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RSSIndian American Charged For ‘Phantom’ Payday Loan Scam
April 12th, 2012
“Phantom” payday loan debts include harassing calls from India.
Authorities in the US have charged an Indian American and two companies he controls for allegedly running a scheme to collect “phantom” payday loan debts that included harassing calls from India. At the request of the Federal Trade Commission, a US district court also halted the operation of the that scheme involved more than 2.7 million calls to at least 600,000 different phone numbers nationwide, according to the FTC. The targeted consumers either didn’t owe money to the scheme operators or didn’t owe at all.
More than $5.2 million
In less than two years, the operators fraudulently collected more than $5.2 million from consumers, many of whom were strapped for cash and thought the money would be applied to loans they owed, according to FTC documents filed with the court.
The charge
The FTC charged California-based Kirit Patel and two companies he controls with violating the FTC Act and the Fair Debt Collection Practices Act. Patel allegedly ran the operation from his home, although he utilized callers from India, the FTC said. The debt collection participants typically demanded several hundred dollars. In violation of federal law, they routinely used obscene language and threatened to sue or have consumers arrested, according to the FTC’s complaint. They also threatened to tell the victims’ employers, relatives, and neighbors about the bogus debt, and sometimes followed through on these threats, the FTC alleged.
American law enforcement agents
Often pretending to be American law enforcement agents such as “Officer Mike Johnson” or representatives of fake government agencies like the “Federal Crime Unit of the Department of Justice,” callers from India who were working with the defendants would harass consumers with back-to-back calls, according to the FTC.
Tags: Fair Debt Collection Practices Act, FTC Act, Payday loans
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Federal Trade Commission Seeks To Shut Down Tribes’ Online Payday Businesses
April 3rd, 2012
The tribes argue that they are exempt from government oversight
The Federal Trade Commission is seeking to shut down an online payday lending operation that involves two Oklahoma Indian tribes after consumers filed more than 7,500 complaints to authorities in recent years.
Complaint
The commission filed a complaint Monday in U.S. District Court in Nevada against high-fee, short-term lending firms operated by the Miami Tribe of Oklahoma and the Modoc Tribe of Oklahoma. The complaint names several individuals as controlling the operation, including race car driver Scott Tucker.
Inflated fees
The FTC claims the payday lending companies “piled on undisclosed and inflated fees, and collected on loans illegally by threatening borrowers with arrest and lawsuits.” The case raises questions about the tribes’ ability to avoid government oversight of their businesses by claiming their sovereign rights. The complaint charges that a web of defendants, including the Miami Tribe’s AMG Services Inc., three other Internet-based lending companies, seven related companies and six individuals violated federal law by deceiving payday loan customers. The agency seeks an injunction to stop the companies from operating while authorities pursue the case.
No reply
A message left for Miami Nation Chief Thomas Gamble with Miami Nation Enterprises was not returned Monday. Modoc tribal officials did not respond to a message seeking comment on the complaint. Attempts to contact Tucker through his racing company’s website were unsuccessful.
Commission’s claims
The commission’s filing claims the lending companies would make repeated small withdrawals from customers’ accounts, with each payment incurring a fee. In one example cited, a customer was charged $675 in fees to pay off a $300 loan. The companies also threatened customers with lawsuits or arrest to obtain payments, according to the filing.
Tags: Federal Trade Commission, Inflated loan fees, Payday loans
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Payday Loans Complaint Names Racecar Driver
April 3rd, 2012
Company under federal scrutiny after more than 7,500 complaints to authorities
The Federal Trade Commission filed a complaint Monday in US District Court in Nevada against driver Scott Tucker, his brother, and several Internet-based lending companies, including AMG Services Inc. The FTC charges that he and others controlled lending companies that piled on undisclosed and inflated fees, in some cases more than triple the amount borrowed, and then collected on the loans illegally by threatening borrowers with arrests and lawsuits.
Exaggerated repayment
In one example, a consumer was told that a $500 loan would cost him $650 to repay. Instead, the FTC says, the defendants attempted to charge him $1,925 to pay off the loan. The agency says he was threatened with arrest if he didn’t pay that amount.
Payday Loans
Payday loans are typically small, short-term loans with extremely high interest rates that are effectively advances on a borrower’s next paycheck. According to the FTC, the operation involving Tucker has claimed in legal proceedings that it is affiliated with Native American tribes and immune from legal action. Tribal affiliation does not exempt Tucker from complying with federal law, the commission says.
Tags: Federal Trade Commission, Native American tribes, Payday loans
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Loan Store Ordered To Refund Consumers. Clear Message to Loan Industry
March 28th, 2012
Consumer Protection BC steps in and orders Canadian payday lender to comply
A 2010 investigation concluded that Cash Store Financial, a Canadian payday lender was charging customers more than the maximum legal amount of $23 per $100 on payday loans by charging additional fees to issue loans on cash cards. The payday lender was issued a Compliance Order in November 2010 to stop charging the unlawful fees and refund customers. Cash Store requested a reconsideration of the decision which was granted in early 2011. The reconsideration process is now complete and the key elements of the original decision have been confirmed.
No extra charge
“Payday loan consumers cannot be charged extra for cash cards, that is the law,” said Manjit Bains, Vice President of Corporate Relations, Consumer Protection BC. “This decision sends a clear message to the industry and to consumers that consumers must never have to pay more than $23 for every $100 borrowed.”
Penalty and Comply order
Cash Store has been ordered to comply with BC payday lending laws and refund consumers who have been overcharged since November 1, 2009. They have also been ordered to pay a $25,000 administrative penalty as well as costs incurred by Consumer Protection BC. Cash Store has satisfied Consumer Protection BC that it does not make payday loans contingent on the supply of cash cards by confirming that they are providing an option to consumers, in addition to cash cards, to receive their money in a timely manner. Cash Store has 90 days to reimburse consumers and 120 days to provide proof of reimbursement to Consumer Protection BC. Consumer Protection BC will continue to monitor the situation to ensure that the law is being followed and consumers are refunded. Updates can be found at www.paydayloanrightsbc.ca
Tags: Lenders, Payday loans
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Ohio Court Closes Payday Loan Loophole
March 23rd, 2012
About 318,000 people make use of payday loans throughout Ohio.
Ohio’s check-cashing businesses found a loophole in the Short-Term Loan Act, passed in June 2008, which placed limitations on short-term loans known as payday loans. Payday lending consists of small loans with big interest rates and lots of fees and it’s big business. According to a survey, in 2006 there were 183 payday lenders in Franklin County alone that generated more than $37 million in fees. The average borrower takes out 12 loans a year and about 318,000 people make use of payday loans throughout Ohio.
Money trap
Critics say payday loans are traps for low-income people that lock them into a never-ending cycle of high-interest loans. The Ohio Coalition for Responsible Lending concluded that the average two-week loan in 2007 was $328 and the average cost of that loan was $49. If a borrower needed to take out a loan to repay the first and did so five times, he would be obligated to pay nearly $300 in fees in just 10 weeks.
The Short-Term Loan Act
This required that payday loans be less onerous: Loans cannot exceed $500 and must have a repayment period of at least 31 days. Lenders cannot charge more than 28 percent interest, which must be calculated in accordance with the federal law, and can assess only a single $20 check-collection charge.
The loophole
Instead of obtaining licenses under the Short-Term Loan Act, however, lenders have circumvented the law by applying for licenses under two other lending laws that allow for more fees and, hence, more profit. Ohio Division of Financial Institutions records show that approximately 1,500 lenders now are licensed under these two laws, and no licenses are issued under the Short-Term Loan Act.
The Cashland suit
No one challenged the lenders until the Elyria Municipal Court took a hard look last June at one lender. Ohio Neighborhood Finance, which does business as Cashland, filed suit against Rodney Scott for his failure to repay a $500 loan when due two weeks later. Cashland sought to recover the $500, fees and interest of $112, and attorney fees, though the claim for attorney fees was later withdrawn. Cashland claimed that its loans were all “payday” style loans that are to be repaid within 14 days, but Cashland wasn’t licensed to make the payday-type loans envisioned by the Short-Term Loan Act. Instead, Cashland was licensed under a law that governs second-mortgage loans and argued that its second-mortgage loan license permitted it to make payday-type loans.
The court’s decision
The court was not persuaded. It allowed Cashland to recover only eight percent interest, not the 25 percent it claimed, and denied all fees. The decision is noteworthy. “This court will not nullify the will of the legislature and voters and read into the second-mortgage loan law some previously unnoticed, implied authority for a type of lending historically the subject to special usury legislation.”
Tags: Ohio lending, Payday loans, Short-Term Loan Act
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Read This and Be Very, Very Careful With Loans
March 21st, 2012
Consumer Ripoffs by Offshore Corporations
This woman was desperate to pay a handful of crucial bills, so she went online and researched digital loans. She read about Internet payday loan companies and how they work, and then she found one that seemed better than the others.
My details
“In order to find out if I qualified I had to give them my bank account and social security number as you would for any loan,” she told The Skanner News. “There was my first stupid thing.” This Oregon resident, who has requested anonymity because she hasn’t yet told her family that a $400 loan turned into a $1,000 nightmare, has helped touch off a national effort by Sens. Jeff Merkley (D-OR) and Sen. Daniel Akaka (D-HI) to regulate the billion-dollar offshore payday lending industry.
CFPB
Now Merkley and Akaka have officially requested that Consumer Financial Protection Bureau (CFPB) Director Richard Cordray take action against such payday lenders, who reach right into unwary consumers’ bank accounts and siphon out everything they can get. Merkley brought the issue to the National Newspaper Publishers’ Association last week in Washington D.C., during Black Press Week.
Millions affected
“Millions of Americans are being affected by the abusive and deceptive payday lending practices,” says Merkley. “While Oregon is lucky to have state legislation in place to stop the worse practices, there are still loopholes and offshore websites that are dragging Oregon families into black holes of debt. It is time to bring order to the Wild West of the lending market.”
Tags: Lending market, Offshore lending, Payday loans
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Banks and Credit Unions Move Into Payday Loans
March 20th, 2012
A tough industry to control
A fixture for years in poor, working-class neighborhoods, payday loans are increasingly being offered by local banks and employee credit unions, triggering concerns by consumer groups that more Americans will be trapped in high-interest loans that could take years to pay off.
The Payday Loan
Conventional payday loans from storefront operations provide workers a two-week advance of as much as $500 on their paychecks for a flat fee or an interest rate that doesn’t sound too extreme on the surface. But many people can’t repay the loans when they come due. Instead, they simply roll the loans over from payday to payday, or take out new loans to cover the old ones, piling on additional costs that can result in interest charges of 300 percent or more over the course of a year.
Mushrooming
More than two dozen regional and community banks now offer versions of these loans, most starting their programs since 2007. The biggest increase, however, has come at credit unions. Nearly 400 of them now are in the market, attracted by a 2010 change in regulations that boosted the maximum interest rate on payday loans to 28 percent from 18 percent.
The banks
The move by banks into payday lending, or direct deposit advances, as many call it, led about 200 groups to write to federal regulators last month and call for prompt action to stop “this inherently dangerous product.”
Tags: Bank loans, Credit unions, Payday loans
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Payday Loan Industry Accused of Confusing Voters with “Dummy” Petitions
March 16th, 2012
“They sent threatening letters to our churches last month”
An effort to cap payday loan interest rates at 36 percent with a petition is getting competition that critics say would only serve to confuse voters. Supporters of the ballot initiative are working to collect the 90,000 signatures needed to put the measure on the November ballot. “We know that if we get enough signatures, and we get on the ballot that we will win,” said Molly Fleming-Pierre of Communities Creating Opportunities, the group behind the interest-rate cap petition. “Voters in Missouri are sick and tired of triple-digit interest rates.”
Confusing tactic
But Fleming-Pierre and other say that opponents of the measure are working to confuse voters with similar-sounding petitions that would, in fact, limit the ability of the state to regulate the payday loan industry. “They sent threatening letters to our churches last month, and now they’ve gotten a few what we call ‘dummy’ petitions,” said Fleming-Pierre, referring to the efforts of a group called Missourians for Equal Credit Opportunity, which has submitted three petitions of their own with the state, and has begun collecting signatures.
Capping interest rates
The first petition would cap interest rates at 360 percent. “We think that’s a major attempt to confuse voters, because we’re trying to cap them at 36 percent, not 360 percent,” said Fleming-Pierre. “But as a voter, if you read that quickly you might not notice.” The second petition put forth by Missourians for Equal Credit Opportunity would cap payday loan interest rates at 13.99 percent, but with a catch in the fine print, a clause that says “unless both parties agree otherwise in writing.”
Amendment
The third petition is actually an amendment to the state constitution banning lawmakers from regulating the payday loan industry. “We’re already one of the loosest regulatory states in the entire nation,” said Fleming-Pierre. “We have the highest interest rate cap in Missouri of anywhere else in the nation.” Seventeen states currently cap payday loan interest rates at 36 percent. Industry critics say that there’s an all-out effort to make sure Missouri doesn’t become number 18. “The payday lending industry (makes) $317 million every single year in interest in the state of Missouri, and they don’t want to lose that,” said Fleming-Pierre.
No confusion
A spokesman for Missourians for Equal Credit Opportunity in St. Louis told FOX 4 that his group isn’t trying to confuse voters, saying that their petitions are just as legitimate as their opponents.
Tags: Capping interest rates, Interest rates, Payday loan
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That Payday Loan’s ‘Gotta Be Bad News’
March 13th, 2012
So why are you hiding it from your wife?
Much has been reported in recent years about payday loans and the huge fees and sky-high interest charges that borrowers can rack up if they use such services. And though their early demise has been predicted, they are not only alive, they are thriving!
A sad story
Earlier today on Tell Me More, columnist Petula Dvorak recounted the sad story of Tyrone Newman and his “holiday splurge” that led to a 651 percent interest rate and the $1,500 he borrowed that turned into what could have been an $18,000 bill if his boss hadn’t stepped in to help him get out of that financial mess. The perils of taking payday loans to cover expenses and then getting further into debt if you can’t make the payments have been well documented.
Newman’s story
He didn’t want to tell his wife that he’d gone to payday lenders to get money for the family’s Christmas presents. And as he told Dvorak, “that’s all you gotta know. Anything you gotta hide from the wife has gotta be bad news.”
Tags: Debt, Payday loans
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Churches Launch anti-Payday Loan Petitions
March 11th, 2012
A group of religious leaders meet to learn more about payday loans.
Responding to an invitation of Michael Overton, senior pastor of First Baptist, church leaders learned how the problem of payday loans is affecting people in their neighborhoods and what they can do about it, according to a news release. Present at the Feb. 27 event were representatives from Baptist, Catholic, Church of Christ, Episcopalian, Jewish, Lutheran, Methodist and Mormon congregations.
Interest
Those in attendance learned that, according to the Missouri Department of Finance’s Jan. 4, 2011 report to the General Assembly, the average payday loan was $307. The average rate of interest was 445 percent APR. That means a $300 loan would have an interest charge of nearly $50 for only 14 days.
Missouri
According to the report, in January 2011, 2.43 million loans were made in Missouri, with an average loan amount of $307.56 and an average annual rate of interest at 444.61 percent. According to current Missouri law, a loan and subsequent renewals may not earn more than 75 percent of the original principal in interest and fees. That means a $100 loan can earn up to $75 in interest and fees. In comparison, neighboring states all have caps of $15 per $100 loaned. Missouri allows up to six renewals. Renewals are not allowed in any neighboring states.
Petitions
At the meeting, petitions were distributed. The petitions call for legislation to bring Missouri’s laws in line with neighboring states by placing a cap of 36 percent on this type of loan. The Missouri legislature has failed to pass this legislation in spite of bills presented since 2008. Anyone who wishes to sign a petition, or secure petition forms and collect additional signatures, can do so by contacting First Baptist Church at
417-866-7202.
Tags: Interest rates, Missouri, Payday loans
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