The recent indictments and judgments against payday loan lenders and the apparent “pass” being given to the criminals at Wells Fargo show just how far from ideal the American judicial system is. Most people have seen depictions of Lady Justice, the blindfolded personification of the legal system. She holds a balance scale in one hand and a sword in the other. The depiction is intended to show that the legal system is blind to wealth, race, fame, identity, status and power, that the evidence will be weighed in an impartial manner and that punishment will be meted out to the guilty. Lady Justice is an allegorical personification that dates to ancient times and spans many cultures. A representation of an ideal legal system, Americans have particularly embraced the personification.
Wells Fargo Criminals Will Apparently Walk Free; Payday Loan Lenders Indicted
By now, many people have heard about the scandal involving Wells Fargo. Bank employees have been accused of “widespread illegal practices,” such as opening millions of accounts that customers never authorized and then charging them for the accounts. Approximately 5,300 employees have been fired, but the executive supervising 6,000 branches in which the illegal activities occurred was not among them. Instead, she has announced that she will be retiring at the end of the year, and she will leave with her stock awards and reputation intact. On top of earning in excess of $27 million during the past three years, the executive’s retirement package could be up to $125 million.
As Susan M. Ochs points out in an opinion piece appearing at NYTimes.com, in the banking industry, senior executives are seldom the ones who suffer the repercussions of a scandal. However, when thousands of employees and 2 million fraudulent accounts are involved, it tends to point to a systemic problem, which is what upper management has the responsibility to address.
The bank has been ordered to pay fines amounting to approximately $185 million, but no senior executives have been fired as a result of the scandal, according to CNN. Elizabeth Warren has verbally lambasted John Stumpf, the CEO of Wells Fargo, and although he resigned his position on the Federal Reserve Advisory Council, he is currently still in command of the bank. Furthermore, although Warren accused Stumpf of “gutless leadership” and stated that he should be “criminally investigated,” it is unlikely that any criminal charges will ever be filed against him.
However, two payday loan lenders did not fare as well. Scott Tucker and Richard Mosely Sr. were arrested near Kansas City to face federal charges. The men are accused of charging exorbitant interest payments that ranged between 400 and 700 percent, falsely representing their businesses as tribal-owned and “exploiting” customers through deceptive, usurious and misleading practices in his payday loan enterprize. Tucker has also been charged with collecting unlawful debts in violation of the RICO act, and the government wants him to forfeit $2 billion, his private jet and six race cars. The Miami Tribe of Oklahoma has agreed to turn over $48 million to the government, funds received through tribal corporations associated with Tucker’s payday loan company.
Instead of testifying before the Senate — like Strumpf — Tucker and Muir were led into a courtroom in shackles for their first court appearance. Bond was set at $400,000 for Muir and $2 million for Tucker.
Tucker and Muir Are Just the Tip of the Iceberg
The Consumer Financial Protection Bureau and the Federal Trade Commission have been in hot pursuit of payday loan lenders in recent years. In 2015, the Kansas City Star reported that 14 companies owned by Frampton T. Rowland III and Timothy A. Coppinger have been charged with using online data to generate loans for people without first securing a formal application or even obtaining the borrowers’ permission. The settlements were $22 million in Rowland’s case and $32 million for Coppinger, and under the terms of the settlement, the two men can no longer offer loans.
In September 2015, the Consumer Financial Protection Bureau requested that a federal judge order James Carnes and the payday loan company that he formerly owned, Integrity Advance LLC, to pay more than $132 in restitution and a total of more than $18 million in civil penalties. The CFPB charges that the loan terms presented to consumers misrepresented the actual payday loan repayment costs and were “ambiguous.” The Kansas City Star reported that the CFPB also alleges that remotely created checks were used to withdraw money from customers’ accounts after the customers had instructed their banks to stop honoring the company’s automatic debits. Although remotely created checks are banned in telemarketing, they are not illegal for other uses. A witness for the CFPB admitted the possibility that some borrowers had stopped the automatic debits in an effort to avoid repayment on their payday loan, but the agency continues to condemn the practice.
Stay Informed on the Topic
Payday loan lenders have been facing increased criticism recently. The issues involved are complex, so if you would like to learn more, visit the Personal Money Store.