Last month, a federal judge ordered a man to fork over nearly $300,000 after an investigation showed that the man and two companies that he controlled were running a payday lending scheme. The man and his two companies were ordered to pay because the Federal trade Commission says the contract for the payday loans contained an inconspicuous "wage assignment" clause. Loan applicants were asked to click a box in online applications to indicate that they agreed with the loan terms, including that sneaky assignment clause.

The FTC claimed in a lawsuit that the man's two companies then illegally took money from the consumer's paychecks to pay back the loans. The scheme involved illegal wage garnishment. The FTC says federal agencies are allowed under the law to garnish worker's paychecks without a court order when a consumer owes the federal government money. That law does not apply to private companies.

The man's two businesses reportedly misrepresented federal law to a number of employers as a part of the payday loan scam. The FTC says the companies told employers that they had the same authority to garnish wages as the federal government. They federal agency says the companies even falsely told the employers that the workers knew their wages could be garnished.

The FTC charged the man and his two companies with violating the Fair Debt Collection Practices Act and the FTC Act. Now the man and his companies will have to pay, to the tune of nearly $300,000 for the unlawful wage garnishment scam. The FTC filed the lawsuit last spring as part of a crackdown on predators that target financially distressed consumers.

Cincinnati debt relief lawyers know that creditors can, at times lawfully garnish wages. However, as the FTC points out, private companies must first obtain a court order to lawfully garnish wages. One way to stop wage garnishment is under the bankruptcy code. Filing for bankruptcy puts a halt to all attempts to collect on a debt, and creditors can only resume collection activities with permission from the court, which is only available under certain circumstances.

Source: Federal Trade Commission, "Court Rules in Favor of FTC; Orders Defendants in Payday Lending Case to Pay More Than $294,000 for Illegal Garnishment of Consumers' Paychecks," Dec. 19, 2011