A U.S. district court in Missouri has temporarily shut down an online payday lending scheme that allegedly took tens of millions of dollars from consumers by trapping them into loans they never authorized.
After depositing money into the bank accounts of consumers, the scammers — operating under various names — used the supposed “loans” as a pretext to take money from these accounts, the FTC said.
The court imposed a temporary restraining order that appoints a receiver to take over the operation. The court order gives the FTC and the receiver immediate access to the companies’ premises and documents, and freezes their assets.
Over one eleven-month period between 2012 and 2013, the scheme’s operators issued $28 million in payday “loans” to consumers, and, in return, extracted more than $46.5 million from their bank accounts, the FTC alleged.
“These defendants bought consumers’ personal information, made unauthorized payday loans, and then helped themselves to consumers’ bank accounts without their authorization,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “This egregious misuse of consumers’ financial information has caused significant injury, especially for consumers already struggling to make ends meet. The Federal Trade Commission will continue to use every enforcement tool to stop these unlawful and harmful practices.”
In its complaint, the FTC alleges that Timothy Coppinger, Frampton (Ted) Rowland III, and several companies they owned or operated, used personal financial information bought from third-party lead generators or data brokers to make unauthorized deposits of between $200 and $300 into consumers’ bank accounts.
Often, the scheme targeted consumers who had previously submitted their personal financial information – including their bank account numbers – to a website that offered payday loans.
After depositing money into consumers’ accounts without their permission, the scheme operators withdrew bi-weekly reoccurring “finance charges” of up to $90, without any of the payments going toward reducing the loan’s principal, the FTC alleged.
The scammers, the FTC alleges, then contacted the consumers by phone and email, telling them that they had agreed to, and were obligated to pay for, the “loan” they never requested and misrepresented the true costs of the purported loans.
In many cases, if consumers closed their bank accounts to make the unauthorized debits stop, the scheme operators sold the supposed “loan” to debt buyers, who then harassed consumers for payment, the FTC contends.