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Data Brokers Sold Payday Loan Applicants’ Information to Scammers: FTC

WASHINGTON -- A data broker operation sold payday loan applicants' financial information to scammers, who took in millions of dollars by debiting bank accounts and charging credit cards without authorization, the Federal Trade Commission charged Wednesday.

The data brokers bought "hundreds of thousands of consumer payday loan applications" and, instead of passing them to legitimate payday lenders, sold them to non-lending third parties, the FTC charged in a complaint. Among the companies, was Ideal Financial Solutions Inc., which bought 500,000 applications and raided the accounts for at least $7.1 million, the FTC said.

"These non-lender third parties included phony Internet merchants, such as Ideal Financial, that used consumers' sensitive information to commit fraud by debiting consumers' bank accounts for purported financial products that the consumers never purchased," the complaint said.

The FTC is seeking a permanent injunction against the defendants -- Sequoia One of Wyoming, Gen X Marketing of Florida and individuals associated with the companies, Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew Jr., and Paul T. McDonnell -- and the return of ill-gotten gains.

In a statement, Jessica Rich, director of the FTC's Bureau of Consumer Protection, said that data brokers that act unethically are as culpable as the scammers themselves.

"Companies that collect people's sensitive information and give it to scammers can expect to hear from the FTC," she said.

ID Theft Protector LifeLock Violating Settlement, FTC Alleges

McDonnell and the Bartholomews have agreed to settle, the commission said, under an order that prohibits them from selling or otherwise benefiting from customers' personal information. The order's $7.1 million judgment against the Bartholomews will be suspended upon payment of $15,000, it said.

The FTC documents were filed in U.S. District Court in Nevada and the final orders are subject to court approval.

Payday loans are small extensions of credit that borrowers agree to repay in a short time, such as when they next receive a paycheck. Lenders who offer the products say they help people who are strapped for cash but consumer advocates say borrowers often end up with high debt because of high interest rates, fees and rolling over the loans.

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