The technology officer of a payday loan marketer the Federal Trade Commission says illegally debited the bank accounts of hundreds of thousands of cash-strapped consumers agreed in a settlement to pay $850,000 for his role.
The FTC has been cracking down on payday lending and other types of predatory financial services as part of a broad campaign to protect consumers made vulnerable by the Great Recession.
According to the agency's complaint, Swish Marketing Inc., of Palo Alto, Calif., and its three officers, Mark Benning, Matthew Patterson, and Jason Strober, the technology officer in question, operated websites advertising short-term, or "payday," loan matching services. Swish Marketing's sites included an online loan application form that tricked consumers into ordering a debit card when they applied for a loan.
On numerous sites, clicking the button for submitting loan applications led to four product offers unrelated to the loan, each with tiny "Yes" and "No" buttons. The "No" button was pre-checked for three of them. The "Yes" button was pre-checked for a debit card, with a fine-print disclosure giving the consumer's consent to debit their bank account.
Those who simply clicked a prominent "Finish matching me with a payday loan provider!" button were unwittingly charged for the debit card. Other websites touted the card as a "bonus" and disclosed the fee only in fine print below the "submit" button. As a result, consumers were improperly charged up to $54.95 each.
In August 2009, the FTC filed a complaint against Swish Marketing and VirtualWorks LLC, the debit card company that helped them design the online offers, alleging deceptive business practices. Virtual Works, formerly known as Private Date Finder, and which also did business as EverPrivate Card and Secret Cash Card, paid Swish Marketing as much as $15 for each transaction. Virtual Works and its owner Joshua Finer settled with the FTC in August 2009, paying a $52,000 fine.
In April 2010, the FTC filed an amended complaint against Swish Marketing and its officers, adding an allegation that the defendants sold bank account information to the debit card company without consent. The amended complaint further alleges Benning, Patterson, and Strober were made aware of complaints about the unauthorized debits, as indicated in their e-mail and instant messages.
For example, Patterson explained that consumers were going "ballistic" about the debit because "the offer was defaulted to yes ... and customers don't see it." More than six months after first learning of the complaints, Benning described the practice of defaulting to "Yes" as "fraud and identity theft."
The settlement order bars Jason Strober, the Vice President of Product Development and/or Engineering of Swish Marketing, from misrepresenting material facts about a product or service.
Strober is permanently prohibited from misrepresenting that a product or service is free or a "bonus" without disclosing all material terms and conditions, and from charging consumers without first disclosing what billing information will be used, the amount to be paid, how and on whose account the payment will be assessed, and all material terms and conditions.
The order further requires that transactions be authorized by consumers, and that Strober, in marketing financial products or services, monitors his affiliates to ensure compliance. He also is required to provide specific cooperation to the FTC in its ongoing litigation. In addition, Strober is required to pay an $850,000 penalty.
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