In March of 2016 the Federal Trade Commission (FTC) filed an amended complaint against PSC Administrative, Payday Support Center, Coastal Acquisitions, Infinity Client Solutions, Jared Irby, and Richard Hughes.
The FTC alleged the Defendants sought out consumers with payday loans to sell them a debt settlement or debt validation solution. It seems the program was described similarly to other such business models. “Defendants have induced consumers to enroll in their program by claiming that they will renegotiate the repayment terms of consumers’ loans so that consumers’ payments will be reduced. Defendants advise consumers to terminate their direct payments to lenders and pay money into Defendants’ program instead. Defendants have promised consumers that, at the end of a four to six month program term, the consumers’ loans will be paid off or otherwise eliminated.”
Then the complaint went on about advance fees, telemarketing issues, marketing concerns, yada, yada, yada. You can read the complaint below.
The FTC Does Not Always Win
Contrary to what some in the debt relief industry might believe, the FTC does not always prevail. On June 17, 2016 Judge William Steele denied a request for summary judgment and was critical of the arguments.
One of the core issues was what constitutes a debt relief service. The Court was not buying the argument that the average consumer would be confused by the marketing messages describing the services of the Defendants. And despite the fact there were 256 complaints registered by the BBB over a sort of bait and switch situation with promises versus service, the Defendants allege the complaints were unfairly perpetrated by the payday loan companies.
The Defendants state they received 2.5 million inbound calls from almost 300,000 different people and closed 58,175 of them.
The court document below contains some of the sales scrip messages that were used if you want to read them. But maybe calling them scripts is not accurate since the Judge said, “The defendants, however, have presented evidence that these documents were not truly scripts to be read to potential customers over the telephone but a shorthand overview for the benefit of the sales reps.”
The Judge also made an interesting statement about the recorded undercover FTC investigator call in which a number of the alleged activities was being sold to the investigator. The Judge said, “While it is also uncontroverted that Shaquasia once made the first, third and fifth representations, she was speaking with an FTC investigator, not a customer, so there appears to be no consumer injury.”
At the core of the issue seems to be what consumers thought they heard and what was promised. The FTC says the Defendants represented they would renegotiate the terms of the debt, landing this within a debt relief service.
But despite what the telemarketers told consumers on the phone, the written agreements the consumers signed said, “Please note that, pursuant to this Contract, Company will not renegotiate, settle, or in any way change the terms of any of your debts.”
At the end of the day the Court sent the FTC home and told them to try again. The case certainly continues but clearly the Defendants got their money worth out of Greenspoon Marder on this round.
Feel free to read the rejection by the Court.