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Two payday lenders have settled Federal Trade Commission 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 recovered about $25.5 million thus far 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.

“Payday lenders need to be honest about the terms of the loans they offer,” said Jessica Rich, Director of the Bureau of Consumer Protection. “These lenders charged borrowers more than they said they would. As a result of the FTC’s case, they are paying a steep price for their deception.”

The settlements stem from FTC charges filed in federal court in April 2012 alleging that the lenders and others misrepresented how much loans would cost consumers, in violation of the FTC Act.  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, in violation of the Truth in Lending Act (TILA), and made preauthorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act (EFTA). 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 TILA, 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. The orders also bar defendants from violating the TILA and the EFTA.

The Commission votes approving the proposed stipulated final orders for Red Cedar and SFS were 4-0. The U.S. District Court for the District of Nevada entered the orders on November 25, 2015.

The Commission previously reached court-approved settlements with AMG Services, MNE Services, Robert D. Campbell, Troy LittleAxe, and Don Brady. Litigation continues against AMG Capital Management LLC, Level 5 Motorsports LLC, LeadFlash Consulting LLC, Black Creek Capital Corporation, Broadmoor Capital Partners LLC, Scott A. Tucker, the estate of Blaine A. Tucker, and relief defendants Park 269 LLC and Kim C. Tucker.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs and subscribe to press releases for the latest FTC news and resources.