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Ten payday lenders, defined as a company that lends money at usually high interest rates against an upcoming paycheck, are facing Federal Trade Commission (FTC) charges regarding advertising and collection tactics.

The Nevada government added to the federal charges, which allege that payday lenders did not disclose important information about the loans and that their collection tactics were “abusive”.  Potential customers were told that they could borrow several hundred dollars for a fee ranging from $35 to $80 provided that the amount was repaid in the next week.   Borrowers had to provide the companies, some of them based in the United Kingdom, with their bank and social security information.

During repayment, special clauses that the government contends were not disclosed to borrowers would cause the loan amount to increase by many times over.  If the borrower terminated the lender’s access to the account, they were subject to what the government called “abusive” collection tactics.  Borrowers were allegedly told they were subject to arrest or property seizure.

he corporate defendants are Cash Today, Ltd., The Heathmill Village, Ltd., Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Lotus Leads, Inc., First4Leads, Inc., Rovinge International, Inc., and The Harris Holdings, Ltd., each also doing business as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., Interim Cash, Ltd., and BIG-INT, Ltd. The individual defendants are Aaron Gershfield, Ivor Gershfield, and Jim Harris.

Tough economic times can sometimes cause consumers to seek alternative income or lending sources.  As always, checking the lender’s reputation with your local consumer affairs office — at either the local or state level — is the best course of action before borrowing from any well-known lender.

Posted under Finance

The Internal Revenue Service released legal guidance today outlining the protections in place for the new private debt collection program.

The guidance, contained in Announcement 2006-63, describes the limited role private collection agencies (PCAs) may play in collecting back taxes and the legal restrictions and procedures in place to safeguard taxpayer privacy and taxpayer rights.

The IRS will assign delinquent federal tax accounts to three PCAs beginning Sept. 7. An initial 12,500 taxpayers who owe back taxes will be in this group, with the number reaching approximately 40,000 by year’s end.

“We’re going to implement this program very carefully so we have a good program on sound footing,” IRS Commissioner Mark W. Everson said. “We are working hard to protect taxpayer privacy and taxpayer rights.”

In addition to describing the rules that will guide PCA conduct and protect taxpayer rights, Announcement 2006- 63 also describes the type of contacts a PCA may have with a taxpayer and the procedures in place for the IRS to assist in training and monitoring PCAs.

To assist the IRS in its collection of back taxes, the 2004 American Jobs Creation Act authorizes the IRS to hire private firms to collect federal tax debts. This provision was carefully crafted by Congress and includes several limitations to ensure the private firms will be subject to the same stringent taxpayer protection and privacy rules that IRS employees work under. In addition, private firms cannot subcontract the work.

The IRS has also developed its own guidelines for the private firms, including background checks on all private firm personnel associated with the project as well as a mandatory, IRS-directed training program for company personnel.

Private firms are not authorized to take enforcement actions such as filing liens, or making levies or property seizures. In addition, private firms are not authorized to work on technical issues such as offers in compromise, bankruptcies, hardship issues or litigation. Rather, the IRS will assign to the private firms cases in which the taxpayer has not disputed the liability. The private firms will contact taxpayers to make payment arrangements.

“Redirecting relatively simple cases to private firms will permit the IRS to continue to focus its existing collection and enforcement personnel on more complex tax issues,” Everson said.

Posted under Finance