Payday Loan Lead Generators Settle FTC Charges
June 27, 2008
Two companies that generate payday loan leads have agreed to settle Federal Trade Commission charges that their Internet advertising misled the public. Specifically, the FTC said the ads stated what the loans would costs and when they would have to be repaid, but didn't show the annual percentage rate information as federal law requires.
Since the APR on the typical payday loans can run several hundred percent, consumers who realize they are being charged 350 percent interest on that $200 loan might think twice before taking it out. At least, that's the idea behind the law.
The settlements require the advertisers to disclose APR information in similar payday loan ads in the future and to comply in all other respects with the Truth in Lending Act. APR information helps consumers compare the costs of these payday loans with others and with alternative forms of short-term credit.
In typical payday loan transactions, consumers receive cash in exchange for their personal checks or authorization to debit their bank accounts, and lenders and consumers agree that consumers' checks will not be cashed or their accounts debited until a designated future date.
Payday loans have high fees and short repayment periods, which translate to high annual rates, and they often are due on the borrower's next payday, usually about every two weeks.
The two companies, We Give Loans, Inc. and Aliyah Associates, LLC, d/b/a American Advance, are lead generators based in Minnesota and Arizona, respectively. They advertise payday loans on their Web sites and collect information from consumers through their online applications. They then sell this "lead" information to lenders that ultimately offer payday loans to consumers.
The Truth in Lending Act requires that those who advertise the cost of credit must disclose the APR of the loans to help consumers make better-informed decisions, including assisting them in comparison shopping among loans.
Source : http://www.consumeraffairs.com
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