FTC Goes After Debt Relief Companies Who Deal With Payday Loans

On February 18, 2015 the Federal Trade Commission filed suit against PSC Administrative, Coastal Acquisitions, Infinity Client Solutions, Infinity Collect, Jared Irby, and Richard Hughes for violations of the Telemarketing Sales Rule.

The FTC alleges the Defendants solicited consumers with debt relief services, who owed payday loans.

“Defendants have induced consumers to enroll in their program by claiming that they will renegotiate the repayment terms of consumers’ loans so that consumers’ payments will be reduced.

Defendants advise consumers to terminate their direct payments to lenders and pay money into Defendants’ program instead.

Defendants have promised consumers that, at the end of a four to six month program term, the consumers’ loans will be paid off or otherwise eliminated. Defendants’ efforts for many consumers have consisted of little more than sending a form letter to consumers’ payday lenders requesting “validation” of the underlying loan. In those instances, Defendants have not renegotiated the repayment terms of consumers’ loans.

In numerous instances, Defendants’ actions have failed to result in any reduction or elimination of the payday loans consumers enrolled in Defendants’ program. Defendants have collected a fee at enrollment and, thereafter, bi-weekly through the pendency of the program. In numerous instances, consumers discovered that none of the payments made through the program went towards paying off their loans.”

The FTC says the Defendants ran radio ads that said:

“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 loan cash advances, listen closely.

You may be eligible for a program that payday loan companies don’t want you to know about, a program that will get payday loan companies out of your bank account and put an end to the payday loan nightmare.

So call [toll free number] to find out if the program is right for you.

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 states when consumers responded to the advertising or the website paydaysupportcenter.com and called the Defendants they were pitched a “Financial Hardship Program.” The FTC says, “In numerous instances, after confirming their “qualifications,” Defendants’ telemarketers have offered to substantially reduce consumers’ monthly payments from what consumers owe their payday lenders at the time of enrollment. In numerous instances, Defendants’ telemarketers have offered to “get rid of,” “pay off,” or “take care of” all of consumers’ payday loan debts by the end of the consumers’ enrollment in Defendants’ four to six month program.”

The sales pitch also allegedly touted using debt validation to eliminate debts. The complaint filed by the FTC says, “Defendants’ telemarketers have typically mentioned “validation” as part of the process or one of the steps that Defendants would undertake to resolve consumers’ payday loans. In numerous instances, Defendants’ telemarketers have stated or implied that sending a form validation letter would result in the cancellation of some loans and that Defendants would renegotiate consumers’ repayment terms for those loans that are not cancelled as a result of the “validation process.”

The FTC complaint points out what may be a critical flaw with the debt relief approach taken by the Defendants. The complaint states, “Many, if not all, payday lenders have simply ignored Defendants’ validation form letters and continued collection efforts. Defendants’ validation program appears to mimic the title and general subject matter from certain inapplicable provisions of the Fair Debt Collection Practices Act (“FDCPA”). 15 U.S.C. § 1692 -1692p. The FDCPA contains a section on “Validation of debts,” setting forth circumstances where consumers have the right to, within a specific time period, request the underlying data supporting collection attempts by those debt collectors covered by the statute. 15 U.S.C. § 1692g. However, in most situations, payday lenders collecting on their own behalf are not covered by the FDCPA. 15 U.S.C. § 1692a (4) and (6).”Source

An indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. – Source

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