Operator Of Payday Lending Venture Found Guilty Of Racketeering, Other Charges

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Nearly two years after federal authorities arrested the man behind the company responsible for one of the scammiest payday loans Consumerist has ever seen, the man and his lawyer were convicted of racketeering related to running a $3.6 million online payday lending operation that exploited more than 4.5 million people. 

A federal jury in Manhattan found AMG Services owner Scott Tucker and his lawyer Timothy Muir guilty on 14 charges including violating the Racketeer Influenced and Corrupt Organizations (RICO) Act, three counts of conspiring to collect unlawful debts, and three counts of collecting unlawful debts; as well as violating the Truth in Lending Act.

The U.S. Attorney’s Office for the Southern District of New York announced the verdict Friday after a five-week trial in which the jury found the men had “targeted and exploited millions of struggling, everyday Americans.”

“The jury saw through Tucker and Muir’s lies and saw their business for what it was – an illegal and predatory scheme to take callous advantage of vulnerable workers living from paycheck to paycheck,” Acting Manhattan U.S. Attorney Joon H. Kim stated.

Tucker and Muir were ordered to home confinement until they are sentenced next year.

The Case

The Department of Justice first filed charges against Tucker and Muir in Feb. 2016 for illegal actions related to operating a $2 billion payday lending enterprise that “systematically evaded state laws.”

According to the DOJ indictment [PDF], the online payday loan operation — which did business as Ameriloan, Cash Advance, One Click Cash, Preferred Cash Loans, United Cash Loans, US FastCash, 500 FastCash, Advantage Cash Services, and Star Cash Processing — charged illegal interest rates as high as 700% and collected hundreds of millions of dollars in undisclosed fees from consumers, including those in states with laws that bar interest rates in excess of 36%.

High Interest Rates
The indictment alleged that from 1997 until 2013, Tucker’s business issued loans to more than 4.5 million people. On average the loans carried interest rates between 400% and 500% through “deceptive and misleading disclosures” about the loans’ costs.

The company’s disclosure, as required by the Truth in Lending Act (TILA), allegedly materially understated the amount a loan would cost, including the total of payments that would be taken from the borrower’s bank account.

The DOJ claimed that through at least 2012, Tucker and Muir structured the repayment schedule for loans in a way that when borrowers were paid, the company could automatically withdraw the entire interest payment due on the loan. The principal of the loan was left untouched.

Authorities alleged that the company continued this “finance charge” deduction system payday after payday, applying none of the money toward the principal for at least 10 weeks. At that point, the company would increase withdrawals by $50 per payday.

Through this all, the indictment claimed that Tucker and Muir knew the TILA box understated the amount the loan would cost, including the total of payments that would be taken from the borrower’s bank account.

For example, the DOJ found that a disclosure box for a customer who borrowed $500, showed they would only have a finance charge of $150, for a total payment of $650. In reality, the finance charge was $1,425, for a total payment of $1,925 by the borrower.

Misrepresented Affiliations
The indictment claimed that when several states began investigating Tucker’s businesses after believing they were in violation of usury laws, the men devised a plan to evade authorities.

To do so, Muir allegedly created sham associations with Native American tribes, using these filings as a shield against state enforcement actions.

According to the DOJ, starting in 2003, Tucker and Muir entered into agreements with several Native American tribes, including the Miami Tribe of Oklahoma.

The purpose of the agreements was to entice the tribes to claim they owned and operated parts of the payday lending enterprise, so that when states sought to enforce laws prohibiting the loans, the businesses could claim to be protected by sovereign immunity.

In return for claiming part ownership of the company, the tribes were compensated with a potion of the revenues from the business.

Additionally, in order to create the illusion that tribes owned and controlled the payday lending businesses, Tucker opened bank accounts to receive the profits of the companies.

The indictment claimed that Tucker received over $380 million from these accounts, and spent the funds on lavish personal expenses, such as a fleet of Ferraris and Porsches, a professional auto racing team, a private jet, a luxury home in Aspen, CO, and his personal taxes.

Not The First Run-In

Friday’s verdict isn’t the first run-in with the law Tucker has experienced.

Last year, Nevada U.S. District Court Judge Gloria Navarro found that Tucker’s payday loan business harmed consumers by using misleading loan terms and charged usurious interest rates.

Tucker was ordered to pay $1.26 billion to the Federal Trade Commission to resolve allegations of running online payday lending operations that exploited more than 5 million consumers.

The FTC first filed suit [PDF] against Tucker and his business partners in 2012 (amended in 2013), claiming that AMG Services, Inc., three other internet-based lending companies, seven related companies, and five individuals, violated federal law by deceiving consumers when providing and collecting on payday loans.

Regulators accused the company of providing poorly crafted and automatic repayment schedules that caused borrowers to pay significantly more for loans.

For example, the FTC claimed that borrowers of $300 loans ultimately were on the hook for $975 based on the allegedly deceptive disclosures.

The FTC claimed that the operation told borrowers seeking loans that they would be charged the amount borrowed plus a one-time finance fee.

However, regulators found that the companies made withdrawals from borrowers’ bank accounts and assessed a new finance fee each time, without disclosing the true costs of the loan.

Were You Harmed?

Following Friday’s verdict, the U.S. Attorney’s Office for the Southern District of New York is urging individuals who think they may have been duped by Tucker or his companies to come forward.

Consumers who believe they were a victim of this crime, including a victim entitled to restitution, and wish to provide information to law enforcement should contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900.

Individuals can find additional information online.