Money Tree To Pay $75,000 in Civil Penalties, up to $1.2 Million in Consumer Redress

The Federal Trade Commission today announced two separate but related settlement agreements with The Money Tree, Inc. ("Money Tree"), a Georgia-based lender, and its president, Vance R. Martin -- one involving allegations that Money Tree and Martin discriminated against consumers who receive public assistance and elderly consumers when these consumers applied for loans from Money Tree, and the other involving allegations that Money Tree required consumers to purchase credit-related insurance and auto club memberships (thus substantially increasing the cost of their loans) but failed to disclose to consumers the true cost of their credit.

Under the first agreement, Money Tree and Martin will pay $75,000 in civil penalties to settle FTC charges that they discriminated against applicants who receive public assistance and elderly applicants, in violation of the Equal Credit Opportunity Act ("ECOA") and its implementing Regulation B. Under the second agreement, Money Tree must offer refunds of certain insurance premiums to its current customers to settle FTC charges that the company failed to disclose the true costs of credit, in violation of the Truth in Lending Act ("TILA") and its implementing Regulation Z.

Money Tree, which also does business as Money To Lend, is based in Bainbridge, Georgia, and operates offices throughout Georgia, Alabama and Louisiana. The company makes short-term installment loans, most of them to low-income consumers.

The first agreement settles FTC charges that Money Tree and Martin discriminated against loan applicants who receive income from public assistance -- such as Social Security, Supplemental Security Income, Veterans Administration benefits and Aid to Families with Dependent Children -- by imposing stricter loan terms on these applicants than on employed applicants, regardless of income level, and by collecting, or trying to collect, loan payments from public assistance customers before the payments were due. In addition, the FTC alleged that Money Tree and Martin required, as a condition of the extension of credit, that applicants who receive public assistance participate in a program in which their monthly public assistance payments are deposited directly into a bank designated by Money Tree. According to the FTC allegations, employed applicants were not required to participate in such a program.

The first agreement also settles FTC charges that Money Tree and Martin discriminated against elderly applicants by discouraging them from applying for credit, denying their applications if they did apply, or offering them credit on less favorable terms than younger applicants because credit-related insurance was not available due to the applicants’ age. Under the agreement to settle these ECOA charges, Money Tree and Martin will pay $75,000 in civil penalties and will be barred from discriminating in the future against elderly applicants and applicants who receive public assistance.

The second agreement settles FTC charges that Money Tree required consumers applying for loans to purchase some combination of the following four "extras" if they wanted a loan: credit-life insurance, credit-disability insurance, accidental death and dismemberment insurance, and an auto club membership. The majority of Money Tree’s loans are for amounts between $150 and $400. On average, consumers paid approximately $80, plus interest, for the extras. Because the extras were mandatory, the TILA and Regulation Z require that Money Tree include the cost of the extras in the finance charge and the annual percentage rate ("APR") disclosed to consumers. According to the complaint, Money Tree failed to do this and, instead, wrongfully included the cost of the extras in the amount financed, causing consumers to pay interest on the premiums and fees for these extras, in violation of the TILA and Regulation Z. According to the FTC, the amount by which Money Tree understated APRs varied. In one instance, for example, the APR was understated by 35%. In another, it was understated by 132%. Money Tree and Martin also allegedly violated Section 5 of the Federal Trade Commission Act ("FTCA") by inducing consumers to sign statements asserting that they had voluntarily purchased the extras, when, in fact, they were required to pay for the extras as a condition to receive a loan.

The redress plan under this second agreement will require Money Tree to send a notice to all of its current customers offering them the opportunity to cancel the credit-life, credit- disability, and accidental death and dismemberment insurance coverages written on their loans, and to obtain cash refunds or credits. Money Tree could pay as much as $1.2 million in redress, depending on the number of consumers who cancel their insurance.

The second agreement will prohibit Money Tree and Martin from requiring consumers to sign statements that credit-related insurance or auto club memberships are voluntarily purchased if these extras are, in fact, required to obtain the loan. The agreement also will prohibit Money Tree from even referring to credit-related insurance or auto club memberships without, at the same time, also telling consumers that Money Tree has approved their loan application, and the amount of the loan that has been approved. The agreement also prohibits Money Tree from referring to the availability of the extras without also disclosing that such coverage is optional and not required to obtain a loan. The agreement further requires Money Tree to include the cost of such extras in the finance charge and the APR disclosed to consumers if the extras are mandatory. In order to charge a consumer for one or more of these extras, Money Tree will now have to obtain the consumer’s signature on a separate document entitled the "Voluntary Insurance Election Form." The form will state clearly that the consumer has already been approved for the loan and that the consumer should not sign the form unless he or she wants to buy one of the extras. The form also will include the amount the consumer will pay if he decides he wants the extras.

The second agreement also settles FTC charges that Money Tree and Martin failed to comply with provisions of the Fair Credit Reporting Act that require creditors, when they deny a consumer’s credit application because of information contained in a credit report, to tell the consumer the name and address of the consumer reporting agency, or "credit bureau," that supplied the report. The proposed order would require that, when Money Tree denies an applicant’s loan application because of information in a credit report, Money Tree will give the consumer the name and address of the credit bureau that provided the information.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

The Commission vote to approve the two agreements was 5-0. On behalf of the FTC, the Department of Justice today filed the first complaint and settlement agreement (involving the ECOA allegations) in the U.S. District Court for the Middle District of Georgia, in Macon. The second complaint and settlement agreement will be placed on the public record for a 60-day public comment period. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

Copies of the complaints and settlement agreements are available on the FTC’s World Wide Web site at: http://www.ftc.gov and from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326- 2222; TTY for the hearing impaired 1-866-653-4261. Proposed consent agreements also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov

(FTC File No. 932 3023)
(Civil Action No. 6:97-CV-7)