U.S. regulators don’t appear to be letting their guard down when it comes to payday lenders and their notorious fees. The Federal Trade Commission said Friday it has reached a $306 million settlement with two online lenders, AMG Services and MNE Services.
Under the proposed settlement, AMG and MNE will pay $21 million – the largest FTC recovery in a payday lending case – and will waive another $285 million in charges that were assessed but not collected, the agency said.
The FTC had filed its complaint in a federal district court in Nevada against AMG and MNE and several others in April 2012. The complaint alleges that the lenders violated the FTC Act by misrepresenting tow much the loans would cost consumers. For example, the loan contract stated that a $300 loan would cost $390 to repay, but consumers would be charged $975 to repay the loan.
“The settlement requires these companies to turn over millions of dollars that they took from financially-distressed consumers, and waive hundreds of millions in other charges,” said Jessica Rich, Director of the Bureau of Consumer Protection. “It should be self-evident that payday lenders may not describe their loans as having a certain cost and then turn around and charge consumers substantially more.”
The FTC also charged the lenders with violating the Truth in Lending Act (TILA) for allegedly failing to accurately disclose the annual percentage rate and other loan terms, and making pre-authorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act (EFTA).
In May 2014, a U.S. district court judge ruled that the lenders’ loan documents were deceptive and violated TILA, affirming the FTC’s allegations in the complaint.