Consumer Finance Insights
October 19, 2017

FTC Obtains $4.1 Million Judgment Against Seller of Fake Payday Loans

On October 17, 2017, the Federal Trade Commission (FTC) announced​ that it obtained a $4.1 million default judgment from the U.S. District Court for the District of Kansas against a phony debt collection operation that sold lists of fake payday loan debts to debt collectors.  According to the FTC, the operation harassed consumers for debts they did not owe and successfully persuaded some ​to pay the fake debts.

As previously reported by Enforcement Watch, the FTC filed suit against the individual and three affiliated companies on January 9, 2017.  According to the complaint​, the operation provided debt collectors with the names of millions of consumers from whom debt collectors then demanded payment. In order to do so, the FTC alleged that the individual used the name of his brother–a racecar drive who recently had a $1.3 billion judgment entered​ against him related to a purported payday lending scheme–to add credibility to the scheme.  The phony debt portfolios that were eventually sold to debt collectors contained extensive personal information about the named individuals, including their social security and bank account numbers.  According to the FTC, some consumers were persuaded to pay these fake debts.

The default judgment was issued over defendants request to excuse their default.  The judgment requires that the defendants pay more than $4.1 million they received from selling the lists, bans them from handling sensitive debt information, like credit or debit card numbers, and mandates that the defendants destroy the personal information they used.