Two payday lenders recently settled Federal Trade Commission (FTC) charges that they broke the law by charging undisclosed and inflated fees.
AMG Services, Inc. and MNE Services, Inc. will pay $21 million and will waive another $285 million in charges that were assessed but not collected.
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.
The FTC’s complaint alleged that the defendants violated the FTC Act by misrepresenting to consumers how much loans would cost. For example, the defendants’ contract said a $300 loan would cost $390 to repay–but they actually charged consumers $975 to repay the loan.
The defendants were also charged with violating the Truth in Lending Act (TILA). They allegedly failed to accurately disclose their annual percentage rates and other loan terms as well as making preauthorized debits a condition of the loans, which violates the Electronic Funds Transfer Act (EFTA).
A U.S. district court judge ruled in May 2014 that the loan documents were deceptive and violated TILA.
In addition to assessing the $21 million payment and waiving an estimated $285 million, the settlement bans the defendants from misrepresenting the terms of any loan, including the payment schedule, the total amount the consumer will owe, the interest rate, annual percentage rates or finance charges, and any other material facts. Defendants are also prohibited from violating TILA and EFTA.