FTC Ends $7M Payday Loan Scam

The Federal Trade Commission shut down a data broker operation that allegedly cheated consumers out of $7.1 million. The scheme is accused of collecting sensitive data from people who thought they were applying for a payday loan and then selling the information to malicious companies that accessed bank accounts and credit cards without permission.

In Aug. 2015, the FTC brought charges against Jason A. Kotzker and his codefendants for supposedly not delivering the data to legitimate payday lenders and helping scammers hide the fraud from banks.

“The order prohibits Kotzker from selling or disclosing consumers’ sensitive personal information, making misrepresentations about any financial or other product or service and profiting from consumers’ personal information and failing to dispose of it properly,” a statement from the FTC explained.

“It imposes a judgment of more than $7.1 million that will be partially suspended upon payment of $45,000, which represents virtually all of Kotzker’s assets.”

The FTC claims that the defendants in the case sold applications to Ideal Financial for roughly $0.50 a piece, while the going rate for actual payday lenders is at least $100. The data brokers were accused with knowingly conducting this scheme and also with knowing that the account skimming was happening.

The complaint alleges that the defendants helped cover up the fraud with fine-print disclosures. The defendants are Sequoia One LLC, Gen X Marketing Group LLC, Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew, Jr. and Paul T. McDonnell. Three of those (Paul T. McDonnell, Theresa D. Bartholomew and John E. Bartholomew, Jr.) agreed to settle in the case.

“Scammers used consumer information they bought from this operation to make millions in unauthorized charges,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Companies that collect people’s sensitive information and give it to scammers can expect to hear from the FTC.”