CFPB Sues Online Payday Lender for Money Seizure Scam; Hydra group uses bogus payday loans to illegally access consumers’ bank accounts

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The Consumer Financial Protection Bureau (CFPB) announced on Wednesday September 17, 2014 its action to stop the operations of an online payday lender, the Hydra Group, which it claims is carrying out an illegal cash scam. The lawsuit alleges that the Hydra Group uses information purchased from online lead generators to access consumers’ checking accounts to illegally file payday loans and withdraw fees without consent. The Hydra Group then uses forged loan documents to claim that consumers had accepted bogus payday loans online. At the request of the CFPB, a U.S. District Court judge temporarily ordered the operation to stop and its assets frozen. The lawsuit also seeks to return ill-gotten gains to consumers and to impose a fine on the company.

“The Hydra Group has carried out a brazen and illegal cash seizure scam, taking money from consumers’ bank accounts without their consent,” said CFPB director Richard Cordray. “The total disregard for the law shown by the Hydra Group and the men who control it is shocking, and we are taking decisive action to ensure that other consumers are not harmed.”

The complaint against the Hydra group can be viewed at the following address: http://files.consumerfinance.gov/f/201409_cfpb_complaint_hydra-group.pdf

The CFPB lawsuit names Richard F. Moseley, Sr., Richard F. Moseley, Jr., and Christopher J. Randazzo, who control the Hydra group. The lawsuit alleges that the defendants operate the business through a maze of incorporated entities to evade regulatory oversight. Their collection of around 20 companies includes SSM Group, Hydra Financial Limited Funds, PCMO Services and Piggycash Online Holdings. The entities are based in Kansas City, Missouri, but many of them are incorporated offshore, in New Zealand or in the Commonwealth of Saint Kitts and Nevis.

Consumers’ problems would start after submitting sensitive personal financial information to online lead generators that match consumers with payday lenders. These lead generators then auction the consumer information to companies that provide payday loans. In some cases, they sell large volumes of leads to data brokers who then resell them to lenders. The Hydra Group buys this information, uses it to access consumers’ checking accounts to deposit unauthorized payday loans, and then begins charging unauthorized fees.

While most of the victims of the Hydra group were consumers who did not even know they had been targeted until they noticed an unauthorized deposit in their bank accounts, some consumers actually took out loans from the Hydra group. These consumers have also been subjected to illegal practices. The CFPB alleges that over a 15-month period, the Hydra Group made $ 97.3 million in payday loans and collected $ 115.4 million from consumers in return.

The CFPB alleges that the Hydra Group and its operators are breaking several laws, including the Consumer Financial Protection Act, the Truth in Lending Act and the Electronic Funds Transfer Act. According to the Bureau’s complaint, Hydra’s illegal actions include:

  • · Withdrawal of money every two weeks: The Bureau alleges that the Hydra group deposits money into consumer accounts without authorization. After depositing the payday loan, usually $ 200 or $ 300, he then withdraws a “finance charge” of $ 60 to $ 90 from the account every two weeks indefinitely. According to the Bureau’s complaint, some consumers had to obtain stop-payment orders or close their bank accounts to end these bi-weekly debits. In some cases, consumers have been swindled out of thousands of dollars in finance charges.
  • · Non-existent or false disclosures: Lenders are generally required by law to disclose the terms of a loan to the consumer before the transaction. But in the case of the Hydra Group, the Bureau alleges that consumers typically get the loans without seeing the finance charges, the annual percentage rate, the total number of payments, or the payment schedule. Even when consumers receive loan terms in advance, the Bureau believes they contain misleading or inaccurate statements. For example, the Hydra Group informs consumers that it will charge a one-time fee for the loan. In effect, he collects these fees every two weeks indefinitely, and he does not apply any of these payments to the reduction in the principal of the loan.

  • · Require reimbursement by electronic pre-authorized funds transfer: According to the Bureau’s complaint, even in cases where consumers have made loans from the Hydra group, defendants have violated federal law by requiring consumers to agree to repay pre-authorized funds electronically. Federal law stipulates that loan repayment cannot be conditioned on the prior authorization of consumers of recurring electronic fund transfers.

  • · False loan documents: Bureau alleges that when consumers contact Hydra Group to dispute loans and their charges, representatives insist the consumer has authorized the loan and go so far as to show them copies of bogus requests or transfer authorizations. electronic. Likewise, when the consumer’s bank or credit union contacts the Hydra Group to inquire about the charges, the company also shows them false documents. As a result, consumer banks or credit unions may refuse requests to cancel deposits or withdrawals from the Hydra Group.

  • · Recovery of illegitimate debts: Even when consumers successfully close their deposit accounts, the Bureau alleges that, in many cases, the Hydra Group sells the bogus debt to third-party debt collectors. Although there is no legitimate basis for the debt, consumers are still contacted and sued for loans they never accepted.

The CFPB lawsuit aims to put an end to the illegal activities of the Hydra group. He is also asking for money to be returned to consumers who were victims of the Hydra group scam and asking for a civil fine for the company’s misdeeds.

The CFPB filed its lawsuit against the Hydra Group and sought a temporary restraining order from the US District Court for the Western District of Missouri on September 9, 2014. The court granted the request the same day, freezing the assets of the defendants. and installing a receiver to oversee the business and ensure that the group’s illegal conduct ceases. The court has set a hearing on the Bureau’s preliminary injunction request, during which the Bureau seeks to maintain this remedy as the case progresses.

The Bureau’s complaint is not a finding or ruling that the defendants in fact broke the law.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer credit markets operate by making rules more efficient, enforcing them consistently and fairly, and giving consumers more control over their economic life. For more information visit consumerfinance.gov.


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