FTC Cracks Down on Payday Lenders Big Sky Cash and Western Sky for Illegal Wage Garnishments

by Lynnette Khalfani-Cox, The Money Coach on September 14, 2011

in Loans


Payday Loans

Here’s yet another reason to stay away from payday lenders: some of the more unscrupulous ones may try to illegally garnish your paycheck.

That’s what the Federal Trade Commission has accused Payday Financial LLC of doing.

The FTC has filed an action in U.S. district court, contending that the payday lender allegedly attempted to illegally garnish consumers’ wages.

Pending a trial in the matter, Payday Financial has agreed to stop the alleged misconduct.


The FTC has been on a tear recently, cracking down on all kinds of scams – from debt settlement schemes to payday loan abuses.

In this most recent action, the FTC alleges that Payday Financial, LLC, doing business as Lakota Cash and Big Sky Cash, along with other defendants, became overzealous in its attempt to collect on payday loans and illegally attempted to garnish consumers’ wages without obtaining a court order.

According to the FTC, defendant Martin A. Webb operates Payday Financial, LLC, and several related businesses in Timber Lake, South Dakota.


The companies offer cash-strapped consumers all across the country short term, high-cost payday loans ranging from $300 to $2,525.

The businesses also heavily promote their services via TV ads and websites including www.bigskycash.com and www.westernsky.com.

In Trouble Yet Again

As regular readers of AskTheMoneyCoach.com may recall, this isn’t the first time these particular payday lenders have run into trouble with regulators.

In March, 2011, Maryland regulators shut down Martin Webb, Big Sky Cash and Western Sky, for illegally charging consumers exorbitant interest rates – sometimes as high as 1,825% – in violation of Maryland law, which caps payday loans at 33%.

The FTC complaint alleges that when a consumer does not pay back a payday loan on time, the defendants send documents to his or her employer that mimic those used by federal agencies collecting debts owed to the government in an attempt to garnish the consumer’s wages.

Under federal law, the government does not need to get a court order and can directly require employers to garnish a person’s wages for debts the government is owed.

However, private creditors – including payday lenders – must first obtain a court order before garnishing a debtor’s wages.  And here’s where Payday Financial and the other defendants allegedly ran afoul of the law.

Payday Financial and the other defendants are charged with violating the FTC Act by:

  • misrepresenting to employers that the defendants are legally authorized to garnish an employee’s wages, without first obtaining a court order;
  • falsely representing to employers that the defendants have notified consumers about the pending garnishment and have given them an opportunity to dispute the debt; and
  • unfairly disclosing the existence and the amounts of consumers’ supposed debts to employers and co-workers without the consumers’ knowledge or consent.

On top of all that, the FTC complaint alleges that the defendants have violated the FTC’s Credit Practices Rule by requiring consumers taking out payday loans to consent to have wages taken directly out of their paychecks in the event of a default, and have violated the Electronic Funds Transfer Act and Regulation E by requiring authorization for electronic payments from their bank account as a condition of obtaining payday loans.

Note to consumers: even if you’re desperate for cash and you go to a payday lender, don’t ever agree to such terms. They’re illegal.

The full list of defendants named in the FTC complaint include: Payday Financial, LLC, Great Sky Finance, LLC, Western Sky Financial, LLC, Red Stone Financial, LLC, Financial Solutions, LLC, Management Systems, LLC, 24-7 Cash Direct, LLC, Red River Ventures, LLC, High Country Ventures, LLC, and Martin Webb.

If you’ve been scammed, defrauded or mistreated by unfair business practices, you have the right to file a complaint by using the FTC’s online Complaint Assistant or calling 877-FTC-HELP (877-382-4357).

The FTC enters complaints into Consumer Sentinel, its secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.


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Lynnette Khalfani-Cox, The Money Coach

Personal Finance Expert and Co-Founder at Ask The Money Coach.com
Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.

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John Bakken

What are illegal wage garnishments? I have never heard that term before.

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