Fed. Trade Comm'n v. AMG Servs., Inc.

• Decision Date: 28 May 2014
• Docket Number: Case No. 2:12–cv–00536–GMN–VCF.
• Citation: 29 F.Supp.3d 1338
• Parties: FEDERAL TRADE COMMISSION, Plaintiff, v. AMG SERVICES, INC., et al., Defendants.
• Court: U.S. District Court — District of Nevada

29 F.Supp.3d 1338

FEDERAL TRADE COMMISSION, Plaintiff

v.AMG SERVICES, INC., et al., Defendants.

Case No. 2:12–cv–00536–GMN–VCF.

United States District Court, D. Nevada.

Signed May 28, 2014.

Blaine T. Welsh, U.S. Attorney's Office, Las Vegas, NV, Courtney Anne Estep, Jason David Schall, Nikhil Singhvi, Federal Trade Commission, Helen Wong, Ioana Rusu, Lashawn M. Johnson, Washington, DC, for Plaintiff.

Andrew A. Kassof, Bradley Weidenhammer, Charles Kalil, Debra K. Lefler, Peter Wozniak, Richard Howell, Kirkland & Ellis LLP, Chicago, IL, Nicole Ducheneaux, Fredericks Peebles & Morgan LLP, Omaha, NE, Bradley S. Lui, Morrison & Foerster LLP, Washington, DC, Conly J. Schulte, Fredericks Peebles & Morgan LLP, Louisville, CO, David J. Merrill, David J. Merrill, P.C., Joshua M. Dickey, Bailey Kennedy, Von S. Heinz, Lewis Roca Rothgerber LLP, L. Christopher Rose, Michael R. Ernst, Jolley Urga Wirth Woodbury & Standish, Brian R. Reeve, Gregory A. Brower, Snell & Wilmer LLP, Jay Young, Robert L. Rosenthal, Howard and Howard, Patrick J. Reilly, Holland & Hart LLP, Las Vegas, NV, Francis J. Nyhan, Fredericks Peebles & Morgan LLP, Sacramento, CA, Jeffrey D. Morris, Nick J. Kurt, Ryan C. Hudson, Berkowitz Oliver Williams Shaw & Eisenbrandt LLP, Whitney P. Strack, Nathan F. Garrett, Graves Garrett LLC, Linda C. McFee, Robert Peter Smith, McDowell, Rice, Smith & Buchanan, P.C., Kansas City, MO, Darren J. Lemieux, Lewis and Roca, E. Leif Reid, Lewis Roca Rothgerber LLP, Reno, NV, Alyssa D. Campbell, Legal Advocates for Indian Country, LLP, Owasso, OK, Paul C. Ray, Paul C. Ray, Chtd., North Las Vegas, NV, for Defendants.

ORDER

GLORIA M. NAVARRO, Chief Judge.

Pending before the Court for consideration is the Report and Recommendation (ECF No. 539) of the Honorable Cam Ferenbach, United States Magistrate Judge, entered on January 28, 2014. On February 14, 2014, the Muir Law Firm, LLC and Timothy J. Muir (collectively the “Muir Defendants”) filed their Limited Objection (ECF No. 541) and AMG Services Inc., SFS, Inc., Red Cedar Services, Inc., and MNE Services, Inc. (collectively the “Lending Defendants”) filed their Objection. (ECF No. 542.) The Lending Defendants' Objection was joined by Defendants A MG Capital Management, Level 5 Motorsports, LeadFlash Consulting, Black Creek Capital Corporation, Broadmoor Capital Partners, Scott A. Tucker, Blaine A. Tucker, Don E. Brady, Troy LittleAxe, and Robert D. Campbell. (ECF Nos. 545, 548, 549, 552.) The Federal Trade Commission (the “FTC”) filed its Response to the Muir Defendants' Objection (ECF No. 554) and Response to the Lending Defendants' Objection (ECF No. 556) on March 2, 2014.

For the reasons discussed below, the Court will accept and adopt Magistrate Judge Ferenbach's Report and Recommendation (ECF No. 539) to the extent that it is not inconsistent with this opinion.

I. BACKGROUND

The FTC's Complaint (ECF No. 1) alleges that Defendants violated portions of the Federal Trade Commission Act (the “FTC Act”),¹ the Truth in Lending Act (“TILA”),² and the Electronic Fund Transfer Act (“EFTA”),³ in connection with the Defendants' activities in offering and extending “high-fee, short-term ‘payday’ loans and the collection of those loans.” (Complaint 2:23–25, ECF No. 1.) The relevant facts underlying these claims primarily involve the loan application and loan repayment processes created by Defendants.⁴

A. The Loan Application Process

In order to obtain a short-term, payday loan from the Lending Defendants, borrowers must complete online applications available through the Lending Defendants' websites⁵ that request personal, employment, and financial information. (Defendants' Opposition 6:8–7:20, ECF No. 493.) With the information provided in the loan applications, the Lending Defendants determine a maximum amount that can be borrowed, which ranges between $150.00 and $800.00. (Id. 7:20–8:3.) This information also allows the Lending Defendants to make automatic withdrawals from the borrowers' bank accounts. (Id. )

In order to receive the loan proceeds, the borrower is required to select the desired loan amount, click four separate boxes accepting the Lending Defendants' terms and conditions, type his or her name in an electronic signature box, and click a button that reads: “I AGREE Send Me My Cash!” (Id. 8:4–9:22.) The borrowers, however, are not actually required to read the terms and conditions of their loans in order to receive the loan proceeds. See generally (Id. ) On the contrary, the webpage format discourages the reading of the terms and conditions because it breaks the terms and conditions up into nine separate hyperlinks in eight or nine point font. See (Id. 8:4–9:22.) Furthermore, the most important link that takes the borrowers to the document at issue for the present motions—the Loan Note and Disclosure link—is the least conspicuous⁶ of the nine links. (Id. ) The boxes and disclosure links appear on the websites as follows:

? I have read and accept the terms of the Application, including the terms and provisions of the LIMITED WAIVER OF SOVEREIGN IMMUNITY and the ARBITRATION PROVISION contained therein.

? I have read and accept the terms of the Privacy Policy & Electronic Disclosure and Consent Agreement.

? I have read and accept the terms of the Authorization Agreement.

? I have read and accept the terms of the Loan Note and Disclosure, including the terms and provisions of the LIMITED WAIVER OF SOVEREIGN IMMUNITY and the ARBITRATION PROVISION contained therein.⁷

(Id. 9:1–22.) If a borrow does click on the Loan Note and Disclosure link, the following document appears, which consists of a Truth in Lending Box (“TILA Box”) and 764 words in densely packed, fine print with some of the fine print curiously contained in a second box:

LOAN NOTE AND DISCLOSURE

Borrower's Name: __________

Parties: In this Loan Note and Disclosure (“Note”) you are the person named as Borrower above. “We” Ameriloan are the lender (the “Lender”).

All references to “we”, “us” or “ourselves” mean the Lender. Unless this Note specifies otherwise or unless we notify you to the contrary in writing, all notices and documents you are to provide to us shall be provided to Ameriloan at the fax number and address specified in this Note and in your other loan documents.

The Account: You have deposit account, No * * * * * * * * * *5844 (“Account”), at First Arkansas Bank and Trust (“Bank”). You authorize us to effect a credit entry to deposit the proceeds of the Loan (the Amount Financed indicated below) to your Account at the Bank.

DISCLOSURE OF CREDIT TERMS: The information in the following box is part of this Note.

ANNUAL PERCENTAGE RATEFINANCE CHARGEAmount FinancedTotal of PaymentsThe cost of your credit as a yearly rateThe dollar amount the credit will cost youThe amount of credit provided to you or on your behalfThe amount you will have paid after you have made the scheduled payment   684.38%$90.00$300.00$390.00Your Payment Schedule will be: 1 payment of $390.00 due on 2010–09–24 , if you decline* the option of renewing your loan. If your pay date falls on a weekend or holiday and you have direct deposit, your account will be debited on the business day prior to your normal pay date. If renewal is accepted you will pay the finance charge of $90.00 only, on 2010–09–24. You will accrue new finance charges with every renewal of your loan. On the due date resulting from a fourth renewal and every renewal due date thereafter, your loan must be paid down by $50.00. This means your Account will be debited the finance charge plus $50.00 on the due date. This will continue until your loan is paid in full. *To decline this option of renewal, you must select your payment options using the Account Summary link sent to your email at least three business days before your loan is due. Security : The loan is unsecured.Prepayment : You may prepay your loan only in increments of $50.00 . If you prepay your loan in advance, you will not receive a refund of any Finance Charge. (e) The Annual Percentage Rate is estimated based on the anticipated date the proceeds will be deposited to or paid on your account, which is 9–8–2010.Itemization Of Amount Financed of $300.00 ; Given to you directly: $300.00 ; Paid on your account $0See below and your other contract documents for any additional information about prepayment, nonpayment and default.

Promise to Pay: You promise to pay to us or to our order and our assignees, on the date indicated in the Payment Schedule, the Total of Payments, unless this Note is renewed. If this Note is renewed, then on the Due Date, you will pay the Finance Charge show above. This Note will be renewed on the Due Date unless at least three Business Days Before the Due Date either you tell us you do not want to renew the Note or we tell you that the Note will not be renewed. Information regarding the renewal of your loan will be sent to you prior to any renewal showing the new due date, finance charge and all other disclosures. As used in this Note, the term “Business Day” means a day other than Saturday, Sunday, or legal holiday, that Ameriloan is open for business. This Note may be renewed four times without having to make any principal payments on the Note. If this Note is renewed more than four times, then on the due date resulting from your fourth renewal, and on the due date resulting from each and every subsequent renewal, you must pay the finance charge required to be paid on that due date and make a principal payment of $50.00. Any payment due on the Note shall be made by us effecting one or more ACH debit entries to your Account at the Bank. You authorize us to effect this payment by these ACH debit entries. You may revoke this authorization at any time up to three Business Days prior to the date any payment becomes due on this Note. However, if you timely revoke this authorization, you authorize us to prepare and submit a check drawn on your Account to repay your loan when it comes due. If there are insufficient...