Online payday lenders reach settlement in lawsuit over collection tactics

September 22, 2009

A group of short-term online lenders agreed to pay $1 million to the Federal Trade Commission and the state of Nevada as part of the settlement of a lawsuit accusing the lenders of unfair and deceptive collection tactics.

The companies were accused of a range of unlawful tactics, including harassing debtors by calling them at work and yelling profanities at them. They were also alleged to have improperly disclosed borrowers' personal financial information to third partties

The FTC also said that the lenders failed to provide legally required information to borrowers about interest rates, and that the lenders intentionally deceived borrowers about the terms of their loans. This violates the U.S. Truth in Lending act, according to the FTC.

The lenders also made spurious threats of legal action or even arrest against delinquent borrowers, and this will be among the many practices that the lenders - two registered in the U.K., one in Gurnesy, and seven American, though two of the last have since folded - will be barred from using in the future.

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