Oh, the Irony – A Payday Loan Businessman Faces a Billion Dollar Fine

Nevada Chief Judge of the Las Vegas federal court, Gloria Navarro, fined racecar driver Scott Tucker and the payday loan companies that he owns $1.27 billion, which is to be paid to the Federal Trade Commission for deceiving payday loan customers. The report, which was posted online at Time.com, explained that the judgment applied to companies that Tucker owns, which include Level 5 Motorsports LLC, AMG Capital Management LLC and two other companies.

The judgment matches the amount that the FTC sought in the lawsuit, $1.32 billion, less $52 million that other stakeholders in the companies have already paid or still owe. Chief Judge Navarro wrote in her judicial opinion on the extraordinary judgment, “Where, as here, consumers suffer economic injury resulting from a defendant’s violations of the FTC Act, equity requires monetary relief in the full amount lost by consumers.”

$1.27 Billion Judgment Levied Against Payday Loan Mogul and NASCAR Driver Scott Tucker

Tucker was charged with deceiving customers and being fully aware that they didn’t understand the terms of their loans. Navarro ruled that Tucker was “recklessly indifferent”about how his companies did business and that he couldn’t claim the violations were isolated incidents. Navarro wrote, “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.” The case was filed in the U.S. District Court, District of Nevada, as case number 12-00536: FTC v. AMG Services Inc, et al. Tucker was also barred in the future from engaging in any consumer lending activity according to a report posted at Businessinsider.com.

Tucker Faces Criminal Charges for Marketing Deceptive Payday Loans

A Kansascity.com news report revealed that the judgment against Tucker and his deceased brother was the largest FTC judgment in history, which far exceeded the previous record of $478 million judgment that was awarded in 2012. However, the story doesn’t end with this record-setting judgment. Tucker also faces criminal charges in Manhattan for masterminding a payday loan scheme that took advantage of consumers to the tune of $2 billion. Many of Tucker’s payday loan customers ending up paying 300 percent of the amounts that they borrowed.

Payday Loans Trigger Outrage but Remain Popular with Rank-and-File Borrowers

Payday loans have come under increased scrutiny and legal actions based on violations of existing FTC laws and an environment of increased political opposition that has been fostered by the high-profile regulatory efforts of the CFPB, or Consumer Financial Protection Bureau, which was created by the Dodd-Frank Act. Jtexconsumerlaw.com has called Dodd-Frank the “strongest consumer financial reform since deposit insurance.”

The Dodd-Frank Act was passed in response to the financial meltdown of 2008 and increased calls for financial reform. Payday loans, which are short-term, temporary loans of small-dollar amounts, carry high interest rates to cover the higher administrative costs of processing short-term loans. The wide availability of these loans to higher risk borrowers often results in people defaulting on repaying their loan obligations. Some borrowers get trapped in cycles of debt, which has triggered massive political opposition to the industry.

Despite RICO charges and FTC actions against some companies that offer these loans, payday lending remains popular with customers who rely on them because they don’t have other resources when they need immediate cash. Some politicians support free enterprise and people’s inherent rights to make their own decisions about borrowing and handling their own finances. Eurweb.com reports that a recent subcommittee meeting of House Financial Services criticized some of the proposed measures that have been proposed to curtail payday lending. Rep. Mia Love of Utah, a black woman, commented, “I find it offensive that you would say that people aren’t smart enough to make decisions for themselves.” Critics suggest that black, ethnic, immigrant and poor people are often targeted by payday loan companies, but supporters of the industry suggest that these are just the demographic profiles of working people who most need these loans.

Payday Loan Trade Association Fights for Responsible Payday Lending

The payday loan industry has been represented by the Community Financial Services Association of America, or CFSA, for more than 16 years. This trade organization speaks for lenders of payday loans and other short-term loan products and fights to protect consumer rights to choose whether to take out any kind of loan. The organization at Cfsaa.com also works to promote regulations that protect consumers from deceptive and misleading practices by some payday loan companies. The CFSA supports responsible and ethical lending that ensures all customers are fully informed about interest rates and their obligations. Payday loans are intended only for short-term cash needs and not for long-term financing or continuous rollovers of the original payday loan.

Find out more about payday loans, high-profile lawsuits against the industry and the industry’s efforts to police and discourage the worst offenders through trade organizations at the PersonalMoneyStore.com.