A federal judge has ruled that a Kansas-based payday lending operation intentionally deceived borrowers about the cost of their loans.
AMG Services in Overland, Kan., and some affiliated companies with ties to American Indian tribes inflated fees and failed to disclose charges, leaving consumers with debts far exceeding the original amount they borrowed, U.S. District Judge Gloria M. Navarro in Nevada said.
Employees of the firms, Navarro said in her May 28 decision, "were instructed to conceal how the repayment plans worked in order to keep potential borrowers in the dark."
A call to the law firm said to be representing AMG and the other firms, Muir Law Firm LLC, was not immediately returned.
The Federal Trade Commission filed charges against the companies in April 2012 that accused them of failing to disclose loan terms and improperly requiring customers to preauthorize electronic payments as a condition of receiving a loan.
AMG and the affiliates used deceptive documentation in connection with at least 5 million loans, the FTC said in a press release after the judge's decision.
The FTC reached a partial settlement with the companies on several issues last July. As part of the settlement, they were prohibited from using threats of arrest to collect loan payments. They were also banned from requiring advance bank account withdrawals.
AMG is said to have provided customer service, collections, loan documentation and other services to several payday loan firms associated with American Indian tribes: SFS, Red Cedar Services and MNE Services.
Judge Navarro ruled in March that the payday lenders' tribal affiliations did not exclude them from the FTC's jurisdiction.
Litigation in the case will continue to determine liability and damages.