Consumer Finance Insights
January 16, 2015

FTC Reaches Largest-Ever Payday Lending Settlement

On January 16, 2015, the FTC announced that it reached a settlement with two online payday lenders for allegedly misrepresenting the cost of loans to consumers in violation of Section V of the FTC Act. The companies were among a group of payday lenders that were sued by the FTC for alleged misrepresentation under the FTC Act, failing to accurately disclose the APR of a loan in violation of the Truth in Lending Act, and requiring preauthorized debits as a condition for taking out a payday loan in violation of the Electronic Fund Transfer Act. As part of the agreement, the lenders agreed to pay $21 million to the FTC, the largest FTC recovery in a payday lending case, and waive $285 million in charges to consumers. The settlement also requires that the lenders make certain disclosures, prohibits and enjoins future misrepresentations, and enjoins conditioning the extension of credit on preauthorized electronic fund transfers. The Commission unanimously approved the stipulated final order that was filed in the litigation pending before U.S. District Court for the District of Nevada. Twelve other Defendants remain in the litigation.