Settlement Requires Defendants to Pay Almost $1 Million
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A South Dakota-based payday lending operation and its proprietor will pay $967,740 to the U.S. Treasury as part of a settlement resolving FTC charges that they used unfair and deceptive tactics to collect on payday loans and compelled debt-burdened consumers to travel to South Dakota and show up before a tribal court that 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 conform with federal law.”
According to the complaint filed by the FTC, Webb and his companies suggested short-term, high-fee, unsecured payday loans of $300 to $Two,525 to consumers across the country, advertising on television and online. The FTC charged that defendants illegally attempted to garnish consumers’ wages without a court order, and sought to manipulate the legal system and force borrowers to emerge before the Cheyenne Sea Sioux Tribal Court in South Dakota, which did not have jurisdiction over their cases. The defendants also attempted to obtain tribal court orders to garnish consumers’ wages, according to the agency.
Under the terms of the settlement, Martin A. Webb and his companies have 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. Following a partial judgment in favor of the FTC in September 2013, the defendants surrendered $417,740 in ill-gotten gains stemming from their prior practice of attempting to garnish consumers’ wages without court orders.
In addition to the monetary payment imposed on the defendants, the settlement prohibits them from further unfair and deceptive practices, and bars them 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.
For consumer information regarding payday loans see: Payday Loans.
In addition to Webb, the FTC’s complaint and amended complaint named as defendants Payday Financial, LLC, Good Sky Finance, LLC, Western Sky Financial, LLC, Crimson Stone Financial, LLC, Financial Solutions, LLC, Management Systems, LLC, 24-7 Cash Direct, LLC, Crimson Sea Ventures, LLC, and High Country Ventures, LLC.