LAS VEGAS (CN) – Two Florida marketing companies knew they were selling consumer information to a dicey payday lender that scammed people for $43 million, the FTC claims in court.
Sequoia One and Gen X Marketing Group collected and sold payday loan applications in a scheme that stole millions of dollars from millions of victims, the Federal Trade Commission claims in its Aug. 7 lawsuit.
The government claims that, from 2009 until at least 2013, the two companies worked as data brokers, collected sensitive consumer information from 2.2 million consumers seeking payday loans, and sold it to non-lenders such as Ideal Financial Solutions.
Sequoia One and Gen X allegedly bought some of the information and obtained other information through several websites they own, which claim to help people obtain payday loans. However, the data is actually used to “commit fraud by debiting consumers’ bank accounts” for products that people never bought, the FTC says.
“Ideal Financial processed at least 1.5 million unauthorized charges, totaling at least $43 million, to consumer bank accounts using information from consumer payday loan applications purchased from defendants and other data brokers,” the complaint states. “Consumers did not consent to these debits and only learned of them after Ideal Financial had debited their bank accounts. Ideal Financial falsely told complaining consumers that they purchased its bogus financial management or counseling products at a payday loan website.”
Ideal Financial is not a party to last week’s lawsuit, but the FTC sued that company and other defendants for FTC Act violations in January 2013, claiming they targeted financially-vulnerable consumers for their unauthorized charges.
“To handle the tens of thousands of complaints they received from consumers, the defendants set up a call center in St. George, Utah, and hired a company with call centers in the U.S., the Philippines, and El Salvador,” a news release for the 2013 lawsuit states. “When consumers asked how the defendants got their account numbers, call center agents were unable or unwilling to tell them.”
Friday’s lawsuit against Sequoia One and Gen X refers to Ideal Financial as a “phony online” merchant. The complaint alleges the two companies, which operated as one enterprise, sold consumer information to Ideal Financial but had to create several websites in the name of Pinnacle Processing, which the FTC describes “merely as a front” to hide the connection after drawing bank scrutiny to Ideal Financial’s unauthorized withdrawals.
The lawsuit claims that Ideal Financial debited at least $7 million in unauthorized charges using customer information provided by Sequoia One and Gen X, but it is unclear how much those two companies made. It is alleged that they sometimes sold payday loan applications for 50 cents each.
Jason Kotzker, Theresa Bartholomew, John Bartholomew Jr. and Paul McDonnell, all named as defendants in the lawsuit, “knew about the business practices” and “the high probability of the fraud and intentionally avoided the truth,” the complaint states.
An Ideal Financial executive told Kotzker in 2011 that Ideal Financial was charging consumers a “blind bump,” which is a fee hidden within a website’s terms and conditions content, according to the complaint.
Despite indications that Ideal Financial improperly billed consumers, the FTC says Kotzker and his co-defendants continued doing business with the company by selling information that included consumers’ names, addresses, birthdates, Social Security numbers, bank accounts and other sensitive information. Kotzker owns Sequoia One and works as a manager of Gen X, along with McDowell and Theresa Bartholomew.
The government seeks a permanent injunction, damages and legal costs for FTC Act violations. It is represented by FTC attorney Gregory Ashe.
U.S. Attorney Daniel Bogden was not immediately available for comment and neither were officials for Sequoia One or Gen X Marketing.
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