ranging from $35 to $80, and that if the loan was not repaid by then, it would be extended automatically for an extra fee that would be debited from the consumer’s bank account “until the loan is repaid.”

The FTC charges the companies with violating the FTC Act by using unfair and deceptive collection tactics, including falsely threatening consumers with arrest or imprisonment, falsely claiming that consumers are legally obligated to pay the debts, threatening to take legal action they cannot take, repeatedly calling consumers at work and using abusive and profane language, and disclosing consumers’ purported debts to co-workers, employers, and other third parties. They also allegedly violated the Truth in Lending Act and Regulation Z by failing to make required written disclosures, clearly and conspicuously, before consummating a consumer credit transaction, including the amount financed, itemization of the amount financed, the finance charge, the annual percentage rate, the payment schedule, the total number of payments, and any late payment fees.

Pending trial, the court order bars the U.S.-based companies and their principal from deceptive debt collection practices such as misrepresenting that consumers can be arrested or imprisoned for failing to pay debts, that consumers are legally obligated to pay the full amount of a debt claimed as owed, and that for nonpayment consumers may or will be subject to legal action, such as a lawsuit, seizure of property, or garnishment of wages. The preliminary injunction also prohibits unfair collection practices such as continuously and repeatedly calling consumers and third parties at consumers’ work places, using obscene or threatening language toward consumers and third parties, and disclosing the existence of consumers’ purported debts to third parties.

The U.S.-based companies and their principal also are barred from violating the Truth in Lending Act and Regulation Z, in the extension of closed-end credit, by failing to make the required TILA disclosures as provided by law, and by failing in any other manner to comply with TILA and Regulation Z. They also are prohibited from violating the laws of the State of Nevada by making loans from Nevada or identifying Nevada as the source of a loan or as their principal place of business, unless properly licensed; and by failing to provide notice and disclosure of all material facts as required by state law, including failing to disclose the location, physical address, and non-toll-free telephone number of all of their locations. In addition, the U.S.-based companies and their principal are prohibited from violating any state or federal law regarding the sale or lease of goods or services, including using coercion, duress, or intimidation in any kind of transaction.

The injunction also bars the U.S.-based companies and their principal from disclosing or benefitting from customers’ personally identifiable or financial information, and it contains record-keeping provisions to allow the FTC to monitor compliance with the order.

The defendants named in the court order are Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Lotus Leads, Inc., First4Leads, Inc., and Rovinge International, Inc., and Jim Harris. Also charged in the complaint but not named in the order are four United Kingdom-based companies operating in the U.S. as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., and Interim Cash, Ltd., and their principals, Aaron Gershfield and Ivor Gershfield.

NOTE: The Commission issues 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. These complaints are not a finding or ruling that the respondents 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 1,500 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. 0723093)
(Cash Today PI)