A U.S. District Court judge has ordered Swish Marketing, Inc., to pay $4.8 million to settle a case in which the Federal Trade Commission alleged the company and its directors used Web advertising to trick payday loan applicants into purchasing prepaid debit cards.

The sites purported to match short-term, or “payday,” loan applicants with potential lenders, according to the complaint, but the application form also included an order for a debit card. To submit the application, users were given four product offers all unrelated to the loan, each with “yes” and “no” buttons. The “no” button was preclicked for three of the offers, with “yes” preclicked for the debit card, the agency said. When users clicked the “Finish matching me with a payday loan provider!” button, they were charged up to $54.95 for the debit card, the FTC claimed.

Other sites touted the debit card as a “bonus” and disclosed the enrollment fee only in fine print below the submit button, according to the complaint. The FTC alleged the sites “conveyed the general message that the consumer, in completing the application form, was merely applying for a payday loan, as opposed to purchasing any good or service.”

The case dates back to August 2009, when the FTC filed its complaint against Swish Marketing and the seller of the debit card, VirtualWorks, alleging deceptive business practices. The agency later filed an amended complaint with additional charges that Swish sold consumers’ bank account information to VirtualWorks without their express consent.

VirtualWorks and the executive defendants reached prior settlements with the FTC. In addition to the $4,856,872 payment – the total amount of consumer injury caused by the activities in the FTC’s complaint, reduced by the amounts already paid by other defendants – the court order banned the defendants from engaging in marketing any product with a negative option program. The order also requires the defendants to obtain informed consent from consumers prior to using their information collected for a particular purpose for any other purpose by a third party. Misrepresentations about material facts about a product or service as well as calling a product or service “free” or a “bonus” are also barred under the order.

To read the complaint in FTC v. Swish Marketing, click here.

To read the court’s order in FTC v. Swish Marketing, click here.

Why it matters: In a press release about the court order, the FTC said it is “closely monitoring payday lending and other financial services to protect financially distressed consumers.” Marketers utilizing negative options programs have also been on regulators’ radar recently, and legislation introduced last year by Sen. Jay Rockefeller, the Restore Online Shoppers’ Confidence Act, would have imposed stringent rules on all online negative option sales, with detailed disclosure, consent, and cancellation requirements.