In a record Federal Trade Commission settlement involving payday lenders, two companies will pay $21 million to resolve charges that they violated the law by charging consumers undisclosed and inflated fees.

AMG Services Inc. and MNE Services Inc., and several co-defendants, were sued in April 2012 in federal district court in Nevada.

The FTC alleged that the defendants violated the FTC Act by misrepresenting to consumers how much loans would cost them. For example, the defendants' contract stated that a $300 loan would cost $390 to repay, but the defendants then charged consumers $975 to repay the loan.

The FTC also charged the defendants with violating the Truth in Lending Act by failing to accurately disclose the annual percentage rate and other loan terms and making preauthorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act.

MNE Services lent to consumers under the trade names Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services and Star Cash Processing. AMG serviced the loans.

Along with the $21 million payment and another estimated $285 million in waived charges, the settlement contains broad prohibitions barring the defendants from misrepresenting the terms of any loan product, including the loan’s payment schedule, the total amount the consumer will owe, the interest rate, annual percentage rates or finance charges and any other material facts. 

"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."

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