Debt collector accused in payday lender scheme

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July 7, 2014 – A debt collector and his Georgia-based business operation were barred by a federal judge from using “strong-arm tactics” to collect payday loan debt from consumers, according to reports.

American Banker reported on the case, which was filed by the Federal Trade Commission. FTC alleged that the tactics used by the defendants violated the Federal Trade Commission Act and the Fair Debt Collection Practices Act. FTC’s statement said the defendants violated these laws by “telling consumers’ family members, employers, and co-workers about the debt; failing to identify themselves as debt collectors; using profanity; making repeated inconvenient or prohibited calls; failing to provide information in writing about the debt; and making unauthorized withdrawals from consumers’ bank accounts.”

The Banker article notes federal authorities are targeting cases like this under the Justice Department’s Operation Choke Point initiative, which investigates whether credit unions and banks allow third-party payment processors, working on behalf of payday lenders, to illegally access consumer checking accounts.

A report from the House Oversight and Government Reform Committee last month says the Justice Department’s “Operation Choke Point” program acted to pressure banks to cut off legal businesses the Obama administration considered “high risk.” The committee, chaired by Rep. Darrell Issa, R-Calif., also alleged that the department did not have “adequate legal authority” for the program.

Rep. Blaine Luetkemeyer, R-Mo., introduced a bill, H.R. 4986, to curb the Justice Department’s ability to continue its “Operation Choke Point” program. In April, NAFCU joined with other financial services trades in a statement to the House Financial Services Committee warning that this program “could seriously deter the natural growth and development of e-commerce and stifle future economic growth.”

NAFCU continues to monitor this issue and the effects on credit unions.

Related Links:
American Banker article
FTC statement
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