A South Dakota-based payday lending operation and its owner will pay $967,740 to the U.S. Treasury to settle Federal Trade Commission charges of using unfair and deceptive collection tactics.

Martin A. Webb and his companies offered payday loans ranging from $300 to $2,525 to consumers across the U.S. and advertised on television and online, according to the FTC's complaint. The defendants tried to garnish consumers' wages without a court order and sought to manipulate the legal system by forcing borrowers to appear before the Cheyenne River Sioux Tribal Court in South Dakota, which did not have jurisdiction over their cases. 

"Debt collectors cannot garnish consumers’ wages without a court order, and they cannot sue consumers in a tribal court that doesn’t have jurisdiction over their cases," said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. "Regardless of tribal affiliation, debt collectors must comply with federal law."

Webb and his companies, under terms of the settlement, agreed to a $550,000 civil penalty for violating the Credit Practices Rule, which prohibits payday lenders from requiring borrowers to consent to have wages taken directly out of their paychecks in the event of a default. The defendants surrendered $417,740 stemming from their prior practice of attempting to garnish consumers’ wages without court orders, according to a partial judgment in favor of the FTC in September 2013.

Along with the monetary payment imposed on the defendants, the settlement bans them from further unfair and deceptive practices and from suing any consumer in the course of collecting a debt, except for bringing a counter suit to defend against a suit brought by a consumer.

Other defendants named in the complaint include: Payday Financial LLC, Great Sky Finance LLC, Western Sky Financial LLC, Red Stone Financial LLC, Financial Solutions LLC, Management Systems LLC, 24-7 Cash Direct LLC, Red River Ventures LLC and High Country Ventures LLC.

Western Sky agreed last year to stop funding loans amid rising legal battles with authorities in several states. It previously cited "unprecedented government interference" as the reason for laying off the majority of its employees in Timber Lake, S.D. and its decision to close its office in Eagle Butte, S.D. In October, Webb and Western Sky were among the defendants sued by Arkansas Attorney General Dustin McDaniel's office for allegedly to offer illegal payday loans online while claiming to be affiliated with a Native American tribe to avoid legal action.

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