Defendants In Massive Payday Lending Scheme Agree To Industry Ban
This story was updated at 2:06 p.m.
Two Kansas City area businessmen accused of bilking consumers out of millions of dollars in a payday lending scheme will be banned from the consumer lending industry under a settlement with the Federal Trade Commission.
According to the FTC, the businessmen, Timothy A. Coppinger and Frampton T. Rowland III, and companies they controlled made fraudulent loans to unwitting payday loan applicants and then used the loans as pretexts to withdraw “finance” charges from the applicants’ bank accounts.
"It's a brazen scam that took money from thousands of consumers without their knowledge," said Matt Wilshire, a staff attorney with the FTC.
The settlement, filed in federal court in Kansas City, erases the applicants’ debts and imposes so-called redress judgments of $32 million on Coppinger and his companies and $22 million on Rowland and his companies.
The FTC said in a news release that the judgments will be suspended upon the defendants’ surrender of various assets, including bank accounts, interests in various corporations, the surrender value of life insurance policies and cash payments.
Court documents state that Coppinger and Rowland issued $28 million in fraudulent payday loans and obtained $46.5 million in return.
Wilshire said that consumers made in excess of $173 million in gross payments to the defendants. Although some consumers authorized the loans after they were notified about them, others never verified the loans but still found charges posted on their bank statements.
"They put money into people's accounts without their knowledge and then started taking out money until they got caught. That was how their business ran," Wilshire said.
"They'd deposit $200 or $300 into accounts and then they would take $60 or $90 increments out of the bank indefinitely until the consumer caught them."
Wilshire said that more than 70,000 consumers nationwide were bilked in the scheme. He said many of them were victimized twice because debt collectors who acquired some of the loans tried to collect on them.
The Pitch, a Kansas City alt-weekly, reported in September that CWB Services LLC and other businesses controlled by Coppinger operated for years at 2114 Central in the Crossroads District before relocating to Mission, Kansas.
U.S. District Judge Dean Whipple halted the companies’ operations and froze their assets and bank accounts last fall. The settlement filed in court Tuesday morning is subject to Whipple’s approval.
Besides CWB Services, Coppinger operated Orion Services LLC, Sandpoint Capital LLC, Sandpoint LLC, Basseterre Capital LLC, Basseterre Capital LLC, Namakan Capital LLC, and Namakan Capital LLC. Roland operated Anasazi ervices LLC, Anasazi Group LLC, Vandelier Group LLC, St. Armands Group LLC, Longboat Group LLC, doing business as Cutter Group, and Oread Group LLC, doing business as Mass Street Group.
Dan Margolies, editor of the Heartland Health Monitor team, is based at KCUR.