The Federal Trade Commission has reached a partial settlement with the principal defendants in its case against the payday lending operation, AMG Services Inc.
The agreement resolves allegations that the defendants threatened consumers in debt collection calls and violated the Electronic Fund Transfer Act, or EFTA.
The defendants in the case include automobile racer Scott Tucker, his brother Blaine Tucker, four other individuals, AMG Services, three other Internet-based lending companies and six related companies.
The FTC alleged that the defendants violated the FTC Act by piling on undisclosed and inflated fees, and by threatening borrowers with arrest and lawsuits in collection calls. The FTC also alleged that the defendants violated the Truth in Lending Act by giving inaccurate loan information to borrowers, and that it violated EFTA by requiring consumers to preauthorize electronic withdrawals from their bank accounts as a condition of obtaining credit.
According to documents filed by the FTC, over the last five years, the defendants tactics have generated thousands of complaints to law enforcement authorities. In many cases, the defendants inflated fees left borrowers with supposed debts of more than triple the amount they had borrowed.
One of the AMG defendants main arguments was that the FTC lacked authority to enforce the FTC Act, TILA and EFTA against tribes and tribal businesses. But U.S Magistrate Judge V. Cam Ferenbach concluded that the FTC Act gives the FTC the authority to bring suit against Indian Tribes, arms of Indian Tribes and employees and contractors of arms of Indian Tribes, and likewise found that the FTC has authority to bring its TILA and EFTA claims.
The agreement bars the settling defendants from using threats of arrest and lawsuits as a tactic for collecting debts, and from requiring all borrowers to agree in advance to electronic withdrawals from their bank accounts as a condition of obtaining credit.
The FTC continues to litigate other charges against the AMG defendants, including allegations that they deceived consumers about the cost of their loans by charging undisclosed charges and inflated fees.
Last week, Judge Ferenbach handed the FTC a victory in both this case and its overall crackdown on deceptive payday lenders, finding that these lenders remain within the reach of federal law even if they are affiliated with American Indian tribes.
The judge's report and recommendation is subject to review by U.S. District Judge Gloria M. Navarro.
The FTC has sued several payday lenders for engaging in unfair and deceptive practices against consumers. The court found that payday lenders cannot avoid three key federal consumer protection statutes the FTC Act, the Truth in Lending Act and the Electronic Fund Transfer Act simply by aligning themselves with American Indian tribes.
The FTC alleged that these other lenders, like AMG Services, have employed deception and other illegal conduct to take advantage of financially distressed consumers seeking these loans.