(Adds names of defendants, scam details)
WASHINGTON, Aug 12 (Reuters) - The U.S. Federal Trade Commission said on Wednesday it charged a data broker operation with selling payday loan applicants' financial information to scammers who took in millions of dollars by debiting bank accounts and charging credit cards.
The data brokers bought the loan applications and, instead of passing them to legitimate payday lenders, sold them to companies including Ideal Financial Solutions Inc, which bought 500,000 applications and raided the accounts for at least $7.1 million, the FTC said.
"Scammers used consumer information they bought from this operation to make millions in unauthorized charges," said Jessica Rich, director of the FTC's Bureau of Consumer Protection. "Companies that collect people's sensitive information and give it to scammers can expect to hear from the FTC."
The FTC identified the defendants as Sequoia One LLC, Gen X Marketing Group LLC, Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew Jr., and Paul T. McDonnell.
McDonnell and the Bartholomews have agreed to settle, the commission said, under an order that prohibits them from selling or otherwise benefiting from customers' personal information. The order's $7.1 million judgment against the Bartholomews will be suspended upon payment of $15,000, it said.
The FTC documents were filed in U.S. District Court in Nevada and the final orders are subject to court approval.
Payday loans are small extensions of credit that borrowers agree to repay in a short time, such as when they next receive a paycheck. Lenders who offer the products say they help people who are strapped for cash but consumer advocates say borrowers often end up with high debt because of high interest rates, fees and rolling over the loans. (Reporting by Doina Chiacu; Editing by Will Dunham and Bill Trott)