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Payday Lenders’ Info|Runs Out of Control

LOS ANGELES (CN) - In a lawsuit replete with "illegal actors," the Consumer Financial Protection Bureau claims that a Burbank, Calif., company that buys consumer information from payday lenders and sells it puts consumers' personal information at risk.

The CFPB filed a federal complaint against D and D Marketing dba T3 Leads and its president and vice president, Grigor and Marina Demirchyan, on Dec. 17.

T3 is a "lead aggregator" - it buys consumer information (leads) from "lead generators" that sell payday and installment loans. "T3 then sells the leads to lenders and other lead purchasers," the government says.

However: "T3 has failed to vet or monitor its lead generators and lead purchasers, which exposed consumers to the risk of having their information purchased by illegal actors. And T3 has allowed its lead generators to attract consumers with misleading statements and has taken unreasonable advantage of consumers' lack of understanding of the material risks, costs, or conditions of the loan products for which they apply. This conduct was unfair and abusive," the CFPB says.

The "lead generators," or payday lenders, advertise their loans on the Internet. After people apply for a loan, they sell the applications to T3, which resells them to "lead purchasers," according to the complaint. The lead purchasers include payday lenders, installment lenders, data brokers, and "remarketing companies."

T3 does not know who ends up with the information it sells, the CFPB says, and the remarketers use it to solicit the people whose information it is for products they never asked for.

Since T3 has no idea who ends up with its information, it has no idea whether the purchasers and repurchasers are operating legally, the CFPB says. It also works with "tribal lenders" aka "offshore lenders," who claim immunity from regulation because they supposedly are based on U.S. Indian reservations.

The CFPB calls T3's business abusive, unfair and dishonest, as it misrepresents its service as offering "expertise in providing quality payday loan leads," though it has no idea who it's dealing with.

"Contrary to representations by lead generator, consumers are likely to be steered, through T3's ping tree, to lenders offering less-favorable terms than may otherwise be available to them," the complaint states.

"In particular, consumers are likely to be steered to lenders that charge higher interest rates than lenders that comply with state laws, that do not adhere to state usury limits, or that claim immunity from state regulation and jurisdiction."

And what is a ping tree?

"To filter leads to lead purchasers, T3 uses a 'ping tree,' which sets the order in which lead purchasers have the option to purchase a given lead from T3," the complaint states. "The position of each purchaser in the ping tree is determined primarily by the price the purchaser is willing to pay for a lead; the higher the price, the better the purchaser's position in the ping tree.

"A consumer who submits a loan application on a lead generator's webpage is immediately redirected from that page to a lender's webpage. This automated process takes just seconds, and the consumer is not informed that the loan application has been sold to T3 or sold by T3 to a lead purchaser."

What's more, the "lead generators" change their websites without notifying T3, and T3 does not monitor the new websites for "misleading or inaccurate statements" after it's established a relationship, the CFPB says.

It seeks disgorgement, fines and an injunction.

T3Leads did not respond to email requests for comment.

The CFPB was formed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, during the worldwide financial crisis. It began operating in July 2011, after stiff resistance from Republicans in Congress, who refused to confirm President Obama's nominee, Harvard Law school Professor Elizabeth Warren, as its director. Warren is now a U.S. senator from Massachusetts.

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