Six payday loan companies charged with financial fraud

Monday, March 4th, 2013 By

FTC Building

The Federal Trade Commission has frozen assets of six companies accused of payday loan fraud. Image: wsavespublicart / Flickr / CC BY

This morning, the Federal Trade Commission filed a fraud lawsuit against a group of several individuals and companies. The FTC says these companies and individuals defrauded customers seeking payday loans. These companies allegedly charged customers for products they did not want or choose.

Alleged violations of FTC Act

A group of companies headed by Michael Bruce Moneymaker, Mike Smith and Michael Bruce Millerd was named in the complaint by the Federal Trade Commission. Among others, these three ran Fortress Secured, Belfort Capital Ventures Inc., Dynamic Online Solutions LLC, HSC Labs Inc., Red Dust Studios Inc. and Seaside Ventures Trust. These companies are accused of obtaining customers’ bank account information through payday loan applications and then misusing it. Most often, the account information was used to charge customers “subscriptions” for services they did not knowingly agree to.

Alleged misuse of Terms of Service agreements

Customers coming to the websites run by the companies and individuals named in the complaint often were required to accept Terms of Service agreements to complete applications. Buried in the Terms of Service were agreements to monthly subscriptions for services like voicemail and airline tickets. These “continuity services” usually had a $40 to $50 subscription fee and another $19.95 per month. Many customers had no idea they were enrolled in the services and only discovered it if they checked their monthly statements. When the customer contacted the companies, they were rarely, if ever, given a refund. The customers were often also told that they were not entitled to refunds because they had agreed to the service.

Specifics of the FTC complaint

Michael Bruce Moneymaker and his associates were charged with five specific crimes:

  • Obtaining consumers’ bank account information and debiting their accounts without their informed consent
  • Falsely representing that consumers’ authorizations were part of their payday loan applications
  • Failing to conspicuously disclose that consumers would be charged for third-party trial offers automatically
  • Falsely telling consumers that they were not entitled to refunds because they agreed to enroll in the defendants’ programs and pay for them and had agreed that they could get a refund only if they asked during the initial trial period
  • Falsely promising refunds to consumers and not providing them

Protecting yourself from payday loan fraud

Protecting yourself from payday loan and lender fraud takes just a few extra minutes. Be sure to read the full text of any agreement you digitally or physically sign. If you are applying for payday loans or any other financing, be sure that the company you are applying for provides a physical address, phone number and responsive customer service.


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