On January 5, 2016, the Federal Trade Commission (“FTC”) announced that two online payday lenders reached a settlement with the FTC to resolve charges that payday lenders illegally charged consumers undisclosed and inflated fees. As part of the settlement, each company agreed to a penalty of $2.2 million and combined waived $68 million in uncollected consumer fees. The FTC stated that, together with earlier related settlements, it has collected nearly $25.5 million in connection with the case and has caused the waiver of $353 million in uncollected consumer debt.
The settlements relate to FTC charges filed in federal court in April 2012, which alleged that the payday lenders violated the FTC Act by misrepresenting the cost of loans to consumers. The FTC also alleged that the lenders violated the Truth in Lending Act (“TILA”) by failing to accurately disclose the annual percentage rate and loan terms, and violated the Electronic Funds Transfer Act (“EFTA”) by making preauthorized debits from consumer bank accounts a precondition for loans.
In May 2014, the federal court found that the payday lenders’ loan documents were deceptive and violated the TILA and entered stipulated final orders prohibiting the lenders from misrepresenting loan terms and other material facts. The orders also barred the lenders from future violations of TILA and the EFTA. The FTC subsequently approved the stipulated final orders that were then entered in the United States District Court for the District of Nevada on November 25, 2015.