In an effort to further protect consumers against fraudulent payday loan advance businesses, the Federal Trade Commission has started to crack down on dishonest operations.
These business are allegedly charging undisclosed and inflated fees to consumers who use their products. In addition, in certain cases some lenders have also been using illegal business practices by threatening borrowers with arrest and lawsuits if they fail or refuse to pay these unexpected fees.
FTC Cracking Down
In one specific case, the FTC brought up charges against a payday lender affiliated with a Native American tribe that felt it was immune from legal action. While this is true on a state level, the FTC operates on a federal level and was able to bring the lender up on federal charges. This is the second time in less than a year that a payday lender has been busted for trying to utilize a similar loophole.
While these lawsuits are still being pushed down the legal pipeline, the FTC has had past success in meeting fraudulent payday loan activity head on. In a separate case, the agency charged racing driver and investor Scott Tucker for allegedly charging similar inflated fees.
It’s believed that Tucker’s company illegally dipped into borrowers’ bank accounts multiple times after completing their payday transaction. Each time this occurred, not only did they take cash straight out of accounts, they also charged a new, and inflated, financing fee every time, without disclosing the true cost of the loan to borrowers. According to the FTC, the defendant would then threaten borrowers with legal action and imprisonment for failing to pay and that they would be sued. It’s believed this scheme affected more than 7,500 individuals.
Important to Review All Documents
These examples of fraudulent payday lending schemes are a prime example of why it’s important to examine all documents you are required to sign before taking out a cash loan. While a majority of payday lenders run legitimate operation intended to help you get out of a financial pinch, like any industry there are a few bad eggs. If you have read through the clauses enclosed in you payday loan request and still have some questions about the process, you can contact a loan professional at MoneyNowUSA for more information.