published Friday, March 28th, 2014

Lawsuit against payday king for spam texts gains class-action status

IN BRIEF:

* What: class-action lawsuit against payday companies, including three owned by Chattanooga businessman Carey V. Brown, for spam text messages

* Original plaintiff: Flemming Kristensen

* Defendants: Credit Payment Services, MyCashNow.com, Enova International, Pioneer Financial Services, Leadpile, Click Media, Net1 Promotions

WHO'S WHO:

• Credit Payment Services - Chattanooga entrepreneur Carey Vaughn Brown's primary payday company, which has conducted business through a number of affiliates. Brown officials have presented his various companies, which are incorporated in Nevada, operated out of Chattanooga but presented as overseas entities, as independent companies that engage in a variety of activities outside the payday loan arena.

MyCashNow.com - One of Brown's now shuttered payday websites, which also included DiscountAdvances.com and PayDayMax.com.

• Leadpile - A subsidiary of now-defunct Area203 Digital, one of Brown's Chattanooga-based companies, Leadpile is accused of sending unwanted SMS spam messages to thousands of Americans.

Kristensen Class Action Suit
Kristensen Class Action Suit

A Chattanooga-based payday lender accused of spamming thousands of Americans with unwanted text messages suffered a setback this week as a lawsuit against his businesses gained class-action status.

Payday lender Carey V. Brown continued to say that his companies did no wrong.

Brown may have lost much of his payday empire in a battle with federal and state regulators last fall, but that hasn't stopped lawyers in Nevada from pressing a civil class-action lawsuit against his companies, specifically Credit Payment Services, Leadpile and the shuttered MyCashNow.com website.

Those companies allegedly violated the Telephone Consumer Protection Act by spamming consumers with random text messages that contained offers for payday loans, a type of loan that carries a high interest rate and must be paid off after two weeks to avoid mounting fees.

Consumer advocates say that payday loans trap people in a cycle of debt as the loans roll over and the fees eventually grow higher than the original loan. Payday lenders say they are providing a service for poor Americans who need a financial bridge from one payday to the next, in order to avoid more serious consequences, such as missing a car payment or having the electricity turned off.

But the attorneys in this case don't take issue with Brown's loans, they're upset with the way they say he solicited customers using millions of robo-dial text messages that, in some cases, would have cost the recipients money to receive. The texts contained links that redirected recipients to websites controlled by Brown and others.

After denying two motions to dismiss the lawsuit, U.S. District Judge Andrew Gordon this week granted class certification to all individuals who received a spam text message between Dec. 5, 2011, through Jan. 11, 2012, from one of three specific telephone numbers.

Brown on Thursday denied that his companies had anything to do with the unwanted text messages from phone numbers 330-564-6316, 808-989-5389 or 209-200-0084.

"None of my companies have ever sent any spam, nor would we tolerate spam," Brown said.

Reporters have previously located blog posts on the website of Leadpile, one of the companies named in the lawsuit and controlled by Brown, praising text-message spamming as "an interesting and productive way to generate leads or more business, including branding awareness."

In a post titled "SMS and Lead-gen in a Lead Exchange," Leadpile marketing director Eugen 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.

Judge Gordon, who joined the bench in Nevada in 2013 after being nominated by U.S. President Barack Obama, found that there were a "downhill" series of contractual relationships that started with Brown's companies and rippled toward the group that did the alleged spamming.

The benefits of the text messages, in this case leads for potential payday customers, flowed back "uphill" toward the companies controlled by Brown, Gordon wrote in his reasoning behind the ruling.

Brown has claimed that the actual spammer was an individual located in Ohio -- information that he has given to the attorneys in the case. But for some reason, that person is not being sued, he said.

"There are some unscrupulous attorneys trying to drum up some money for themselves," Brown said.

Contact staff writer Ellis Smith at 423-757-6315 or esmith@timesfreepress.com with tips and documents.

about Ellis Smith...

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, ...

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