FTC Puts Payday Lenders on Notice

March 23, 2010

The Federal Trade Commission (FTC) is sharpening its regulatory focus and taking a hard look at payday lenders and other non-traditional providers of financial services. The consumer protection agency announced last week the take down of a payday lender that tricked consumers into purchasing more than in unrelated debit cards. And here's what it had to say in that announcement:

"The FTC is closely monitoring payday lending and other financial services in order to protect financially distressed consumers."

This is not a threat to be taken lightly. The FTC has broad authority to protect consumers from unscrupulous companies selling goods and services.

In the case at hand, the agency went after an online payday loan "matching" service that was alleged to have conned consumers through an loan application form that tricked them into unknowingly ordering a prepaid debit cards, at a price of $54.95 each. The FTC took the company, its partner companies and principals to court and won a civil judgement amounting to $800,000 plus the sale of a home owned by one of the defendants.

Payday loans and prepaid debit cards both have broad appeal among America's unbanked and underbanked populations, and the FTC has issued consumer advisories about unfair and deceptive practices.

Earlier this month, the FTC and several federal law enforcement agencies announced stepped up efforts to catch scammers taking advantage of financially distressed consumers. That effort, dubbed Operation Empty Promises, has resulted in at least 90 federal enforcement actions thus far, the FTC noted in a statement.

135 million of the world's poor today have some type of microinsurance policy