Yesterday the Federal Trade Commission (FTC) announced an agreement with two payday lenders to settle charges that they illegally charged consumers across the country undisclosed and inflated fees. The two companies, Red Cedar Services Inc. (RCS) and SFS Inc., (SFS) have each paid $2.2 million and collectively waived $68 million in fees to consumers that were not collected. A copy of the stipulated order for permanent injunction and judgment can be found here.
On January 16, 2015 insideARM reported on a prior settlement in this same case. Combined with that earlier settlement, 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.
The settlements stem from FTC charges initially 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 FTC also alleged that the defendants 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.
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.
There is little perspective that can be added to this story. The allegations and stipulated order speak for themselves.