According to a March 8 article that appeared in the online publication, Small Business Trends, The U.S. Federal Trade Commission filed a lawsuit in 2014 in Arizona’s U.S. District Court. The lawsuit alleges that the data broker LeapLab, as well as other brokers, feloniously bought information from online payday loan applications and resold the private data to marketers so they could profit illegally.
One of the marketers involved in the lawsuit is Ideal Financial Solutions, based in Las Vegas. The claimants state that the marketing company used the data it purchased from LeapLab to steal millions of dollars from the accounts of the best payday loans applicants without written legal permission.
Claims made in the lawsuit show that Ideal Financial purchased the information from LeapLab for 50 cents per entry between the years of 2009 and 2013. Taking these details, the company was able to abscond approximately $7 million from over 500,000 customers using their bank account and credit card details.
Last December, data brokers in the scheme admitted to selling the information of hundreds of thousands of customers, including names, telephone numbers, and social security and bank account numbers. In the court settlement, the court directed the defendants to destroy any data they possessed within the next 30 days.
Jessica Rich, who is a Director of the Bureau of Consumer Protection for the FTC commented on the allegations. She said, “Defendants like those in this case harm consumers [two times] – first by facilitating the theft of their money and second by undermining [consumer] confidence about providing . . . personal details to legitimate lenders.”
The information that was abstracted from payday loan applications was used to obtain short-term unsecured payday loan financing. This method of lending is often discouraged because of the exorbitant interest rates that are charged to consumers. Loans of this type are typically meant to pay for an emergency expense when the borrower is in-between paydays. In many instances, people with bad credit use the financing for a non-emergency item, thereby assuming a debt they continually struggle to pay.
The above-mentioned case shows the importance of choosing a reputable lender when taking out a payday loan. Better yet, because the loan comes with a high rate of interest, it is typically more prudent to obtain a short-term loan from a family member or friend, or even take out a credit card cash advance. Payday lenders can charge as much as 30% or more to borrowers for the funding.