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FTC Action Halts Tactics of Payday Lender Martin Webb aka Payday Financial, LLC of SD

9/16/2011

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Wallingford, CT - September 16, 2011 – After the Federal Trade Commission (FTC)  filed an action in U.S. district court, a payday lender that allegedly attempted to illegally garnish consumers’ wages has agreed to stop the challenged conduct pending trial.

As part of its continuing crackdown on scams that target consumers in financial distress, the FTC complaint alleges that Payday Financial, LLC, doing business as Lakota Cash and Big Sky Cash, along with other defendants, illegally attempted to garnish consumers’ wages without obtaining a court order, to collect payments on payday loans.

As a result, the defendants illegally revealed consumers’ supposed debts to their employers and deprived consumers of their right to dispute the debts or make payment arrangements, the FTC alleges.

According to the FTC, defendant Martin A. Webb operates Payday Financial, LLC, and several related businesses in Timber Lake, South Dakota. The defendants offer short-term, high-fee, unsecured payday loans of $300 to $2,525 to consumers throughout the country, advertising on television and through websites such as www.bigskycash.com and www.westernsky.com

The FTC complaint alleges that when a consumer does not pay back a payday loan on time, the defendants send documents to his or her employer that mimic those used by federal agencies collecting debts owed to the government in an attempt to garnish the consumer’s wages.

Under federal law, the government can directly require employers to garnish wages for debts it is owed without a court order. But private creditors must obtain a court order before garnishing a debtor’s wages.  The complaint charges the defendants with violating the FTC Act by:

  • Misrepresenting to employers that the defendants are legally authorized to garnish an employee’s wages, without first obtaining a court order
  • Falsely representing to employers that the defendants have notified consumers about the pending garnishment and have given them an opportunity to dispute the debt, and
  • Unfairly disclosing the existence and the amounts of consumers’ supposed debts to employers and co-workers without the consumers’ knowledge or consent
The complaint further alleges that the defendants have violated the FTC’s Credit Practices Rule by requiring consumers taking out payday loans to consent to have wages taken directly out of their paychecks in the event of a default, and have violated the Electronic Funds Transfer Act and Regulation E by requiring authorization for electronic payments from their bank account as a condition of obtaining payday loans.

To check the reliability of a company and find trustworthy businesses, visit BBB online.

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Founded in 1928, Connecticut BBB is an unbiased non-profit organization that sets and upholds high standards for fair and honest business behavior. BBB offers objective advice and a wide range of education on topics affecting marketplace trust. BBB also offers complaint and dispute resolution support for consumers and businesses. Today, 128 BBBs serve communities across the U.S. and Canada, evaluating and monitoring more than three million local and national businesses and charities. For more advice on finding companies and businesses, start your search with trust at www.bbb.org/.
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