Markets Wired

The Federal Trade Commission has filed a complaint in federal district court, aiming to stop an operation that has targeted consumers with outstanding payday loans, saying they could help resolve those debts but then providing little or none of the financial relief they promised. As a result, many consumers stopped making payments to the original lenders and found themselves in even deeper financial trouble, having paid hundreds of dollars in fees for no benefit.

“The defendants promised to help people struggling to make payments on their payday loans,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Instead, they took the money and ran, leaving their customers deeper in debt.”

According to the FTC’s complaint against Payday Support Center, LLC, now known as PSC Administrative, LLC, and related parties, starting in August 2012 the defendants have used the Internet, radio, and telemarketing to target consumers who owe multiple debts on payday loans, which are typically short-term loans with high interest rates.

The FTC alleges that the defendants induce consumers into enrolling in their “financial hardship program” by claiming that they will negotiate with the lenders to reduce consumers’ payments and eliminate their debt. They advise consumers to stop making direct payments to their lenders and to pay money to the defendants instead, promising that within four to six months, the loans will be paid off.

Their radio and the Internet advertisements include statements such as:

• “Are payday loans ruining your life? Do you have more payday loans than you’re able to pay back right now? If you have two or more payday cash advance loans, listen closely…”
• “All you need is two or more payday loan cash advances to qualify. Even if you’re behind, in collections or have bad credit. We’ll even help you with your internet payday loans…”

The FTC alleges that, in telemarketing calls targeting these financially distressed consumers, the defendants say that they have gone through a “qualifications check,” and that consumers are confirmed to participate in their special “financial hardship program.” They then promise to “get rid of,” “pay off,” or “take care of” all of the consumers’ payday loan debts.

They allegedly also tell consumers that they will negotiate “interest free” payment on the loans through the program, falsely implying that the debts would be paid off, free of all interest and fees. As part of the program, the defendants require consumers to make bi-weekly payments to them, typically between $98 and $160.

In reality, the FTC alleges, the defendants provide little or no debt relief services for their clients, and their limited actions do not generally eliminate or even reduce most clients’ payday loans. While the defendants 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.

The complaint names as defendants: 1) PSC Administrative, LLC, formerly known as Payday Support Center, LLC; 2) Coastal Acquisitions, LLC, doing business as Infinity Client Solutions; 3) Jared Irby, individually and as an officer of PSC Administrative, LLC; and 4) Richard Hughes, individually and as an officer of PSC Administrative, LLC.

In filing the complaint, the FTC is seeking to permanently stop the defendants’ allegedly illegal conduct, as well as a monetary judgment for refunds to return to consumers defrauded by the operation.

Information for Consumers

The FTC has information for consumers about the possible pitfalls of payday loans and online payday loan brokers. It also has a video on its website describing how the payday loan process works.

The Commission vote approving the complaint was 5-0. It was filed in the U.S. District Court for the Southern District of Alabama.

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 case will be decided by the court.

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 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.