A group of nine South Dakota-based payday lenders — doing business under at least 17 different names, but all sharing a common senior executive — has agreed to stop garnishing wages from customers with delinquent accounts, at least until there is some sort of conclusion to the Federal Trade Commission lawsuit against them.
The FTC has sued the nine lenders, including PayDay Financial, Great Sky Finance, 24-7 Direct Cash, and others, and the man who operates them, alleging that they are deceiving customers into giving up their rights to dispute wage garnishments, among other charges.
The FTC says PayDay and its cousins use unfair and deceptive credit practices, including hiding garnishment provisions — in small print deep in the loan application — which illegally deprive applicants of the right to revoke the garnishment agreement in favor of a payment plan and allow garnishment of future wages as well as those already earned by the borrower.
PayDay requires borrowers to agree to electronic funds transfers on future earnings and extends credit to borrowers against future earnings, creating a constant cycle of debt, the FTC says.
Following the FTC’s suit, the businesses agreed to stop garnishing wages unless the customer in question applied for a loan using a form that didn’t include the tricky garnishment clause.
Many payday lenders make their corporate home in South Dakota because the state has no limit on interest rates.
For the full list of affected payday lenders, check out the PDF of the suit here.
FTC Gets Payday Lenders to Back Off [Courthouse News]