According to the FTC, some payday lenders bought consumer financial information from third parties. Using that financial information, they created fake loan agreements, deposited money into people’s accounts, and made unauthorized withdrawals, all in violation of federal law.
What’s more, the lenders lied about the total cost of the loans — not only to consumers who had never asked for the loans in the first place, but also to some who may have authorized the loans. According to the FTC, the lenders told the consumers that their total payments on their loan would be the principal plus a onetime finance charge. Instead, the lenders withdrew bi-weekly automatic payments that didn’t go toward the principal. So, unless the consumers contested or paid down the loans, they were making interest-only payments indefinitely.
The lenders’ ill-gotten gain? A cool $49 million over 10 months, according to the FTC’s review of bank records.
None of this sits well with the FTC, which asked a federal district court to stop the practices and to preserve the possibility of providing refunds to the consumers.