FTC demands short-term loan disclosure


The companies are American Cash Market Inc., Anderson Payday Loans and CashPro d/b/a MakePaydayToday.com. The companies used web advertising to advertise their service and its cost. The example FTC uses is a 20 dollar cost for a 100 dollar loan within the parameters of a typical 14-day pay period. That’s fine. But what the companies left out was what that would work out to as an annual percentage rate. FTC says carrying out the numbers for various loan options results in annual rates of 460%, 520%, all the way up to 782%. "This information helps consumers compare the costs of these payday loans to other payday loans and to alternative forms of short-term credit," explained the FTC.

The three companies were not fined, but agreed to consent orders prohibiting any advertising which leaves out APR information and other key disclosures. The rules, according to the FTC, are contained in the Truth in Lending Act and Regulation Z. Under terms of the consent agreement, none of the companies are required to admit any legal wrongdoing.