The Federal Trade Commission (FTC) has reached an agreement with a payday lender operating under the auspices of an Indian tribe in a move that should provide borrowers with additional protections. After initiating a lawsuit against AMG Services (AMG) last year, AMG and the FTC entered into a settlement agreement filed in federal court that will require AMG to alter some of its business practices.
Of note, borrowers will no longer have to give AMG direct access to their bank accounts, have payments automatically withdrawn from their checking accounts or, importantly, have multiple payments attributed to interest only (without reducing the principal of the loan). In addition, AMG must also refrain from telling borrowers that they could go to jail or be sued if they don’t repay their loans.
As reinforced by this FTC action, payday lenders must at all times ensure that their marketing and lending practices comply with the Truth-in-Lending Act and other applicable state and federal laws and regulations. This is especially the case in light of the increasingly active Consumer Financial Protection Bureau (CFPB). Entities that fail to comply with the requirements of applicable law could find themselves facing regulatory action from numerous state attorneys general, the FTC and/or the CFPB, which could result in significant fines and court-directed changes in business practices.
If you are interested in learning more about this topic, or need to review your payday lender practices based on CFPB guidance, applicable law and this recent FTC action, please contact us at your convenience.