Dougherty & Holloway
US Sues Johnson County Online Payday Lenders for Cash-Grab Scam
The Consumer Financial Protection Bureau, CFPB, has shut down two Johnson County online payday lenders and are suing the lenders for fraud because they allegedly extracted more than $36 million from customers who never agreed to loans.
“It is an incredibly brazen and deceptive scheme,” Richard Cordray, director of the consumer bureau, said in a conference call with reporters Wednesday.
According to the UNITED STATES DISTRICT COURT, WESTERN DISTRICT OF MISSOURI, WESTERN DIVISION
“Defendants, operating through a maze of interrelated companies, use consumer financial information they purchase from third parties to originate online payday loans without consumers’ consent. Defendants deposit the payday loans into consumers’ bank accounts without their authorization, and then use misrepresentations and false documents to further convince these consumers that they agreed to these phony online payday loans. Defendants then use these purported loans as a basis to make repeated, unauthorized withdrawals from consumers’ bank accounts. In some cases, Defendants have bilked consumers out of thousands of dollars in “finance charges” for a $200 or $300 loan that the consumer never agreed to.”
The CFPB says that the Hydra Group and its operators are in violation of multiple laws, including the Consumer Financial Protection Act, the Truth in Lending Act, and the Electronic Fund Transfer Act. According to the Bureau’s complaint, Hydra’s illegal actions include:
- Bi-weekly cash-grab
- Nonexistent or false disclosures
- Requiring repayment by pre-authorized electronic funds transfers
- Bogus loan documents
- Illegitimate debt collection
The CFPB lawsuit seeks to halt the Hydra Group’s illegal business and the money to be returned to consumers victimized by the Hydra Group’s scam. A civil fine is also being pursued for the company’s malfeasance.