Written by Josh McFadden | Last Updated September 12th, 2019Our goal, here at Best Company, is to provide you with honest, reliable information you need to find companies you can trust.
The oft-criticized payday loans industry got another black eye on Wednesday, only further hurting its weakened reputation.
Yesterday, the United States Federal Trade Commission announced that it has filed charges against a data broker group in a scheme involving payday loan centers and scammers, resulting in the loss of millions of dollars of loan applicants' money.
The FTC filed the charges in the U.S. District Court in Nevada. Final orders are awaiting approval.
FTC officials say data brokers got a hold of loan applications people had filled out with payday loan centers and in turn sold the financial information in the applications to companies.
A total of 500,000 applications were compromised in the amount of $7.1 million.
"Companies that collect people's sensitive information and give it to scammers can expect to hear from the FTC," said Jessica Rich, director of the FTC's Bureau of Consumer Protection.
Specifically, the FTC has accused and charged the following parties as participating in the scam: Sequoia One LLC, Gen X Marketing Group LLC, Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew Jr., and Paul T. McDonnell.
McDonnell and Theresa and John Bartholomew will settle out of court, with the two Bartholomews paying $15,000 instead of facing a $7.1 judgment. The FTC has also barred the Bartholomews from any further financial transactions involving the payday loans applicants' information.
Payday loans are touted as a viable and ideal way for people in need of fast cash to obtain readily available loans with a strong likelihood of approval. Payday loan centers intend for the loans to be paid off quickly, ordinarily with an upcoming paycheck. However, critics point out the lenders charge exorbitant interest rates that only put the borrowers in worse financial positions than they were when they sought the loans.