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FTC sues internet 'loan sharks' for deceptive lending

Accused of'abusive and deceptive' collection tactics

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Alleged internet payday loan sharks are being sued for failing to disclose loan terms and strong-arm collection tactics by US consumers watchdogs.

The Federal Trade Commission and the State of Nevada have charged 10 related internet payday lenders, many based in the UK but trading in the US, with supplying unethical loans that allegedly breach US federal and state laws.

Websites such as www.cash2day4u.com, one of the defendants, typically offered loans of up to $500 without credit checks or proof of income, the FTC claims. Would-be applicants were only asked for their bank account details and social security numbers.

Applicants were told they would be able to get a loan, typically around $200, within 24 hours but that it had to be repaid by their next payday in addition to usurious fees of between $35 to $80. Failure to repay the loan in full would result in extra fees.

Consumers were allegedly not provided with loan terms, including details of annual percentage rates for loans or late payment fees. After reportedly repaying the defendants many hundreds of dollars more than loan amounts some consumers told their banks not to pay out on any further demands, or closed the affected accounts. This provoked "abusive and deceptive collection calls from the defendants", according to the FTC.

The loans failed to comply with applicable payday lending laws but consumers were falsely told they were legally obliged to repay by the unlicensed lenders. The defendants allegedly threatened consumers with arrest, property seizure or wage packet deductions. The defendants "repeatedly called consumers, coworkers and employers at their workplace, using abusive language and disclosing consumers' purported debts," the FTC complaint states (pdf).

Defendants in the case were named as Cash Today Ltd, The Heathmill Village Ltd, Leads Global Inc, Waterfront Investments Inc, ACH Cash Inc, HBS Services Inc, Lotus Leads Inc, First4Leads Inc, Rovinge International Inc and The Harris Holdings Ltd. The firms ran their business as Cash Today, Route 66 Funding, Global Financial Services International, Interim Cash, and BIG-INT.

Individual defendants in the case were named as Aaron Gershfield, Ivor Gershfield, and Jim Harris.

The defendants are charged with violating the FTC Act through the alleged use of unfair and deceptive collection tactics. They are also charged with breaching the Truth in Lending Act and other statues by failing to supply loan terms to applicants. The FTC lawsuit, filed in Nevada, seeks fines and an injunction against the defendants. ®

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