Judge Tells FTC 1,300 Consumer Complaints Over Payday Loan Companies’ Coupon Scheme Could Be Hearsay

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FTC EDebitPay Loan Coupon Lawsuit Overview:

• Who: The Federal Trade Commission (FTC) is suing loan companies EDebitPay LLC and Hornbeam Special Situations LLC and their subsidiaries.
• Why: The FTC says the companies ran a scheme where they got loan applicants to agree to a regular fee coming out of their accounts for a “coupon club” in which the coupons were basically worthless. A judge is challenging the legitimacy of the applicants’ complaints. 
• Where: The lawsuit is being heard in a Georgia federal court.

A Georgia federal judge has challenged the Federal Trade Commission (FTC)’s $43 million lawsuit against two payday loan companies that allegedly bilked hundreds of thousands of desperate consumers out of millions of dollars through a useless coupon scheme. 

In a hearing Dec. 21, U.S. District Judge William M. Ray II said he was struggling with the fact that the FTC had admitted as evidence more than 1,300 consumer complaints that had been submitted to it online over the alleged scheme, Law360 reported.

“Complaints can be made online that may or may not be true,” he said. “You haven’t brought a single consumer into this case at all.”

The lawsuit revolves around claims filed in 2017 that Nevada company EDebitPay LLC and its California-based subsidiaries attempted to charge short-term loan applicants more than $130 million between July 2010 and September 2013 in a coupon club membership scheme, succeeding in bilking at least $27 million from consumer bank accounts. 

The membership scheme involved requiring payday loan applicants to check a box online that signs them up to a coupon membership. 

Unwitting Loan Applicants Were Charged Initial, Recurring Monthly Fees, FTC Says

The FTC says unwitting loan applicants were charged initial fees of about $50 or $100 and recurring monthly fees of about $15 or $20 to access online coupons for hotels, movie theaters, restaurants and various retail stores. However, of more than 200,000 people who were signed up, only about 400 used the coupons, the FTC says.

The FTC alleges the scheme was continued by Georgia company Hornbeam Special Situations LLC and its subsidiaries after the company was sold by EDebitPayLLC in 2013. 

It is seeking $43 million in compensation from the companies. 

In the hearing last week, FTC Attorney Hong Park hit back at the judge’s challenge, saying consumer complaints are admissible and show how widespread the issue was. 

“These were probably the most vulnerable consumers that you could have, they were desperate,” he said.

Lawyers for the defendants say that because consumers clicked the checkbox when applying for a loan, the companies operated the scheme legally.

In 2011, EDebitPay was hit with a class action lawsuit alleging it took information from loan applicants and used it to forge checks on behalf of the applicants without their knowledge or consent.

Do you think the FTC should be able to use consumer complaints in its lawsuit? Let us know in the comments!

The FTC is represented in-house by Hong Park, Korin E. Felix, Anna M. Burns and Philip Z. Brown.

The EDebitPay Coupon Lawsuit is Federal Trade Commission v. Hornbeam Special Situations LLC et al., Case No. 1:17-cv-03094, in the U.S. District Court for the Northern District of Georgia.

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