Feds tackle banking loan scams

Federal regulators are cracking down on illegal lending scams that forced consumers to repay millions of dollars in unauthorized loans that they never signed up for.

The Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) said companies deposited more than $125 million in payday loans into people’s bank accounts, even though they never requested the money. This amounted to about $200 to $300 per borrower.

{mosads}The payday lenders would then withdraw fees of about $60 to $90 every two weeks to pay for these unauthorized loans.

“The utter disregard for the law shown by these businesses and the men who control them is shocking, and the grave harm they are doing to consumers simply has to be stopped,” CFPB Director Richard Cordray said.

The CFPB says the Hydra Group collected more than $115 million from the scam, and the FTC says a similar payday lender withdrew more than $46 million from people’s accounts.

When people complained about the unauthorized charges, the payday lenders produced fake loan documents to convince the banks to let them continue with the withdrawals, the CFPB said.

Eventually, these companies would sell the fabricated debt to third-party collectors who would hound people to repay the loans they never agreed to.

The CFPB and FTC have brought charges in federal court in an effort to shut down the companies and reimburse the people who were scammed by them.