A massive Kansas City-based payday loan operation will be banned from offering further loans in a $ 54 million settlement announced Tuesday by federal regulators.
The Federal Trade Commission has charged 14 companies owned by two Johnson County men, Timothy A. Coppinger and Frampton T. Rowland III, with using online data to take out loans for people without their permission.
The companies – including CWB Services LLC, Anasazi Group LLC, and Sandpoint Capital LLC – targeted borrowers who had gone online to search for short-term payday loans, which tend to be small dollar loans paid off in increments of two. weeks.
Borrowers would enter their personal financial information, including checking and routing account numbers, on third-party websites known as “lead generators” to see if the sites could match them with a lender. But most never formally applied for a loan, according to the FTC complaint.
Coppinger and Rowland’s companies then bought borrower information from lead generators, deposited $ 200-300 “loans” into borrowers’ accounts without their permission, and started withdrawing up to $ 90 at a time. for “finance charges,” according to the complaint.
However, the withdrawals were not used to repay any capital. And the companies allegedly sold the bogus loans to debt buyers, who chased the applicants for more money, according to the complaint.
If someone tried to challenge unauthorized transactions, businesses would “falsely tell banks that consumers have authorized the transactions,” according to the FTC complaint.
The companies even produced bogus loan applications or other bogus documents as proof that people had agreed to borrow money, the FTC said.
The FTC also accused the companies of misleading those who genuinely wanted the loans by incorrectly stating actual finance charges, annual percentage rates, payment schedules and the number of payments.
“For example, instead of paying $ 390 for a $ 300 loan (as noted in the loan disclosure documents), some consumers paid defendants over $ 1,000” in automatic charges that would both occur weeks, depending on the complaint.
In a single year from 2012 to 2013, Coppinger and Rowland’s companies issued $ 28 million in payday “loans” and withdrew more than $ 46.5 million from bank accounts, according to the FTC.
Consumer groups say the case highlights the dangers of buying and selling consumers’ personal data online.
“The FTC has a target-rich environment for enforcement action until Congress steps in to curb their out-of-control sales of information to consumers,” said Ed Mierzwinski, director of consumer programs for US PIRG , a nonprofit consumer advocacy group.
As a result of Tuesday’s settlements, companies controlled by Coppinger and Rowland can no longer participate in lending activities and are prohibited from debiting or billing consumers or making unauthorized electronic fund transfers.
Phil Greenfield, an attorney for Rowland, said his client had already voluntarily ceased lending business, long before the FTC filed the case.
“Mr. Rowland fully cooperated with the FTC investigation, and there was no evidence that Mr. Rowland was involved in or was aware of the disputed lending practices of Mr. Coppinger or his call center.” Greenfield said in an email.
He said Rowland accepted the FTC’s offer to settle the case “just to get on with his life.”
Coppinger could not be reached for comment.
The settlements have been filed with the United States District Court for the Western District of Missouri and are subject to court approval.