A federal judge in Nevada said professional racecar driver Scott Tucker and several of his companies owe $1.27 billion to the Federal Trade Commission after systematically deceiving payday lending customers about the cost of their loans.
In one example, lending documents indicated that a customer who borrowed $500 would only have a finance charge of $150, for a total payment of $650 — but the actual finance charge was $1,425.
In a decision late on Friday, Chief Judge Gloria Navarro of the federal court in Las Vegas, Nevada said Tucker was “specifically aware” that customers often did not understand the terms of their loans, and was at least “recklessly indifferent” toward how those loans were marketed.
“Scott Tucker did not participate in an isolated, discrete incident of deceptive lending, but engaged in sustained and continuous conduct that perpetuated the deceptive lending since at least 2008,” Navarro wrote.
The payday lending industry is evolving, but its newest products may simply provide consumers with a different route into a money hole.
Payday lenders are increasingly turning to installment loans, with all of America’s biggest payday lending companies now selling the products, according to new research from Pew Charitable Trusts. Instead of requiring repayment of a loan within days or weeks, these products are repayable over several months.
On the face of it, these loans may seem like a better deal for borrowers because they provide more time to repay the lender, and consumers tend to prefer an installment payment structure, Pew found. Yet the foundation is warning that the installment loans carry many of the same hallmarks of the traditional payday loans, such as sky-high interest rates. And lenders are shifting to installment loans partly because the products sidestep some state regulations and the Consumer Financial Protection Bureau’s (CFPB) proposed payday lending rules.
On June 30, President Obama signed into law thePROMESA bill, which will establish a federally appointed control board with sweeping powers to run Puerto Rico’s economy. While the legislation’s supporters say the bill will help the island cope with its debt crisis by allowing an orderly restructuring of its $72 billion in bond debt, critics say it is a reversion to old-style colonialism that removes democratic control from the people of Puerto Rico. But does Puerto Rico really owe $72 billion in bond debt—and to whom? A stunning new report by ReFund America Project reveals nearly half the debt owed by Puerto Rico is not actually money that the island borrowed, but instead interest owed to investors on bonds underwritten by Wall Street firms including Goldman Sachs, Citigroup, Merrill Lynch and Morgan Stanley. While the Puerto Rican people are facing massive austerity cuts, bondholders are set to make mind-boggling profits in what has been compared to a payday lending scheme. For more, we speak in San Juan, Puerto Rico, with Carlos Gallisá, an attorney, politician and independence movement leader. And in New York, we speak with Saqib Bhatti, director of the ReFund America Project and a fellow at the Roosevelt Institute. He is co-author of the new report, “Puerto Rico’s Payday Loans.”
Consumer Financial Protection Bureau Director Richard Cordray sat before Senate one last time before he goes to trial with PHH next week over his leadership of the bureau.
And compared to past hearings, this one went pretty smooth for the director, especially considering only 2 years ago he referred to questions from Congress as “offensive.”
Apparently, since then, there are more reasons to praise the work of his regulatory agency.
So what was different today?
This time around Director Cordray came to battle with an army of supporters, keeping the atmosphere in the room extremely calm compared to previous years.
In past semi-annual hearings, Cordray defended the bureau against attacks on itsannual budget, massive data collection, management and lack of oversight, items that barely came up in Thursday’s hearing.
One big reason behind this year’s calm hearing could be the fact that since the CFPB became a watchdog for consumers 5 years ago, it has obtained $11.2 billion in relief for 25 million people. A number that has skyrocketed from the $3.8 billion reported two years ago.
Before the hearing, the panel received petitions from hundreds of thousands of Americans supporting the bureau’s work.
Here are two examples:
- National Community Reinvestment Coalition: “NCRC applauds the Consumer Financial Protection Bureau’s final rule expanding the data collected around the Home Mortgage Disclosure Act… We are particularly pleased that the CFPB has followed the recommendation of NCRC and other advocacy groups to disaggregate the data on race and ethnicity. The CFPB has also shown careful consideration of potential privacy issues in this process, which should assuage any concerns surrounding the collection of the data.”
- National Fair Housing Alliance: “Prior to the establishment of the CFPB there was an obvious void in federal oversight of financial institutions operating to bring a panoply of financial products and services to consumers. This is evidenced by the sheer number of fair lending issues the Bureau is now able to address using its authority under Dodd-Frank. The millions of consumers who have received relief from discriminatory practices are a testament to the Bureau’s necessity. NFHA fully supports the fair lending regulatory and enforcement work the CFPB has undertaken and urges the Committee to do everything within its power to ensure that the agency is fully equipped to continue its work to make our financial markets fair for America’s consumers.”
Brought and paid for. I hope that her constituents in Florida vote her out of office.
WASHINGTON — Payday lenders have been gunning for the Consumer Financial Protection Bureau since the day President Barack Obama tapped Elizabeth Warren to set up the new agency. They’ve had plenty of help from congressional Republicans — longtime recipients of campaign contributions from the payday loan industry. As the CFPB has moved closer to adopting new rules to shield families from predatory lending, the GOP has assailed the agency from every conceivable angle — going after its budget, attempting to tie its hands with new layers of red tape, fomenting conspiracy theories about rogue regulators illegally shutting down businesses and launching direct attacks on payday loan rules themselves.
To date, the GOP blitz has resulted in a few close shaves for the young agency, but no actual defeats. But the industry has cultivated a powerful new ally in recent weeks: Democratic National Committee Chair Rep. Debbie Wasserman Schultz (D-Fla.).
Wasserman Schultz is co-sponsoring a new bill that would gut the CFPB’s forthcoming payday loan regulations. She’s also attempting to gin up Democratic support for the legislation on Capitol Hill, according to a memo obtained by The Huffington Post.
Alex Slusky was under pressure to put the money in his private-equity fund to work.
The San Francisco technology financier had raised $1.2 billion in 2007 to buy and turn around struggling software companies. By 2012, investors includingHarvard University were upset that about half the money hadn’t been used, according to three people with direct knowledge of the situation.
Three Americans on the Caribbean island of St. Croix presented a solution. They had built a network of payday-lending websites, using corporations set up in Belize and the Virgin Islands that obscured their involvement and circumvented U.S. usury laws, according to four former employees of their company, Cane Bay Partners VI LLLP. The sites Cane Bay runs make millions of dollars a month in small loans to desperate people, charging more than 600 percent interest a year, said the ex-employees, who asked not to be identified for fear of retaliation.
Slusky’s fund, Vector Capital IV LP, bought into Cane Bay a year and a half ago, according to three people who used to work at Vector and the former Cane Bay employees. One ex-Vector employee said the private-equity firm didn’t tell investors the company is in the payday-lending business, where borrowers repay loans out of their next paychecks.
(Reuters) – Manhattan prosecutors filed criminal charges against a dozen companies and their owner, Carey Vaughn Brown, accusing them of making payday loans that defied New York’s limits on interest rates, the New York Times reported.
Prosecutors explained how Brown amassed “a payday syndicate,” controlling every part of the loan process, the Times said. Payday loans are usually taken by employees before they get their paychecks and are paid when they receive their salaries.
Brown, along with the chief operating officer for several companies, Ronald Beaver, and legal adviser Joanna Temple, “carefully crafted their corporate entities to obscure ownership and secure increasing profits,” New York Times quoted the authorities as saying. (http://nyti.ms/1kXYOej)
Brown incorporated Mycashnow.com, an online payday lending arm, in the West Indies, to try to put the company beyond American authorities’ reach, the Times said.
Race-car driver’s payday lending business ‘deceived borrowers’
A payday lending business with ties to Indian tribes successfully dodged allegations for years that it violated state lending laws. But now, a U.S. district judge has dealt the online business a defeat, rulingin a lawsuit that the company broke federal law by deceiving borrowers about how much they’d have to repay.
The Federal Trade Commission, which brought the lawsuit, will now ask U.S. District Court Judge Gloria M. Navarro of Nevada to order the company and others involved to repay borrowers tens of millions of dollars in illegal charges.
The Center for Public Integrity and CBS News exposed in 2011 that Scott Tucker, a convicted felon turned professional race-car driver, started the online lending business, now known as AMG Services of Overland Park, Kan. Tucker turned to three Indian tribes in Oklahoma and Nebraska when the attorney general of Colorado tried to shut his business down.