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A new, brazen fraud begins with a twist: Instead of losing money, consumers get money, which is unexpectedly deposited into their checking account. But the surprise windfall turns into a big headache, and even bigger bills, the CFPB says in a lawsuit disclosed Wednesday.
The cash comes from a payday lender owned by a firm named The Hydra Group, which turns around and immediately begins charging huge fees and interest against the unexpected deposit, the CFPB says. Some consumers received $200 or $300, then saw $60-$90 in fees withdrawn from their accounts every two weeks “indefinitely.”
“The Hydra Group has been running a brazen and illegal cash-grab scam, taking money from consumers’ bank accounts without their consent,” said CFPB Director Richard Cordray. “The utter disregard for the law shown by the Hydra Group and the men controlling it is shocking, and we are taking decisive action to prevent any more consumers from being harmed.”
When consumers or banks challenged the unexpected deposits and withdrawals, Hydra officials produced fake paperwork that they claimed authorized the transactions, the CFPB alleges.
The Hydra Group did not immediately respond to request for comment.
The CFPB says trouble began for consumers when they entered their personal information into websites that promised to match borrowers with payday lenders. The Hydra Group uses information bought from those firms to access consumers’ checking accounts to illegally deposit payday loans and withdraw fees without consent.
Its collection of roughly 20 businesses includes SSM Group, Hydra Financial Limited Funds, PCMO Services and Piggycash Online Holdings. The entities are based in Kansas City, Mo., but many of them are incorporated offshore, in New Zealand or the Commonwealth of St. Kitts and Nevis.
Including some payday loans that were authorized by consumers, over a 15-month period the Hydra Group made $97.3 million in payday loans and collected $115.4 million from consumers in return, according to the CFPB.
The CFPB lodged its complaint against the Hydra Group and requested a temporary restraining order in the U.S. District Court for the Western District of Missouri on Sept. 9, 2014.
The Hydra Group was also sued by the FTC. Over one 11-month period between 2012 and 2013, the defendants issued $28 million in payday “loans” to consumers, and, in return, extracted more than $46.5 million from their bank accounts, the FTC alleged.
Other allegations from the CFPB:
If you’re having issues with a payday loan scam (or any kind of financial scam), it’s important to watch your bank and credit card statements for unauthorized activity, and to work with the financial institution to shut down accounts that are being accessed illegally. It’s also important to keep an eye on your credit reports for unauthorized debts and to watch your credit scores for big changes that could indicate a problem on your credit reports. Consumers are allowed one free credit report annually from each of the three major credit reporting agencies. They can also sign up to monitor their credit scores for free using a resource like Credit.com.
Image: BrianAJackson
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