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Payday Loan Law: A Proper Privacy Policy Will Keep The FTC At Bay

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Payday Loan Law 101

The Federal Trade Commission is on a mission to extinguish deceptive online marketing practices. A few months ago, Acai berry, weight loss websites were FTC target #1; today, the commission is cracking down on “negative option” programs commonly found on payday loan sites.

Redwood, California-based Swish Marketing is the latest company to attract the FTC’s wrath. Why? According to the FTC, Swish tricked unsuspecting customers into purchasing debit cards they never requested or wanted.

The Pay Day Loan Cover

Swish Marketing operated several payday loan websites that matched applicants with lenders. Visitors to the site filled out a typical loan information request form, which required applicants to divulge personally identifiable information.

But Swish’s forms were misleading. When users hit submit, they were brought to a confirmation page offering several add-on services dubbed “bonuses.” The “bonuses” each had a checkbox users could click if interested. Most of the options’ were set to “no” by default – except for a debit card option.

Not only was the debit card default set to “yes,” but the option was tiny and easily missed. The Swish marketing team also made sure the “Submit Information” button was the most prominent element on the page; the FTC argued the design added to the overall deception.

Thousands of people were duped and charged $54.95 for a debit card they didn’t need, want, or request.

Previous Complaints Against Swish and Its Operators

The debit card scam is not Swish Marketing’s first offense. In 2009, the FTC brought Swish and VirtualWorks, LLC – a debit card company – up on deceptive marketing charges. In 2010, the FTC amended allegations to the complaint. In addition to questionable marketing tactics, Swish, VirtualWorks and several of the companies’ primary officers were accused of selling users’ information without consent and ignoring customer inquiries into the issue.

The initial investigation was settled with a $850,000 payment and a promise to do better.

Swish’s Punishment For Breaking Payday Loan Law Rules

So what punishments did the FTC dole out for breaking payday loan law?

  • A $4.8 million dollar fine,
  • A Ban on creating websites that misrepresent facts about products and services, and
  • An insistence that Swish monitor actions of their affiliate marketers to ensure no laws are broken in the name of Swish Marketing and associated products.

Online businesses are the new normal; as such, people are constantly coming up with innovative ways to market and promote products. And like any nascent industry, the lines are still a little blurry as to what is considered legal and what is not – but an Internet lawyer can help you sort that out.

While what Swish did was technically illegal; however, their legal woes (and resulting fines) could have been significantly mitigated had they had a payday-loan-friendly privacy policy.

Payday Loan Law Attorney

Do you have a payday loan law question? Our firm focus is Internet law, and we’ve helped countless businesses with a host of online legal matters – including properly setting up personal finance online businesses. Contact us today to make sure your website-house is in legal order.

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