Tribal Payday Lenders Get Comeuppance

     LAS VEGAS (CN) – Two tribally owned payday lenders agreed to pay $21 million and waive $285 million in uncollected charges to settle a deceptive trade practice complaint from the Federal Trade Commission.
     AMG Services and MNE Services are owned by the Miami Tribe of Oklahoma.
     In April 2012 the FTC accused the tribal lenders and other defendants of violating the Truth in Lending Act and Electronic Fund Transfer Act by charging “undisclosed and inflated fees” on payday loans.
     Without admitting or denying guilt, the lenders on Jan. 15 agreed to pay $21 million to the FTC and waive $285 million in uncollected charges owed by consumers across the nation. The $21 million is the largest recovery ever in a payday lending case, according to the FTC.
     The FTC says the lenders misrepresented the amount loans would cost, for instance, telling consumers a $300 loan would cost $390 to pay off, but charging them $975.
     Because the lenders are affiliated with the Miami Tribe, they claimed they were not subject to FTC regulation.
     But U.S. District Judge Gloria M. Navarro ruled in March 2014 that they are subject to FTC oversight and enforcement.
     Navarro ruled that the FTC Act “grants the FTC authority to regulate arms of Indian tribes, their employees, and their contractors.”
     “This ruling makes it crystal clear that the FTC’s consumer protection laws apply to businesses that are affiliated with tribes,” the FTC consumer protection director said at the time. “It’s a strong signal to deceptive payday lenders that their days of hiding behind a tribal affiliation are over.”
     The Nevada Federal Court ruled in May 2104 that found the lenders violated the TILA and FTC Act by not clearly disclosing the nature of their automatic renewal plans, in which borrowers incurred repeated finance charges if they did not opt out.
     The lenders filed a motion of appealability, asking if a TILA disclosure can be misleading by not “clearly and conspicuously” disclosing the loan’s automatic renewal plan and whether a summary judgment can disregard the lenders’ evidence.
     Navarro on Wednesday denied the appealability motion , saying “each question simply reflects defendants’ disagreement with this court’s application of relevant law.”
     In the 15-page settlement with the FTC, the lenders waived all rights to appeal and any claims they might have under the Equal Access to Justice Act.
     The settlement permanently enjoins them from misrepresenting payment schedules, amounts and fees consumers will owe, and interest rates and finance charges. The lenders also must disclose the extent to which payments apply to finance charges, interest, fees and principal, and whether there are prepayment penalties or if refinancing triggers and prepayment penalty.
     The settlement enjoins the lenders from violating the TLIA and requires them to disclose in writing all finance charges, annual percentage rates, payment schedules and total payments.
     It also enjoins the lenders from falsely claiming consumers can be arrested, prosecuted or imprisoned for not paying their loans, or that the lenders will “take formal legal action” against borrowers who do not pay.
     The lenders are enjoined from requiring preauthorized electronic funds transfers as a loan condition. All consumer debt is extinguished for loans issued before Dec. 27, 2012 by MNE through subsidiaries Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services, and Star Cash Processing.
     The lenders also agreed they will cooperate with the FTC in its investigation of the case, including testifying in court.
     The case remains active against other defendants.
     Those defendants are SFS, Red Cedar Services, AMG Capital Management, Level 5 Motorsports, LeadFlash Consulting, Black Creek Capital, Broadmoor Capital Partners, Scott A. Tucker, the estate of Blaine A. Tucker, Don E. Brady, and Robert D. Campbell, and relief defendants Park 269 and Kim C. Tucker, according to the FTC.

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