In separate suits brought by the Consumer Financial Practices Bureau (“CFPB”) and the Federal Trade Commission (“FTC”) federal courts have frozen the assets of two separate groups who allegedly defrauded consumers by creating unauthorized payday loans.
Payday loans are short term loans generally made in small amounts that are intended to be repaid out of the borrower’s next paycheck, together with interest. The interest is generally at a very high annual rate, but due to the short anticipated duration of the loan borrowers do not expect to pay a large amount of interest. Consumers often seek online payday loans through websites operated by “lead generators”. Consumers must provide their social security numbers and checking account numbers in order to apply for these loans. This information is then sold to firms who make the loans, according to the CFPB complaint.