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Florida District Court Orders Disgorgement of Profits from Unfair, Deceptive Online Payday Loan Referral Practices
On July 18, the U.S. District Court for the Middle District of Florida held that an online payday loan referral business engaged in unfair and deceptive billing practices and failed to provide adequate disclosures to its customers. FTC v. Direct Benefits Group, LLC, No. 11-1186, 2013 WL 3771322 (M.D. Fla. Jul. 18, 2013). The FTC alleged that the defendants violated the FTC Act by obtaining consumers’ bank account information through payday loan referral websites and debiting their accounts without their consent. The FTC also alleged that the defendants failed to adequately disclose that, in addition to using consumers’ financial information for a payday loan application, they would use it to charge them for enrollments in unrelated programs and services. During a bench trial, the parties presented evidence and arguments regarding the content and operation of the websites and whether consumers could enroll in the referral programs without taking affirmative steps to do so. The court agreed with the FTC’s claims that the defendants’ practices were deceptive and held that the “pop-up box” used to enroll consumers in the programs at issue was misleading. The court explained that the defendants’ website and the online payday loan application form created the overall impression that they were intended for applying for payday loans and that the bank account information that applicants were asked to enter would be used for deposit of the payday loan—not so that the account could or would be debited for the purchase of an unrelated product or service. Further, the court held that the defendants’ disclosures were not clear and conspicuous under the principles included in the FTC’s “.com disclosures guidance.” The court also held that the FTC established that the billing practices were unfair, and ordered the defendants to disgorge over $9.5 million and permanently cease the practices at issue.