FTC: $505 Million in Refunds Sent to Payday Loan Customers
in Compliance & Regulatory
By: Nicola Foggie, NJCUL Vice President, Compliance and Regulatory Affairs

The Federal Trade Commission (FTC) announced Thursday that customers who took out an online payday loan from a company affiliated with AMG Services may be getting a check in the mail from the FTC. The $505 million the FTC is returning to consumers makes this the largest refund program the agency has ever administered.

The FTC sued AMG and Scott A. Tucker for deceptive payday lending. When consumers took out loans, AMG said they would charge a one-time finance fee. Instead, AMG made multiple illegal withdrawals from peoples’ bank accounts and charged hidden fees. As a result, people paid far more for the loans than they had agreed to. In 2016 the FTC won a court case against AMG and Scott Tucker. Then in 2017, a jury convicted Tucker and his attorney of crimes related to the lending scheme. The FTC and Department of Justice are using money obtained in both court actions to give refunds to consumers. Clickherefor answers to questions about the AMG refunds.

Credit unions continuously work to develop products and solutions to help combat illicit pay day lending companies from getting their hooks into your members. Many credit unions offer payday alternative loans, or PALs, that allow members of some federal credit unions to borrow small amounts of money at a lower cost than traditional payday loans and repay the loan over a longer period. PALs are regulated by theNational Credit Union Administration, which created the program in 2010. The loans must be:

  • Issued to borrowers who have been credit union members for at least one month
  • Granted in amounts between $200 and $1,000
  • Affordable, with a maximum annual percentage rate of 28% and an application fee of no more than $20, which reflects the actual cost of processing
  • Repaid fully after one to six months of installments; no rollovers allowed
  • Provided to borrowers one at a time; borrowers may not receive more than three PALs within a six-month period.

These features can help borrowers avoid the potential debt trap created by high-cost, for-profit lenders. Clickherefor more information on NCUA’s rules governing payday alternative loans or contact NJCUL’s Nicola Foggie atnfoggie@njcul.org.