WASHINGTON (6/6/14)--U.S. District Judge Gloria M. Navarro has found AMG Services Inc. deceived customers taking out payday loans by adding undisclosed charges and inflated fees, according to a Federal Trade Commission (FTC) announcement.
The decision represents the latest FTC victory in its crackdown on deceptive payday lenders.
Navarro ruled that in many cases the Overland Park, Kan., firm inflated fees, leaving borrowers with supposed debts of more than triple the amount they had borrowed. In one example cited by the FTC, the defendants allegedly told a consumer that a $500 loan would cost $650 to repay, then attempted to charge him $1,925 to pay it off. Deceptive loan documents were used by AMG Services in connection with at least five million consumer loans, according to the release.
Navarro also found that the defendants' lending practices were deceptive because key portions of defendants' loan documents were "convoluted," "buried," "hidden" and "scattered," and she further cited evidence indicating that the defendants' "employees were instructed to conceal how the loan repayment plans worked in order to keep potential borrowers in the dark."
The FTC suit against the defendants behind AMG Services began in 2012, alleging it violated the FTC Act by piling on undisclosed and inflated fees, and by threatening borrowers in debt collection calls with arrest and lawsuits. The defendants violated the Truth in Lending Act by giving inaccurate loan information to borrowers, and the Electronic Fund Transfer Act by requiring consumers to preauthorize electronic withdrawals from their bank accounts as a condition of obtaining credit, according to the FTC.
The Federal Trade Commission reached a partial settlement on other issues last year with the principal AMG defendants, barring the settling defendants from using threats of arrest and lawsuits as a tactic for collecting debts, and from requiring all borrowers to agree in advance to electronic withdrawals from their bank accounts as a condition of obtaining credit.
Litigation in the case will continue to determine the liability of each defendant and the damages the court will impose.
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