Consumer Finance Insights
March 31, 2016

FTC and Illinois AG Secure Temporary Restraining Order Against Companies’ Deceptive Payday Loan Collection Practices

On March 30, the Federal Trade Commission (FTC) announced that the Northern District of Illinois granted the FTC and Illinois Attorney General’s request for a temporary restraining order against an Illinois payday loan collection operation.  The FTC and AG alleged the payday loan collector was in violation of the FTC Act, Fair Debt Collection Practices Act, Illinois Consumer Fraud Act, and Illinois Collection Agency Act.

According to the complaint, a group of corporate defendants engaged in a nationwide scheme to defraud consumers by collecting payday loan debts that consumers did not actually owe, or that the companies did not have the authority to collect.  Defendants contacted consumers who previously received or inquired about payday loans (often from online lenders), informing them that they were delinquent on the loan or other debt.  According to the complaint, in many cases the consumer was not delinquent, or never even received the payday loan that the defendants referenced.  Defendants allegedly threatened litigation or criminal repercussions in connection with the collection of these purportedly delinquent debts.

The complaint seeks preliminary injunctive relief; a permanent injunction; civil money penalties; and consumer relief.  On March 28, the district court granted a temporary restraining order, prohibiting defendants from engaging in the allegedly deceptive debt collection practices.  The court also ordered an asset freeze and appointed a temporary receiver.