## Facts

- LoanPointe, LLC and related entities operated internet-based payday lending services offering small-dollar, high-interest, unsecured loans.
- Consumers obtained loans online by completing an application and assenting to terms and conditions through an online checkbox.
- Loan documents stated that, upon delinquency, the lender would garnish the borrower’s wages.
- After default, defendants sent employers “garnishment packages” intended to induce employers to withhold employees’ wages.
- Employer-facing letters asserted that defendants were “authorized by federal law” to garnish wages and that the borrower had an opportunity to dispute the debt.
- The court found those assertions false because private creditors generally lack authority to garnish wages without judicial process, and the claimed dispute opportunity was not accurately provided.
- The letters were sent directly to employers, creating the impression that wage withholding was legally required.
- Employers withheld wages from numerous borrowers, resulting in paycheck deductions without court authorization.

## Issues

1. Whether defendants’ wage-garnishment letters materially misrepresented legal authority and debtor rights, constituting deception under § 5 of the FTC Act.
2. Whether the extra-judicial garnishment scheme caused substantial, unavoidable consumer injury not outweighed by benefits, constituting unfairness under the FTC Act.
3. Whether defendants’ online “consent” provisions justified the challenged garnishment communications and practices.
4. Whether the FTC was entitled to permanent injunctive relief and monetary relief, including disgorgement of amounts obtained through the practice.

## Decision

- The court granted summary judgment for the FTC.
- The court held defendants’ garnishment letters and related conduct were deceptive under § 5 because they falsely claimed federal authority to garnish wages and falsely suggested borrowers had been given an opportunity to dispute the debt.
- The court also held the conduct was unfair because it caused substantial wage loss, was not reasonably avoidable once employers received the letters, and lacked countervailing benefits.
- The court rejected reliance on contractual wage-withholding “consent” as a basis to bypass required legal process or to imply governmental or judicial authorization.
- The court entered a permanent injunction barring similar misrepresentations and comparable collection practices.
- The court ordered monetary relief of $294,536 as disgorgement tied to amounts collected through the unlawful garnishment practice.

## Legal Principles

- A materially false claim of legal authority used to induce third parties to act (including claims of federal authorization to garnish wages) constitutes deception under § 5 of the FTC Act.
- A practice is unfair under the FTC Act when it causes substantial consumer injury that consumers cannot reasonably avoid and that is not outweighed by benefits to consumers or competition.
- Contractual provisions or online assent do not confer governmental garnishment authority and do not justify misrepresenting the existence of lawful process or debtor procedural protections.
- Federal courts may grant permanent injunctive relief and equitable monetary relief, including disgorgement, to remedy deceptive and unfair practices in debt collection.

## Conclusion

The court found that defendants’ employer-directed wage-garnishment letters falsely asserting federal authority and dispute opportunities violated the FTC Act’s deception and unfairness standards, warranting a permanent injunction and $294,536 in disgorgement for amounts obtained through the unlawful collection scheme.


Fed. Trade Comm’n v. LoanPointe, LLC, 2022 WL 4348304 (D. Utah 2011)