FTC makes $800,000 settlement with short term loan marketer

The Federal Trade Commission recently settled charges against two short term loan marketers that allegedly tricked consumers into buying prepaid debit cards that were unrelated to their short term loan applications. Matthew Patterson, Mark Benning, Jason Strober and Swish Marketing, Inc. operated websites that advertised short-term loan matching services, according to the FTC. The websites also included a loan application that allegedly tricked consumers into ordering a debit card while they applied for the loan. Consumers who just clicked a button reading "finish matching me with a short term loan provider!" were improperly charged $54.95 for the debit card, the FTC says. The FTC already charged Swish Marketing and VirtualWorks LLC for deceptive business practices, and added more allegations against Swish Marketing in April 2010 that it sold consumers' bank account information without their consent. The most recent settlements bar Patterson and Benning from activities that include misrepresenting material facts about any product or service and charging consumers without first disclosing what billing information will be used, how much they will be charged and which account will be billed. The men are also required to monitor their marketing affiliates to ensure they are in compliance with the order, and Patterson is banned from maintaining an affiliation with Swish Marketing and is not allowed to sell or advertise any product that has a "negative-option" program - in which a consumer's silence is interpreted as agreement to make a purchase. A $5.2 million judgment comes with the two settlements, but will be suspended once Patterson pays $350,000 in up-front fines and pays an additional $450,000 in 10 yearly installments. Judgment against Benning will be suspended when he hands over the proceeds from the sale of his home. Short term lenders can offer a valuable service to consumers who need quick access to a short-term loan or whose consumer credit report disqualifies them from traditional bank loans. But the companies can get in serious legal trouble if they do not abide by state and federal legislation. Lawmakers in Illinois, Texas and other states have passed or are considering regulations that cap the amount of interest on short term loans and the number of loans consumers can take out in a 12-month period. Short term lender and pawn shop operator First Cash recently announced it would be selling its short term operations in Illinois, due in part to laws that would go into effect there in late March, Reuters reports.