Controversial lenders that claim to be owned by Indian tribes and offer payday loans over the Internet have agreed to stop practices that federal authorities say deceive borrowers and violate federal laws.

The agreement, filed in federal court, could save borrowers hundreds of dollars on each payday loan.

The Federal Trade Commission last year sued an Overland Park, Kan., company, AMG Services, to recover millions of dollars in revenues, alleging that borrowers were illegally deceived. The business was founded and is still managed by Scott Tucker, best known as an endurance race-car driver who recently won the Baltimore Grand Prix.

The Center for Public Integrity first exposed Tucker’s business practices in an investigation done with CBS News.

The case awaits trial. But the FTC argued that AMG Services was continuing to mislead thousands of new borrowers. Tucker and the representatives from the Indian tribes last month agreed to change the practices that the FTC said were illegal.

Borrowers previously had to give the lenders direct access to their bank accounts and have payments automatically withdraw from their checking account. But instead of a single payoff, the lenders would withdraw interest-only payments for months.

By drawing out the loan payments out, a $300 loan could end up costing the borrower nearly $1,000. The FTC said this was not properly disclosed under the Truth-in-Lending Act.

With the agreement filed in a federal court in Nevada, the lenders will no longer require access to a borrower’s bank account and the loans will be paid off in one payment. The lenders also agreed not to tell borrowers that they could go to jail or be sued if they didn’t pay the loan back.

A federal judge ordered Wells Fargo to pay $3.1 million in punitive damages over its mishandling of a homeowner's loan, according to a report in the Huffington Post.

The opinion was issued by Elizabeth Magner, a federal bankruptcy judge in the Eastern District of Louisiana. Manger described Wells Fargo's behavior as "highly reprehensible" in its five-year fight with the homeowner.

The plight of the homeowner was raised in a Jan. 27 story on iWatch News. 

In an emailed statement published in the Huffiington Post, Wells Fargo spokesman Tom Goyda said "we believe that there are numerous factual and legal problems with the opinion and are reviewing our options regarding an appropriate legal response."

Meanwhile the Consumer Financial Protection Bureau, created by the Dodd-Frank financial reform law, is reportedly considering new rules to require lenders to provide borrowers with more information about the status of their loans.

The Federal Trade Commission today took up a case that had thwarted state authorities for years, accusing an Internet payday lender with ties to Indian tribes of illegally deceiving borrowers.

The agency is asking a federal judge in Nevada to order AMG Services of Overland Park., Kan., to stop the deceptive practices and pay back borrowers who its says got cheated.

“The defendants have deceived consumers about the cost of their loans and charged more than they said they would, said Malini Mithal, the FTC’s assistant director of financial practices. “The FTC is trying to stop this deception and get refunds for consumers.”

While the company has won arguments in state courts that it has tribal sovereign immunity, allowing it to make loans even in states that restrict or forbid payday loans, that protection doesn’t apply to the federal courts. Court records suggest the business has made more than $165 million, charging interest rates as high as 800 percent on small loans. Borrowers have complained in droves about the lender’s tactics. Law enforcement authorities have received more than 7,500 complaints about the business, the FTC says.

Among the defendants in the lawsuit is Scott Tucker, a professional race-car driver from Kansas City, Kan. Tucker became a millionaire from the payday-lending business he started more than a decade ago. When state investigators started digging into the company’s practices, Tucker came up with a plan to sell the business to three Indian tribes while continuing to run the company and to collect most of its profits, according to recent court records filed in Colorado.

The Center for Public Integrity and CBS News jointly investigated and exposed Tucker’s involvement in the tribal payday lending business in September.

Whistleblower lawsuits made public in recent weeks shed new light on abuses in the mortgage industry that led to — and continued well after — the housing crash in 2007.

The cases suggest that fraud inside the banking industry continued years after the meltdown, some as late as 2011. They have been made public as federal officials put the finishing touches on the $25 billion mortgage fraud settlement with five major lenders.  

A suit unsealed March 7 alleges that Bank of America fraudulently misled borrowers and regulators in order to keep customers out of mortgage modifications that would have cost the bank money but potentially prevented foreclosures — making “a mockery of a program designed by Congress and the Treasury Department to help millions of struggling American homeowners,” the complaint stated.

As a condition of accepting $45 billion from the federal bank bailout, Bank of America promised to help move troubled borrowers into the taxpayer subsidized Home Affordable Modification Program (HAMP).

But that’s not what happened, according to the whistleblower suit filed by Gregory Mackler, formerly an employee of Urban Lending Solutions, the company Bank of America contracted to manage HAMP complaints.

Mackler claims the company developed a host of strategies to evade required HAMP modifications, using stalling tactics designed to run down the clock on the window of time borrowers were eligible for federally subsidized loan modifications.

The suit claims Bank of America:

A crowd of Northern Virginia residents and clergy members marched to General Electric's offices in Washington, D.C., today, demanding that the company's CEO, Jeffrey Immelt, take responsibility for helping homeowners who received subprime loans from the company's now-closed mortgage arm, WMC Mortgage Corp.

WMC, was the subject of a Center for Public Integrity investigation, which found that after GE bought WMC in 2004 it continued to ignore complaints from compliance officers about suspicious loans supported by inflated incomes and falsified documents. After having pumped out roughly $110 billion in high-cost loans, the company’s finances began faltering and GE shuttered the unit in 2007

The FBI is now investigating WMC.

At today’s protest, Rev. Clyde Ellis, pastor at Mt. Olive Baptist Church in Woodbridge, VA, led off a series of speakers with a call-and-response litany of Immelt and WMC’s ills. “They made loans that were structured to fail!” he said.

“Shame!” the knot of roughly 75 protesters shouted back into the building’s otherwise empty lobby and 10-story high atrium.

The protestors were led by a coalition of religious groups, Virginians Organized for Interfaith Community Engagement (VOICE), which targeted GE because they say the company has refused to consider investing money in nearby Prince William County to help struggling homeowners make up for the equity and losses they incurred from the subprime loans. VOICE has successfully begun negotiations for reinvestments with other major lenders, including Bank of America. 

A judge in Denver now says he misunderstood key evidence when he ruled that two payday lenders operating on the Internet were beyond the reach of state regulators because they had been sold to Indian tribes.

Denver District Judge Morris Hoffman says it’s now clear from the evidence that the sales were initially shams to cloak the businesses with tribal sovereign immunity. Yet in his new ruling, the judge still blocks the Colorado Attorney General from investigating the tribal entities further for violating state lending laws.

This bizarre twist in the seven-year-old case seems to allow Indian tribes to sell their sovereign immunity to businesses wanting to violate state laws. Critics dubbed this practice as “rent-a-tribe.” And today, at least 30 online payday lenders claim ties to Indian tribes.

The Colorado Attorney General contends that Scott Tucker, a Leawood, Kan., millionaire and professional race-car driver, started the lending businesses but then crafted sham deals with the Miami Tribe of Oklahoma and the Santee Sioux Tribe of Nebraska to keep states from shutting down his lucrative operation.

Earlier this month, Hoffman said that the evidence made it clear that Tucker’s initial deal with the Indian tribes was legitimate. Yet Hoffman got key facts wrong in his first ruling.

Hoffman said in that ruling that the tribes got 99 percent of the revenue from the payday lending business. In fact, the agreements gave Tucker’s business 99 percent of the revenue. Records show the business affiliated with the Miami Tribe grosses as much as $20 million a month.

Two Indian tribes making payday loans over the Internet, even in states that ban or restrict payday lending, won a court victory Tuesday when a Denver judge blocked the Colorado Attorney General from investigating them further.

The ruling is among a series of recent court decisions posing legal obstacles for states trying to enforce payday-lending laws. Courts have ruled that state regulations don’t apply to businesses owned by tribes. In recent years, a number of tribes have flouted state laws by making loans over the Internet with interest rates as high as 800 percent.

For eight years the Colorado Attorney General has been in court trying to stop businesses affiliated with the Miami tribe of Oklahoma and the Santee Sioux tribe of Nebraska from making loans online. Attorney General John Suthers argued that their claims of tribal ownership are a sham cooked up by Kansas City businessman Scott Tucker, who is better known as an endurance race-car driver.

Tucker started the business in 1998 and approached the tribes only after it came under investigation in Kansas and New York, the court found.

However, the tribes say that their ownership is legitimate. And despite the businesses’ beginnings, District Court Judge Morris Hoffman said not only did the state fail to prove tribal ownership was a sham but added that to him it is clear that the business arrangements today seem not to be shams.

“We’re very disappointed with the court’s order,” said Mike Saccone, a spokesman for the Colorado Attorney General. Attorneys for Tucker and the tribes did not comment on the ruling.

The ruling doesn’t necessarily end the investigation. While the state cannot subpoena the tribes or tribal entities, Judge Hoffman said authorities can still subpoena Tucker and his non-Indian business associates to determine if they still own and control the payday-lending business.