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The Beatles were right: One does get by with a little help from one’s friends – but that’s not always a good thing. A partial settlement just announced by the FTC sheds light on the unsavory cooperative relationship between certain shadowy data brokers and the scammers who buy their wares for illegal purposes.

Consumers struggling to make ends meet often apply for payday loans online. They input their Social Security, bank account, and routing numbers on the assumption that lenders will use the data to evaluate their applications and deposit money directly into their accounts. What they may not know is that in the hands of some companies, their confidential financial information becomes a product sold to third parties – some of whom have nothing to do with lending.

According to the FTC, Florida-based Sequoia One, Gen X Marketing Group, and four principals bought loan applications from the operators of payday lending sites and supplemented that motherlode by soliciting applications on their own site. But rather than serving as a go-between for consumers and legitimate lenders, the defendants allegedly sold sensitive information about more than 500,000 consumers to outfits like Ideal Financial Solutions, a Nevada-based company not in the loan business.

What did Ideal Financial Solutions do with the data? According to the judge presiding over the FTC’s action against Ideal Financial Solutions, the company simply “uploaded that information into its consumer databases and automatically charged a fee (generally around $30) to the consumers’ credit cards or debited their bank accounts.” As the Court found, “Victims had their bank accounts and credit cards charged without their knowledge or consent, and when they called to question the charges and have them reversed, customer service representatives – on defendants’ instructions or with their full knowledge and intent – falsely told the callers that they had authorized the charges.”

The FTC says the Sequoia defendants sold consumers’ loan applications to Ideal even though they knew or had reason to know that Ideal was using them to make those unauthorized debits and charges. What’s more, when the scheme resulted in sky-high chargebacks and the termination of multiple merchant accounts, the FTC says the defendants offered “a little help to their friends” at Ideal by setting up a front company to keep the operation off the radar screen of banks and payment processors. Add it all up, and the FTC says Ideal Financial Solutions processed more than 1.5 million unauthorized charges totaling at least $43 million using information from payday loan applications bought from the defendants and other “friendly” data brokers.

Three of the defendants in this case – Paul T. McDonnell, Theresa D. Bartholomew, and John E. Bartholomew, Jr. – agreed to settle the FTC charges. The proposed orders prohibit them from selling or otherwise benefitting from customers’ personal information. Most of the $7.1 million judgment will be suspended, but the whole amount will become due if it turns out they misrepresented their finances. Litigation against the remaining defendants continues.

What’s the message for others in the industry? The complaint alleges that the defendants engaged in unfair practices in violation of Section 5 of the FTC Act by selling payday loan applications chock-full of sensitive consumer information to non-lenders who had no legitimate need for them. Prudent data brokers don’t avert their eyes when the facts suggest buyers are using information for illegal purposes. And they certainly don’t lend a hand to cover up fraud.

[Note: Edited on August 26, 2016, to specify that the Nevada-based company name is Ideal Financial Solutions.]

 

Comments

Void to know our government is on top of scams like these...better late than never. Excellent article!

How does this case make any difference if the $7.1 million judgement is suspended? Was the any part of the $43 million lost recovered?

You have got to be joking. "Ideal Financial processed more than 1.5 million unauthorized charges totaling at least $43 million using information from payday loan applications bought from the defendants and other “friendly” data brokers." Yet how many people--EXECUTIVE LEVEL, not the poor slob companies use as their fall guys--will be indicted? Three defendants agreed to "settle" with the FTC? SETTLE? Why? They'll be "prohibited from selling or otherwise "benefiting" from customers' personal information?" Yet most of the $7.1 million judgment "will be suspended, but the whole amount will become due if it turns out they misrepresented their finances." Oh, well, then that's okay then. (snark)

Why doesn't "settle" mean a PRISON SENTENCE? These jackarses made multi-millions with their perfidy (and you can bet the three of them probably stashed millions away in untraceable offshore accounts before they got caught. Yet some poor dumb schmuck who gets pulled over and has, say, a baggie of about 10 joints ends up with a 3-year prison sentence. In fact, the bulk of inmates IN our prisons are in there FOR, generally, drug charges like that. We're not talking the drug kingpins but the street users. We'll spend tax dollars warehousing them in our prison system, but white collar criminals, who commit crimes that involve MILLIONS and BILLIONS of dollars rarely get convicted of anything and when they actually do, it's a rich man's prison and a light sentence. Why not put them in the nation's worst, scariest prisons? You know how we put the faces of missing children on milk cartons? How about we start putting the mug shots and names of white collar criminals on milk cartons? On billboards? Make it part of their penance, that their likeness be emblazoned as much as possible for a defined period of time so that there's face/name "recognition." Wouldn't that rock?

Why was ANY of their judgment suspended? Let's put the names of those in the legal system, including judges and attorney generals, etc., on billboards along every major interstate and highway, every one of them who gave these white collar THUGS (being rich and/or wearing $5,000 suits doesn't mean you can't be a THUG too) a basic Get Out of Jail Free card.

When does it end? If you start a website or blog and use a company's logo without asking them first, then proceed to write something negative--lousy customer service, a purchased extended warranty that doesn't cover the one part that most usually needs replacing, overpriced merchandise, the number of jobs a given U.S. company sent overseas and how much the person now doing that job makes per hour--it doesn't matter if you did your due diligence and you printed the FACTS and anything that was an opinion was clearly stated that it WAS an opinion. You'll get a Cease-and-Desist letter faster than you can say "I'm afraid of Donald Trump's hair." Yet companies can buy and sell YOUR name, your private and financial info, to data brokers, telemarketers, etc. and they don't have to pay you a DIME (nor get your permission), though they are, collectively, making millions data brokering. Why should the laws be different for ordinary citizens? Use someone famous, you get sued. But poor Joe Main Street, anyone can "buy" and "sell" his name and info. Worse, he's not even aware of it.

Americans need to WAKE. UP. Your government is selling you out like a street corner pimp. People need to STOP caring if someone is a Democrat or Republican, conservative or liberal. Because both political parties are NOT at each other's throat as much as it appears they are. They aren't different sides of a coin. They are the same side of the same coin! But as long as they keep fanning the flames, keep ordinary citizens preoccupied with arguing with each other so they don't instead unite--the federal government's biggest fear--and realize that though they may have different philosophical beliefs, the ones that matter most, we ALL share in common--clean, safe schools with up-to-date textbooks and good teachers; safe neighborhoods in which to raise your children; an insistence that not only gym be brought back to public schools but EXTENDED by a half hour at least twice a week (since once out of school they are more likely to sit at home engaging in social media than go outside and ride a bike, play a neighborhood game of basketball or soccer). Totally do away with No Child Act, which was a stupid law when it was created and has proved to BE stupid. Teaching to a test isn't teaching; it's just training a monkey by repetition. Small wonder we don't rank near the top in education. We don't deserve to. We also, conservatives and liberals alike, have families to feed, a roof to keep over their family's heads, the ability to keep their children healthy and see a doctor when they need to and not fear being bankrupted in the process. We need homes where the rent or mortgage doesn't cost HALF of your month's wages. We need automobiles that don't cost as much as the downpayment on a new home. ALL companies need to PAY THEIR EMPLOYEES A MINIMUM *LIVING* WAGE, not a minimum wage (that's for school kids so they can afford car payments, their car insurance; it was never intended to raise a FAMILY on for pity's sake!). If any corporation can afford to pay its top executives millions of dollars plus stock options, it can afford to pay its employees a minimum LIVING wage. Period.

And stop letting the right scare you with the specter of socialism. Name a modern president who has actually tried to turn the United States into a socialist country. I don't mean just repeating what you heard on Fox News or MSNBC, on Rush Limbaugh or any other talk show whether liberal or conservative. Almost everyone has access to a computer and the internet today. It's never been easier to poke in the weeds as it is now, catch both political parties and special interests groups lying. No, the GOP and Democrats keep the socialism bogeyman alive because just like in the Wizard of Oz, they don't want you to see that the 'great Oz' is nothing more than a diminutive man hiding behind a curtain using smoke and mirrors and a booming microphone to scare you and keep you scared.

WE ARE NOT IN DANGER OF BECOMING A SOCIALIST NATION. We *are* in danger of becoming an oligarchy, however. In fact, already are to some extent. Were it not the case, the Supreme Court would have NEVER have voted in favor of the very scary Citizens United ruling, which puts and keeps ordinary citizens in the back seat in the dark and corporate America not just in the driver's seat but also the only ones with a flashlight.

Never has America been in more danger from its own government. Exactly what our Founding Fathers feared and warned of has come to fruition--that money begets power that begets more money and power because greed is insatiable. You don't need to be hooked on heroin to be a junkies. You can get just as drugged, addicted, to power and money. The difference is the latter affects billions of people. Americans need to re-discover their roots, the steely backbone their ancestors had that BUILT this country, that took on Great Britain--and WON. Won its autonomy, it's ability to decide and control its own destiny. Don't we owe it to them and the sacrifices they made to be LIKE them? Make them proud of us? Because otherwise, everything they did, the sacrifices they made, will simply have been in vain. And that's unutterably sad.

well said and sad

Well the thing is you can steal millions and get no time sell one crack rock to one person who asked for it and get 30years but reuin hundreds of peoples life who just needed some help and get nothing

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