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Credit Payment Services - Chattanooga entrepreneur Carey Vaughn Brown’s primary payday company, which conducts business through a number of affiliates. Brown officials have gone to great lengths to present his various companies, which are incorporated in Nevada, operated out of Chattanooga but presented as overseas entities, as independant companies that engage in a variety of activities outside the payday loan arena.
MyCashNow.com - One of Brown’s payday websites, which also include DiscountAdvances.com and PayDayMax.com.
Leadpile - A subsidiary of Area203 Digital, one of Brown’s Chattanooga-based companies, Leadpile is accused of sending unwanted SMS spam messages to thousands of Americans.
A Chattanooga-based payday loan conglomerate is facing a class-action lawsuit for allegedly spamming thousands of Americans with unwanted text messages and offers for high-interest loans.
Attorneys claim that the text messages are an invasion of privacy, carry a per-message fee for some users, and could run afoul of the Telephone Consumer Protection Act, which prohibits unsolicited voice and text calls to cellphones.
The class-action lawsuit specifically names Credit Payment Services, MyCashNow.com and Leadpile as defendants — all of which are controlled by Chattanooga payday lender and philanthropist Carey V. Brown.
Leadpile is a subsidiary of Chattanooga-based Area203 Digital, which bills itself a digital marketing agency that helps support the operations of Brown’s other payday lending entities.
Acting through a series of what Brown has called shell companies, he and his co-defendants are responsible for millions of unsolicited text messages, which are designed to redirect unwitting recipients to payday lending websites, attorneys allege. The suit also names Enova International, Pioneer Financial Services and Click Media, which does business as Net1Promotions, as co-defendants.
“In this case, short-term lenders CPS, Enova and Pioneer do not identify themselves in the content of such text messages — rather they remain anonymous and contract with advertising and marketing companies to cause the transmission of such text messages en masse,” the lawsuit claims. “It is only after a consumer takes the bait and applies for a short-term loan at the website in the body of the text message that the true advertisers and beneficiaries of the text messages are revealed.”
John Ochoa, counsel for plaintiff Flemming Kristensen, claims that “thousands of individuals” were hit with the unwanted texts designed to funnel borrowers to Brown’s payday conglomerate.
But David Hutton, an attorney for Scenic City Legal Group, which represents Brown’s companies, said the lawsuit’s claims are not only without merit, but are from the sue-first, ask-questions later school of law.
“Day one of this thing, we proved to them that we had absolutely nothing to do with it,” Hutton said. “It’s litigation trolling.”
Hutton claims that far from a class of thousands of plaintiffs, the attorneys for Chicago-based firm Edelson have just “one text message and one client.”
“None of the affiliated companies send out text messages,” Hutton said, referring to the group of payday loan entities controlled by Brown. “We just don’t engage in that.”
A spokesperson for Area203 Digital, which owns Leadpile, echoed that sentiment.
But blog posts from a high-ranking Leadpile official on Leadpile’s own website tell another story.
In a post titled “SMS and Lead-gen in a Lead Exchange,” Leadpile marketing director Eugen Ilie wrote that text messages have “been always an interesting and productive way to generate leads or more business, including branding awareness.”
In a detailed chart, Ilie demonstrated how a single spam text message sent to thousands of mobile phone users can bring more than 6,400 sets of eyeballs to a company’s website.
“The rule of success is to be creative and test new ways to build your customer base, offering quality and good service to customers,” Ilie wrote.
Legal challenges to Brown’s controversial business model are nothing new for his payday companies, which stopped offering such high-risk, high-interest loans to customers in Tennessee after a series of articles published by the Times Free Press showed that none of the entities possess licensees to make loans in the state. No charges were ever filed in the Volunteer state, though regulators said they were looking into Brown’s businesses.
In spite of stepped-up scrutiny by state regulators, as well as from the Federal Trade Commission and several states’ attorneys general, Brown has continued to operate in most of the U.S. through the use of offshore servers and numerous overseas shell corporations.
While Brown has maintained that his payday transactions take place offshore and he therefore does not need a license, states like Pennsylvania - which filed a cease and desist against Brown’s companies in June - take the position that his business is still subject to the law in the state where the loan is received.
This isn’t Brown’s first class-action lawsuit, either. Brown’s transition from a group of five brick-and-mortar payday loan stores to an offshore payday powerhouse was spurred, in part, by an 2001 class-action lawsuit against his businesses, he said later.
“It was just a matter of time before they come after the Internet businesses, too,” Brown said in a 2005 deposition for an unrelated lawsuit. In recent years, Brown has turned increasingly to public philanthropy, pledging to give away $1 billion of his payday loan earnings through the Covenant Values Foundation.
Attorneys for the plaintiffs are asking for a minimum of $500 in damages per text message from Brown’s companies, as well as from Illinois-based Enova International, Missouri-based Pioneer Financial Services and Georgia-based Click Media.
Contact staff writer Ellis Smith at email@example.com or 423-757-6315.
Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...