Prepared Remarks of CFPB Director Richard Cordray on the Hydra Group Enforcement Action Press Call

Thank you for joining us. Today, the Consumer Financial Protection Bureau is announcing an enforcement action against an online payday lender, the Hydra Group, which we believe has been running an illegal cash-grab scam to force purported loans on people without their prior consent. It is an incredibly brazen and deceptive scheme.

In the lawsuit, we allege that this Kansas City-based outfit buys sensitive financial information from lead generators for online payday loans, including detailed information about people’s bank accounts. It then deposits money into the account in the guise of a loan, without getting an agreement or authorization from the consumer. These so-called “loans” are then used as a basis to access the account and make unauthorized withdrawals for expensive fees. If consumers complain, the group uses false loan documents to claim that they had actually agreed to the phony loans.

These kinds of predatory tactics are obviously inexcusable. So at our request, a federal judge has now entered an order temporarily shutting down the Hydra Group’s illegal activities and freezing its assets. We are also seeking to halt these activities permanently, secure refunds for consumers, and impose a penalty.

Rarely is a company so appropriately named. Like the multi-headed serpent in Greek mythology, the Hydra Group is actually a conglomeration of about 20 businesses with various names. They all operate under the control of three men: Richard Moseley, Sr.; Richard Moseley, Jr.; and Christopher Randazzo. Although their payday lending operations are based in Missouri, many of the companies are incorporated offshore, in New Zealand and the Commonwealth of St. Kitts and Nevis. Their maze of businesses and shell companies seems designed to evade effective law enforcement, and includes names like SSM Group, Hydra Financial Limited, and Piggycash Online Holdings.

The trouble begins when a consumer visits an online lead generator and submits their sensitive, personal financial information in hopes of getting a quick loan. Lead generators then auction off the information to the highest bidder, typically either a payday lender or a broker who resells the leads. When the Hydra Group is the buyer of the information, it uses it to access the person’s checking account illegally to deposit a loan and begins debiting unauthorized fees. The Bureau alleges that over a 15-month period, the Hydra Group made $97.3 million in payday loans and collected $115.4 million from consumers in return.

Most consumers targeted by the Hydra Group receive the $200 to $300 deposits in their bank accounts without any prior knowledge. They do not receive a loan disclosure statement. They do not even know the terms of the so-called “loan” – the finance charge, the annual percentage rate, or the payment schedule. They may have been shopping online for a payday loan, but never signed any specific agreements with the Hydra Group.

While most of the Hydra Group’s victims are unaware they have been targeted until they notice unauthorized deposits in their bank accounts, some other consumers may actually sign up for loans from Hydra Group. The Hydra Group deceives these consumers too, for instance by telling them that it charges a one-time fee for the loan, usually $60 to $90, when instead it collects a fee every two weeks and does not apply these payments to the loan principal. The Hydra Group is also violating the Electronic Fund Transfer Act, which bars lenders from requiring that an offer of credit must be repaid by pre-authorized electronic fund transfers.

Consumers who try to contact the Hydra Group may not be able to reach anyone at all, but if they are able to reach one of the companies, they are presented with bogus documents alleged to justify the withdrawals. If instead the consumer disputes the matter with their bank or credit union, the Hydra Group presents the institution with bogus documents, sometimes causing a denial of the consumer’s request to reverse the withdrawals or deposits. Some consumers have had to close out their bank accounts altogether to put an end to the abuse. If that were not enough, even when a consumer closes the account, we found that the Hydra Group may have sold the bogus debt to third-party debt collectors, who then pursue repayment of the bogus loans and charges.

We filed this lawsuit under seal in the United States District Court for the Western District of Missouri on September 9. The court granted our request for a temporary restraining order that same day, freezing the defendants’ assets and installing a receiver to oversee the business and ensure that the group’s illegal conduct ceases. The court has scheduled a hearing on the Bureau’s request for a preliminary injunction, in which the Bureau seeks to keep this relief in place while the case proceeds. We found it necessary and justified to take this action to halt the Hydra Group’s phony payday loan business. The utter disregard for the law shown by these businesses and the men who control them is shocking and the grave harm they are doing to consumers simply has to be stopped.

I now turn it over to Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. Jessica will talk about a case the FTC brought against a similar unlawful online payday lending operation. We have coordinated here to best use our resources to pursue our separate actions against these bad actors and to provide a common front against this grave misconduct. I commend the FTC on its case and its dedication to ferreting out consumer harm in this area, a goal our agencies share. Thank you.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.