FTC Bans Payday Lenders from Engaging in Lending Activities

  • The Federal Trade Commission (“FTC”) reached a settlement with payday lending company Lead Express, Inc. and related companies and individuals (collectively “Lead Express”) to resolve allegations that they used deceptive marketing practices and unauthorized bank withdrawals to overcharge consumers millions of dollars on payday loans in violation of the FTC Act, the Telemarketing Sales Rule, the Truth in Lending Act and its implementing regulation, Regulation Z, and the Electronic Funds Transfer Act and its implementing regulation, Regulation E.
  • As previously reported, the complaint alleged, among other things, that Lead Express used deceptive marketing tactics on websites and through telemarketing to convince consumers that they were signing up for loans with a fixed number of payments. In fact, consumers often found that Lead Express applied their payments to finance charges only without reducing the loan’s principal, and that it continued to withdraw regular finance charge payments after the promised term of the loan had ended.
  • Under the terms of the proposed stipulated order, Lead Express is subject to a $114.3 million judgment, which is partially suspended due to inability to pay. In addition, any consumer loan made by Lead Express will be considered as paid in full if the principal payment and one interest payment have been made. Furthermore, the order permanently bans Lead Express from engaging in lending activities.
  • One of the defendants in the FTC’s complaint, La Posta Tribal Lending Enterprise, is not a party to this settlement and the FTC is continuing its case against it.