A settlement with the Federal Trade Commission will bring a permanent end to dishonest online payday loan operations run by two Kansas City area businessmen.
The action, which must be approved by a federal judge, shines an ignominious spotlight on a cadre of local entrepreneurs who made quick fortunes by raiding the bank accounts of mostly low-income consumers.
Timothy A. Coppinger, Frampton T. Rowland III and a host of their companies agreed to pay settlements totaling $54 million. The money will be used to compensate their victims.
The charges brought against the two businessmen are truly shocking. The FTC alleged that Coppinger, Rowland and their enterprises obtained financial information about unsuspecting victims, deposited money into their bank accounts without permission, then withdrew payments and claimed they were collecting on loans.
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But in many cases the consumers hadn’t even authorized a loan. And those who had were docked for fraudulent finance charges and interest rates.
It’s good that federal enforcement has shut down the operations and victims will obtain some compensation. But the allegations seem egregious enough to raise questions about whether criminal charges are warranted.
Last week’s settlement follows a similar action in January, in which the FTC ordered Overland Park businessman Scott Tucker to pay $21 million as refunds to bilked customers. Tucker remains a defendant in other FTC litigation. The federal Consumer Financial Protection Bureau has actions pending against several other Kansas City area online payday lenders.
Thankfully, the enforcement seems to have dampened this area’s appetite for online lending. Banks won’t cooperate and the entrepreneurs are no longer envied for their ill-gotten fortunes.
Some local schools, churches and charities were too quick to accept generous donations without questioning how their newly rich benefactors had acquired their wealth. Those institutions should be examining their own consciences now.
The unfolding legal actions against the online lenders must also be noticed in Topeka, Jefferson City and Washington. Too many politicians from Missouri and Kansas are beholden to traditional and online payday lenders who have contributed to their campaigns.
They too are reluctant to question their benefactors, much less regulate them. But regulate they must. We need controls on the rampant sale of consumer financial information, and tight caps on interest rates charged by short-term lenders.
It is too easy for unscrupulous businesses to take advantage of people at a time of need.