Payday Loan Lead Sellers Settle With FTC

Two payday loan lead sellers have agreed to settle Federal Trade Commission charges that their Internet advertising stated payday loan costs and repayment periods without disclosing annual percentage rate (APR) information as federal law requires. The settlements require the respondents to disclose APR information in similar payday loan ads in the future and to comply in all other respects with the Truth in Lending Act (TILA) and its implementing Regulation Z. APR information helps consumers compare the costs of these payday loans with others and with alternative forms of short-term credit.

In typical payday loan transactions, consumers receive cash in exchange for their personal checks or authorization to debit their bank accounts, and lenders and consumers agree that consumers’ checks will not be cashed or their accounts debited until a designated future date. Payday loans have high fees and short repayment periods, which translate to high annual rates, and they often are due on the borrower’s next payday, usually about every two weeks. For more information about payday loans, see the FTC’s consumer education publication, “Payday Loans = Costly Cash,” available at

The respondents, We Give Loans, Inc. and Aliyah Associates, LLC, d/b/a American Advance, are lead generators based in Minnesota and Arizona. They advertise payday loans on their Web sites and collect information from consumers through their online applications. The respondents then sell this “lead” information to lenders that ultimately offer payday loans to consumers. (These leads typically sell for $9.00 to as much as $85 each depending on volume, quality, exclusivity and more.)

The TILA and Regulation Z require that those who advertise the cost of credit must disclose the APR of the loans to help consumers make better-informed decisions, including assisting them in comparison shopping among loans. According to the FTC’s complaints, the companies stated loan costs on their Web sites – a $20 fee for a $100 loan, for example – but failed to disclose the APR. For a typical 14-day pay period, consumers who obtained payday loans advertised by We Give Loans, Inc. would pay an APR from 260 percent to 521 percent or higher, and consumers who obtained payday loans advertised by Aliyah Associates would pay an APR of 782 percent. (The difference is due to the number of days the loan is outstanding.)

PaydayLoanIndustry.comThe proposed consent orders prohibit the respondents from advertising certain credit offers without providing consumers with key disclosures, such as the APR, and bar them from violating the TILA and Regulation Z in any other manner.

The Commission voted 4-0 to accept the administrative complaints and consent orders.

The FTC will publish an announcement regarding the agreements in the Federal Register soon. The agreement will be subject to public comment for 30 days, until July 24, 2008, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC requests that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments that do not contain any nonpublic information may instead be filed in electronic form by following the instructions on the web-based form at and/or

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. These complaints are not a finding or ruling that the respondents have actually violated the law. The consent agreements are for settlement purposes only and do not constitute admissions by the respondents of a law violation.

Copies of the complaints, consent orders, and analyses to aid public comment are available from the FTC’s Web site at and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Frank Dorman,
Office of Public Affairs
Cara Petersen or Quisaira Whitney
Bureau of Consumer Protection

(FTC File Nos. 0723205, 0723206)
(We Give Loans)


Florida Payday Loan Credit Services Organization Issues

The CSO or Credit Services Organization model for offering payday loans has been picking up steam in several states, most prominantly in Texas. There, the model has been confirmed by the courts and virtually every astute operator in Texas has adopted it.
If you’re not famialiar with the CSO payday loan model it essentially consists of a “servicer” that markets the product, services the product, and accepts the risks associated with the product by issuing a “letter of credit” on behalf of the “borrower” to a “lender”. A Credit Services Organization typically charges the consumer $20 – $30 per $100 loaned for 7 to 31 days. The CSO Credit Services Organization is “registered” with the state rather than “licensed” by the state. The state does not “regulate” the CSO.
The “Lender”, by not charging an APR in excess of 10% is not required to be licensed in Texas. Generally, the “lender” participates in any NSF Non-Sufficient Funds and late fees collected by the CSO Credit Services Organization. Thus we see “lenders” achieving 15% – 17% annual returns with zero risk!
The CSO Credit Services Organization model yields much better returns than the typical payday loan-cash advance-deferred deposit statutes existing in various states (Texas, Florida, Oregon… ) and provinces without all the licensing and regulation. It’s no wonder the use of the CSO Credit Services Organization model is on the rise throughout the country.
So, it was certainly a blow to the payday loan-cash advance industry when EZCORP was forced to abandon the CSO model in Florida.
The Florida Office of Financial Regulation had previously filed an administrative action against EZCORP alleging that the Florida business model used in the eleven EZMONEY stores was in violation of the state usury law. On March 25, an administrative law judge recommended that the Office of Financial Regulation issue a cease and desist order against EZMONEY’s credit services operations in Florida. This was issued on Thursday, June 12, by the Office of Financial Regulation and a requested Stay was denied on Monday, June 16, by the First District Court of Appeal.
Joe Rotunda, President & CEO of EZCORP, stated, “We disagree with the finding of the administrative law judge and the subsequent Office of Financial Regulation order. On June 13, we filed a Notice of Appeal with the First District Court of Appeal of Florida. Most disappointing is that a Motion for Stay Pending Appeal of the decision was denied. Consequently, we will close our eleven EZMONEY credit service organization stores in Florida pending the outcome of our appeal process.”
EZCORP is primarily a lender or provider of credit services to individuals who do not have cash resources or access to credit to meet their short-term cash needs. In 462 EZMONEY locations, including the eleven Florida stores to be closed, and 73 EZPAWN locations open on March 31, 2008, the Company offers short-term non- collateralized loans, often referred to as payday loans, or fee based credit services to customers seeking loans.
As in Ohio and Arkansas, the Florida payday loan – cash advance industry is under attack. It will be very interesting to watch developments. Thousands of jobs are at stake in addition to state revenues being at risk and, most importantly, consumer demand for the payday loan product showing no signs of decline.
Consumers have a tremendous desire for our product. If they cannot drive down to their local payday loan store they will get it on the Internet or via a call center. Our consumer will not be denied!
For a thorough discussion of the CSO Credit Services Organization or the payday loan industry in general, visit

Payday Loan Companies Get Creative

We like the fact that the payday loan industry remains creative and optimistic about its future. Could that be because we interface with our customer every day thus gaining tremendous insight into their needs? Unlike those who continue to attack our industry without doing the work necessary to understand the payday loan industry and our customers?

Ohio regulators recently decided they know what’s best for all of us by attempting to destroy our product and reduce the financial choices available to their residents. This despite the fact there have been virtually zero complaints by consumers regarding our industry.

Had the regulators attempted to learn as much about the payday loan customer as we have, they would have learned our product cannot be stopped. By eliminating the ability of payday loan stores to maintain physical locations in their state they have simply forced residents of Ohio to secure their small $200 to $1000 emergency loans from payday loan call centers and Internet sites residing in other states and offshore.

Thus the state of Ohio loses licensing fees, auditing revenue, jobs for Ohio residents (estimated to be 6,000+) and, most importantly, the ability to protect their residents from abuse, due-process, and privacy concerns.

Meanwhile, us pesky payday loan operators are creatively developing new products and methods in order to continue to help residents of Ohio meet their emergency financial needs AND make a buck.

Since controversial House Bill 545 first cleared the state House of Representatives in April, six payday lending companies have sought licenses to make loans under the state’s Small Loan and the Ohio Mortgage Loan acts. Not as lucrative as payday lending, short-term loans permitted under either statute can be made with the equivalent of triple-digit annual percentage rates – similar to the combination of fees and rates that prompted lawmakers to target the industry with H.B. 545.

Payday lenders still must determine if we can remain profitable by making small, short-term loans, and face the legal difficulties. But these license applications indicate those of us in the payday loan industry are not willing to quit Ohio, our customers, or our revenue streams.

“We’re looking for ways to continue to service customers,” said Jeff Kursman, a spokesman for Mason-based Check ‘n Go, which applied for 73 lending licenses under the Small Loan Act. “Nothing is off the table.”