The Federal Trade Commission (FTC) has entered into a settlement with two Kansas City area individuals involving “payday loans” which the FTC claimed violate the FTC Act, the Truth in Lending Act, and the Electronic Funds Transfer Act. Timothy A. Coppinger and Frampton T. Rowland III supposedly made millions of dollars’ worth of such loans through their nineteen companies. Documents filed in court alleged that the two businessmen made nearly $28 million of loans to over 70,000 customers, obtaining $46.5 million in return. Their business model involved deposits of $200 or $300 into an online applicant’s account without the customer’s knowledge, followed by withdrawals of $60 or $90 of “finance charges” at a time until the customer caught on to the scheme. Customers’ loans were often sold to debt collectors who harassed the customers for repayment.
The settlement imposes a total of $54 million in judgments against the two as well as invalidating the payday loan debts, with the judgments to be suspended upon surrender of assets by the defendants. They will also be banned from the consumer finance business. The settlement is subject to approval by a federal district court judge who had ordered a temporary injunction against the companies in September and had appointed a receiver.
(A payday loan is an unsecured short-term loan usually for a maximum of a few hundred dollars. The borrower’s income or credit is often verified, and deposits and withdrawals will typically be made electronically.)