Consumer Finance Insights
October 30, 2023

FTC Consent Order Results in Permanent Ban for Cash Advance Business Owner

On October 30, 2023, the Federal Trade Commission (FTC) announced that the United States District Court for the Southern District of New York​ (SDNY) granted a permanent injunction containing a lifetime ban for the owner of a small-business lending company​​ for unfair business practices and aggressive debt collection methods. On September 27, 2023, Judge Jed. S. Rakoff of SDNY granted summary judgment in favor of the FTC on claims that the company and its owner violated section 5(a) the FTC Act,15 U.S.C. §41, et seq.​, and the Gramm-Leach-Bliley Act, 5 U.S.C. § 6801 et seq., for activities relating to their small-business lending and consumer debt collection practices.

Specifically, the court held that the owner and the company withdrew more money from customer accounts than they were entitled to, required personal guarantees from the owners of small business while advertising that such guarantees were not required, and withheld undisclosed up-front fees. The court held that the owner of the lending business “exercised considerable control” over the company, including through the design of the company’s website disclosures and the loan agreements, such that the court held him personally liable under Section 5 of the FTC Act. The court further held that the defendants filed “Confessions of Judgments” outside of the circumstances permitted by the loan agreements, resulting in financial injury to the consumer business-owners who were required to personally guarantee the loans. The court found that the defendants also made threats of financial, emotional, and reputational harm to consumers who were unable to make payments on behalf of their businesses.

​The court permanently enjoined the owner of the lending company from participating in the merchant cash advance or debt collection businesses. The court denied the FTC’s motion for summary judgment on monetary damages issues, stating that it required further proceedings to determine monetary damages.

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