ThinkProgress explains the new charges…
Federal prosecutors are preparing to bring criminal charges against car-racing mogul Scott Tucker, whose online payday lending empire uses American Indian tribal lands as a base of operations to evade state law, according to Bloomberg.
Predatory payday loans with triple-digit interest rates remain legal in many states, and even those that have banned or heavily regulated the industry have to contend with internet-based versions of the business model that are far more difficult to police. The Federal Bureau of Investigation (FBI) and the Manhattan U.S. Attorney’s office are reportedly readying a crackdown against Tucker’s AMG Services Inc. that may include racketeering charges under a law initially created to fight organized crime.
Tucker’s firm operates in affiliation with various tribes, who act as official owners of the business so that it is immune from state law. A judge recently upheld AMG’s legal immunity in Colorado, thwarting the state attorney general’s attempt to pursue Tucker for violating the state’s restrictions on high-interest short-term lending. However, a separate outstanding suit against Tucker’s firm’s advertising practices has been allowed to proceed. A judge in that case ruled in favor of the Federal Trade Commission (FTC), finding that the company misled borrowers to believe that it would cost $650 to repay a $500 loan, when the fine print of loan agreements actually increased the cost to $1,925.
The payday loan industry has come under fire in recent years, with courts yet to decide on the final liability of its most prominent figure, Scott Tucker. Now, federal prosecutors are taking aim at Tucker’s empire, with the potential to seize his assets should they decide to use the Racketeer Influenced and Corrupt Organizations Act (RICO). If they do, Tucker could face up to 20 years in prison and $25,000 fines.
The industry has been adept at manipulating public policy, with only 15 states banning its storefronts and the internet providing an easy way to dodge regulations. Native American tribes, of which there are 566 federally recognized, are often used as a legal front for payday lenders, with the tribes themselves receiving only a fraction of the revenue.
Despite this, Tucker himself has no such cashflow problem, with the Federal Trade Commission suit stating that his businesses have paid him and his wife over $40 million, funded his career as a race car driver and paid his $8 million Aspen mortgage.
Payday loans, with their annual interest rates of over 300%, are a last resort solution for desperate borrowers. However, industry data shows that the majority of their profits come from those trapped in long cycles of borrowing and re-borrowing, paying thousands of dollars for a few hundred.
In response to this, progressives, such as Senator Elizabeth Warren, are proposing alternatives such as the U.S. Postal Service providing basic financial services and short-term loans at affordable rates.
