On February 18, 2015, the Federal Trade Commission (“FTC”) filed a complaint against Payday Support Center LLC and related entities (“PSC”), alleging that the debt relief companies have made untrue claims related to the services they offer. PSC ran advertisements on the Internet, radio, television and in print, promising consumers that its “financial hardship program” would “get rid of” consumer debt in four to six months. However, despite receiving payment from its clients for the purpose of paying off their debts, PSC failed to deliver any material results to its customers, leading to the subject litigation.
FTC’s Allegations of False Advertising by Debt Relief Business
According to the complaint, PSC targeted consumers with two or more outstanding “payday” (short term, high interest) loans. PSC promised consumers that it would negotiate with lenders to obtain a reduced rate and eliminate consumer debt within four to six months. Consumers who enrolled in PSC’s program were told to stop making payments directly to lenders, and to instead make their payments to PSC. PSC promised that it would, in turn, use the funds to pay off consumers’ debts. PSC also promised that by the end of its program (when the loans were paid off), consumers would only have to pay PSC a small fee of no more than $38.
Instead, the FTC has alleged, PSC would simply send one form letter to the consumer’s lender, which was often ignored. According to the complaint, “[t]ypically, consumers have learned at the end of their program that Defendants failed to resolve consumers’ payday loans and that consumers, in fact, were still obligated to repay their payday loans under the original terms.” When confronted by angry consumers, PSC would allegedly inform them that they were mistaken as to the services they had signed up for, and that PSC was only committed to conducting “loan validations” until the consumer upgraded to a more expensive PSC services plan. PSC must file an answer to the FTC’s complaint next month.
We have previously blogged about state efforts which target marketers of payday loans. The FTC has been equally vigilant in regulating those who promise debt relief. As evidenced by this FTC action, debt relief providers and their marketers must take care to ensure that the services they provide are as advertised.