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 http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt060.shtm.
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 http://secure.commentworks.com/ftc-WeGiveLoans and/or http://secure.commentworks.com/ftc-Aliyah.
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 http://www.ftc.gov 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.
Office of Public Affairs
Cara Petersen or Quisaira Whitney
Bureau of Consumer Protection
(FTC File Nos. 0723205, 0723206)
(We Give Loans)