Tag: payday loan scams

18
Apr

Payday Loan Scammers Give Us Another Bad Rap

From the FTC

The Federal Trade Commission charged two men and their companies with unfairly and deceptively billing consumers without their consent, and not providing promised refunds, in violation of federal law. At the FTC’s request, a federal court temporarily halted the defendants’ deceptive practices pending further proceedings, froze their assets, and appointed a receiver to take control of the business and its assets. The FTC seeks to stop their illegal practices and make them give up their ill-gotten gains and provide refunds to consumers.

According to the FTC’s complaint, Michael Bruce Moneymaker, Daniel De La Cruz, and their companies obtained consumers’ personal information from websites that claimed to match consumers with payday lenders, and then enrolled consumers, without their knowledge, in one or more of several worthless “continuity” programs. These programs included an up-front cost of up to $49.99 each, plus additional weekly or monthly recurring fees of up to $19.98. Continuity programs charge recurring fees until a consumer takes affirmative action to cancel.

The complaint alleges that after consumers submitted their personal information online, they encountered a pop-up box titled “Terms and Conditions” that appeared to be a part of their payday loan application. This pop-up box asked consumers to provide an authorization but made no mention of the defendants or their continuity programs. In many instances, consumers believed the pop-up box was part of their payday loan application and provided the requested authorization.

The FTC alleges that the defendants used consumers’ bank account information, obtained through their payday loan applications, to create and deposit “remotely created checks” to pay for the continuity programs. Consumers learned of their enrollment in the defendants’ continuity programs only when they checked their bank account, or when their bank accounts were overdrawn because of the defendants’ unauthorized debits. Frequently when consumers called the defendants’ customer service numbers to cancel or seek a refund, no one would answer the line, the line would go dead, or the consumer would be put on hold for an extended period of time. If consumers actually reached someone in the defendants’ call center, the defendants’ employees attempted to dissuade them from demanding their money back.

The defendants’ call center employees allegedly told consumers they authorized the charges as part of a payday loan application and that they were being charged for a third-party offer with benefits including a free stored-value Visa card, free voicemail, free airline tickets, and a $10,000 secured credit line. Call center employees also promised consumers refunds that consumers never received. In some instances, consumers who had been enrolled in multiple programs were told they had to call separate numbers to discuss each one, even though the call center handled calls for all of the defendants’ programs.

The defendants allegedly told call center employees to limit the number of refunds offered and evaluated employees’ performance based on their ability to keep the refund rate as low as possible. The defendants’ employees often refused refund requests, gave refunds only to the most persistent consumers, or falsely promised refunds until consumers stopped calling. Some consumers were told, falsely, that a manager would call them or their calls would be returned.

The FTC charges that the defendants violated the FTC Act by:

  • obtaining consumers’ bank account information and debiting their accounts without their express informed consent;
  • falsely representing that consumers’ authorizations were part of their payday loan applications;
  • failing to clearly and conspicuously disclose that consumers would be charged for third-party trial offers automatically extended to them;
  • falsely telling consumers that they were not entitled to refunds because they agreed to enroll in the defendants’ programs and pay for them, and had agreed that they could get a refund only if they asked during the initial trial period; and
  • falsely promising refunds to consumers and not providing the refunds.

The FTC complaint names Michael Bruce Moneymaker, also known as Bruce Moneymaker, Mike Smith, and Michael Bruce Millerd, and also doing business as Fortress Secured; Daniel De La Cruz; Belfort Capital Ventures, Inc.; Dynamic Online Solutions, LLC; HSC Labs, Inc.; Red Dust Studios, Inc.; and Seaside Ventures Trust and its trustee.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Nevada.

To help consumers avoid the hidden costs in some “free trial” programs, the FTC is releasing a new video. Free Trial Offers tells how to check out a free trial before you sign up, and what to do if you find yourself enrolled in a free trial offer without your permission: in short, getting charged for merchandise you don’t want and didn’t order. Watch the video here or at youtube.com/ftcvideos. For more on free trials, click here.

The FTC would like to thank the Financial Crimes Enforcement Network of the Department of the Treasury, the North Carolina Attorney General’s Office, and the Las Vegas Metropolitan Police Department’s Enterprise Area Command for their help in bringing this case.

NOTE: The Commission files a 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. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

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 1,800 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  “Like” the FTC on Facebook and “follow” us on Twitter.

MEDIA CONTACTS:
Frank Dorman,
Office of Public Affairs
202-326-2674
STAFF CONTACTS:
Robin Moore,
Bureau of Consumer Protection
202-326-2167

(FTC File No. 1023165)
(Moneymaker)

29
Mar

SEC Halts $47 Million Investment Fraud at Utah-Based Payday Loan Companies

Utah payday loan lender at trial

Utah payday loan lender at trial

Washington, D.C., March 28, 2011 – The Securities and Exchange Commission today announced that it has obtained a court order freezing the assets of two online payday loan companies and their owner charged with perpetrating a $47 million offering fraud and Ponzi scheme.

The SEC alleges that John Scott Clark of Hyde Park, Utah, promised investors astronomical annual returns of 80 percent on their investments in his companies – Impact Cash LLC and Impact Payment Systems LLC. Investors were told their money would be kept in separate bank accounts and used to fund payday loans and other aspects of the companies’ operations. However, Clark instead commingled investor funds into a single pool and used them to make unauthorized investments, pay fictitious profits to earlier investors, and finance his own lavish lifestyle.
Additional Materials

* SEC Complaint
* Litigation Release No. 21903

“Investors were promised extraordinary returns while Clark was actually diverting their money to make such extraordinary personal purchases as a fully restored classic 1963 Corvette Stingray,” said Ken Israel, Director of the SEC’s Salt Lake Regional Office. “Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates.”

The SEC alleges that in addition to buying multiple expensive cars and snowmobiles, Clark stole investor funds to purchase a home theater, bronze statues and other art for himself.

According to the SEC’s complaint filed in U.S. District Court for the District of Utah, Clark lured at least 120 investors into his scheme. Besides word-of-mouth referrals from earlier investors, Clark also recruited investors by attending trade shows in various states, attending payday loan conferences, and paying salespeople to locate potential investors to meet with Clark. He paid one salesperson more than a half-million dollars over a multi-year period to locate potential investors and attend payday loan conferences and trade shows.

The SEC alleges that from at least March 2006 to September 2010, Clark and the Impact companies raised funds from investors for the stated purposes of funding payday loans, purchasing lists of leads for payday loan customers, and paying Impact’s operating expenses. Impact did not distribute a private placement memorandum or any other document disclosing the nature of the investment or the risks involved to investors. The SEC’s complaint charges Impact and Clark with fraudulently selling unregistered securities.

According to the SEC’s complaint, Clark routinely altered investor account statements provided to him by Impact’s accounting department to create artificially high annual rates of return. The altered account statements with purported profits were then sent to investors. Account statements to customers showed annualized returns varying from 30 percent to more than 200 percent.

In addition to the asset freeze approved late Friday, the court has appointed a receiver to preserve and marshal assets for the benefit of investors. The SEC’s complaint seeks a preliminary and permanent injunction as well as disgorgement, prejudgment interest and financial penalties from Impact and Clark.

This matter was investigated by Jennifer Moore, Justin Sutherland and Marie Elliott of the SEC’s Salt Lake Regional Office, and the litigation will be led by Tom Melton. The SEC appreciates the assistance of the Utah Division of Securities in this matter.

# # #

For more information about this enforcement action, contact:

Kenneth D. Israel, Regional Director
Karen Martinez, Assistant Director
SEC’s Salt Lake Regional Office
(801) 524-5796

http://www.sec.gov/news/press/2011/2011-73.htm