Scott Tucker, a Kansas City man who came upon tremendous wealth by running a payday lending enterprise, was among three people arrested Wednesday in connection with a federal investigation into these businesses.
Tucker and his attorney, Timothy Muir, were arrested in Kansas City, Kansas. Both men were charged by a grand jury in U.S. District Court of Southern New York on charges of conspiracy to collect unlawful debts from payday loan consumers.
Separately, Richard Moseley was arrested and made his first appearance in federal court in Kansas City, Missouri on similar charges. (See separate story here.)
For Tucker, his arrest is the culmination of a long-running investigation, both by the Federal Trade Commission and a grand jury in New York into an elaborate business enterprise that investigators believe deceptively charged usurious interest rates to millions in of payday loan consumers.
Jeffrey Morris, Tucker's attorney, was not immediately available for comment.
For two years, The Pitch has chronicled Tucker's payday-loan enterprises, many of which are ostensibly housed in tribal reservations in order to work around state regulations on interest rates that short-term lenders can charge their customers. But the businesses operated largely in Overland Park, and consumers who sought redress from Tucker's businesses through state courts had their cases dismissed when the payday enterprises claimed "tribal immunity" or that tribal reservations were not subject to state usury laws.
Last week, The Pitch described how the Federal Trade Commission, which has been after Tucker and his businesses for years, believes that customers of Tucker's businesses have overpaid on their loans to the tune of $1.32 billion, owing to deceptive language contained in the terms of the loan disclosures. The FTC alleged, and a federal judge in Nevada agreed, that customers were led to believe that a $300 loan would cost them $390. But labyrinthine wording in the loan documents could have those customers paying closer to $1,000, through automatic loan renewals that weren't made clear to customers, according to the FTC.
The FTC also believes that Tucker has made as much as $419 million from his business, $67 million of which he used to fund his race-car team that races in North American and European motorsports circuits.
Payday loans are short term lines of unsecured credit that are usually extended to people in tight financial situations or whose poor credit makes them ineligible to obtain accounts with conventional banks. To offset the risk of lending to these consumers, payday lenders often charge higher-than-prime interest rates.
But the industry is often criticized for trapping consumers in an endless cycle of debt. In the case of Tucker's businesses, the short term loans were often described as a relatively modest 30 percent, but the grand jury found instances where individuals were paying 700 percent interest on their loans.
In the normal course of business, a consumer takes out a loan and it's repaid when their next paycheck arrives. The grand jury alleged that Tucker's businesses would withdraw only the interest payment on the consumer's payday and leave the principal balance untouched so that the loan would renew and incur another round of interest payments.
Tucker's businesses included Ameriloan.com, 500fastcash.com, oneclickcash.com, unitedcashloans.com and usfastcash.com.
The grand jury in New York claimed that Tucker's various payday loan enterprises "systematically exploited over four and a half million working people throughout the United States who were struggling to pay basic living expenses."
The indictment says that between 2003 to 2012, Tucker's payday lending enterprises generated more than $2 billion in revenues, allowing Tucker to receive "hundreds of millions of dollars in profits." He spent these profits on luxury homes, including an $8 million house in Aspen, Colorado; a private jet and a racing team called Level 5 that races Ferraris in places like Monaco and Abu Dhabi.
The indictment says Tucker's businesses received complaints from consumers, their banks, consumer protection groups and regulators, and that the companies would simply stop collecting money but wouldn't refund any money.
Muir worked as general counsel for AMG Services, one of the main business entities that carried out the payday loan operation out of an office building in Overland Park. He's accused of establishing a corporate structure that made it appear that Native American tribes owned and operated the payday loan businesses. He also allegedly created a scheme to funnel profits from the payday enterprises to Tucker in a way that would conceal his ownership in the companies.
Preet Bharara, the U.S. Attorney for the Southern District of New York, seeks a $2 billion forfeiture from Tucker and Muir, a sum that equals what his office believes are their ill-gotten gains. They're after, among other things:
• Funds from various bank accounts controlled by Tucker and his wife, Kim Tucker
• Funds held by a company called BA Services LLC, which is owned by Tucker
• Commerce Bank funds in the name of Muir
• A 2011 Ferrari 599
• Another 2011 Ferrari 599 GTO
• A 2011 Porsche Cayenne
• Two 2011 Ferrari 458 Challenges
• A 2011 Porsche 911 GT2 RS
• A 2011 Porsche Panamera Turbo
• A 2011 Ferrari SA Aperta
• A 2005 Porsche Carrera GT
• A 2014 Ferrari 458
• A Model 60 Learjet
This story is courtesy of The Pitch.