Consumer Finance from The Center for Public Integrity

Payday lenders agree to stop 'deceptive and illegal' practices

2013-01-04T15:39:47-05:00

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.

Authorities in several states had pursued AMG Services, accusing the company of violating state payday lending laws. Seventeen states restrict or forbid payday loans.

Nearly all states require payday lenders to register. But AMG Services said it was owned by Indian tribes and therefore had tribal sovereign immunity. Those tribes are the Miami and Modoc of Oklahoma and the Santee Sioux of Nebraska.

The attorney general of Colorado spent years battling the tribes in court, showing that they receive only 1 percent of the revenue from the business. Bank records show that much the rest of the money is used to bankroll Tucker’s personal expenses, including millions spent each year on his racing team, Level 5 Motorsports.

The tribes argue that the FTC cannot sue them either, an issue that will be decided in federal court. Other issues yet to be decided are whether the lenders are violating federal law and if so, how much money they would have to pay back.

The lenders use a variety of brand names, including UnitedCashLoans, US FastCash, 500Fastcash, OneClickCash and Ameriloan.

IMPACT: Tribal payday lender sued by Federal Trade Commission

2012-04-02T17:30:30-04:00

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.

Critics have dubbed this tactic “rent-a-tribe” and other lenders have copied the practice. Several states have tried to take action against the company without success. The business has even won major court challenges in the California Court of Appeals and the Colorado Supreme Court.

Colorado Attorney General John Suthers has been trying to stop Tucker and the tribes from lending in his state for seven years and uncovered evidence that the deal Tucker cut with the tribes allowed him to keep 99 percent of the revenue. But a Denver judge recently ruled that, despite this evidence, the state was unable to prove that the deal was a sham. As a result, the business continues to make unlicensed loans even in states where payday lending is restricted or illegal.

“Despite the hard work of state attorneys general, these defendants have been successful in evading prosecution so far,” Mithal said. “But the law that applies to the federal government is different than the law that applies to the states, so the FTC action should put an end to the defendants’ deceptive and unfair practice.

The FTC released exhibits of bank records that show that Tucker and his brother control the bank accounts of the lending business. From September 2008 to March 2011, AMG Services had deposits and withdrawals of more than $165 million. Money from the business was used to pay for Tucker’s $8 million vacation home in Aspen, Colo., flights on a private jet to races, and even plastic surgery, according to court documents. The FTC says Tucker’s racing team has received $40 million in sponsorship fees from the payday-lending business.

Besides Tucker, the FTC is also suing business leaders from the Miami and Modoc tribes of Oklahoma and the Santee Sioux tribe of Nebraska who claim to own and manage the business as well as the tribal companies involved. Among the other companies named in the lawsuit is Tucker’s racing team, Level 5 Motorsports, and even a limited partnership Tucker used to buy his home in Aspen.

Neither Tucker nor attorneys from the tribes responded to a request for comment.

The FTC accuses the company of deceiving borrowers about how much they’d have to pay back. On a typical $300 loan, borrowers were told they’d have to pay only $90 in interest. But the FTC alleges that the lender would automatically “renew” the loan every two weeks, so that the borrower would in reality have to pay $975 on the loan.

The FTC alleges the company also deceived borrowers who were late on payments by falsely threatening to sue them or even to have them arrested. And the lawsuit alleges that borrowers were required to sign over electronic access to their checking accounts, which under federal law cannot be a condition of a loan.

“This provision allows defendants to prey on vulnerable consumers by making automatic withdrawals from their bank accounts,” the lawsuit alleges.

The loans are often made through a separate lead generator called MoneyMutual.com, which uses former talk-show host Montel Williams to promote its loans, sources told The Center for Public Integrity. Neither MoneyMutual.com nor Williams were named in the lawsuit.

The loans are made under several brand names, including OneClickCash, UnitedCashLoans, USFastCash, Ameriloan and 500FastCash.

This is not the first case the FTC has brought against tribal payday lenders. The consumer-protection agency has also filed lawsuits against Payday Financial LLC of South Dakota for trying to garnish wages of its borrowers and threatening to sue them in the Cheyenne River Sioux tribal court. The FTC says the company has no authority to garnish wages or to file cases against nontribal members in a tribal court.

Online payday lenders are the fasting growing segment of the industry, accounting for more than $10 billion a year in loans. Only a fraction of that money goes to tribal affiliated lenders.

Angela Vanderhoof of Olympia, Wash., borrowed $400 from OneClickCash in October 2010, not realizing she would eventually pay $690 in interest on her loan or that she would be hit with as many as four overdraft charges on her checking account in a single day. The withdrawals left her nearly penniless, she said.

When she talked to the Center for Public Integrity last fall, she wondered if she would ever be able to get any of that money back. Today, she’s one of the borrowers listed in the FTC court documents.

“I think it’s great that somebody doing something,” she said. “I didn’t know if anybody would be able to do anything.”

Colo. judge issues new ruling in payday lending case against Indian tribes

2012-02-27T14:20:35-05:00

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.

In a corrected ruling, Hoffman wrote, “Nothing is more telling as far as assessing true owners than to follow the money, and the fact that Tucker put up 100% of the capital and enjoyed 99% of the payday revenues makes it evident that Tucker, and not the tribal entities, continued to own these businesses.”

However, Tucker crafted a new ownership agreement with the tribes in September 2008. Tucker now claims to be an employee of AMG Services, a payday-lending company that the tribes say they own.

The state argues that nothing changed in 2008. It presented bank statements from the payday lending business into evidence that showed that the flow of money remained the same after the new agreements were signed.

Deputy Attorney General Jan Zavislan said at a recent hearing that money from the business accounts was even used to pay Tucker’s personal expenses, including trips on private jets, property taxes on his vacation home, as much as $2 million a month in expenses for his racing team and $22 million to settle a personal lawsuit against Tucker.

Hoffman didn’t acknowledge the bank statements in his ruling. Instead, he concluded that the 2008 sale was legitimate, saying, “over time the tribes were able to take over operations completely.”

Many of the records presented to Hoffman remain under seal. But Hoffman cites two agreements under seal without saying whether those documents changed the split. The Attorney General’s office argued in court there is no evidence that the revenue split changed.

The state of Colorado first ordered two payday lenders called Cash Advance and Preferred Cash Loans to stop making loans in early 2005. Attorneys tracked the businesses to addresses in Carson City, Nev., and asked a court to cite company officers for contempt.

But attorneys for the Miami and Santee Sioux tribes argued in 2005 that they were the true owners of the businesses, which had no connection to the offices in Nevada. They asked the judge to dismiss the subpoenas and the contempt citations because the payday lending businesses were tribal entities.

It was later learned that Tucker started the payday lenders and set up shell companies in Nevada to hide his identity. Hoffman acknowledged that Tucker turned to the tribes only after his business came under investigation.

Hoffman granted the tribes’ motion to dismiss even while acknowledging that the claims of ownership made in it were not true at the time. But the judge said the only thing that matters is whether the claim of ownership is true today.

The state argues that blocking the investigation will lead to companies paying tribes for their sovereign immunity. Hoffman said that is possible but added, “My job is to apply the law, not to write it. If Congress does not want Indian nations hiring non-Indian operators to engage in payday loan businesses, or does not want Indian nations in the payday loan business at all, it could limit or eliminate tribal immunity for such businesses tomorrow.”

The ruling does not prevent the state from continuing to investigate Tucker personally. It’s less clear whether the state can investigate AMG Services, the payday lending business based in Overland Park, Kan. A spokesman for the Attorney General said that their office is still weighing its options.

Indian tribes tied to payday lender escape state probe

2012-02-27T14:18:12-05:00

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.

“If Tucker’s grand scheme was to insulate himself from state scrutiny by associating with these tribes, it was not a very good scheme because he and all his non-tribal officer associates remain subject to investigation,” Hoffman wrote.

In fact, the Colorado Attorney General has subpoenaed Tucker and even had a judge issue a warrant for his arrest for contempt when he failed to respond. But Tucker has so far successfully fought off that subpoena in a county court in Kansas.

Tucker’s subpoena is now before a Kansas appeals court, and a spokesman for the Colorado Attorney General said that case shouldn’t be impacted by today’s ruling. Attorneys general from 22 states have filed a brief in the Kansas case arguing that if the subpoena against Tucker is not enforced, it will make it possible for anyone to circumvent state laws merely by operating over the Internet.

The Colorado investigation dragged on for years before authorities were aware that Tucker had any involvement in the business. As detailed in a joint investigation by iWatch News and CBS News, Tucker initially set up shell corporations and a mail drop in Carson City, Nev., to disguise the ownership of the business.

The Colorado ruling did reveal new facts about the case, though much of the evidence remains under seal. According to the ruling, Tucker started the business in 1998 but didn’t approach the Miami tribe until October 2003, not long after two states brought enforcement actions against the payday lending businesses.

Tucker agreed to give the tribe $5 million in working capital and other services to operate the business, with the tribes agreeing to pay Tucker 1 percent of revenues. A similar deal was cut in February 2005 with the Santee Sioux tribe.

Yet state authorities gave a dramatically different account of the business deal. The state reported at a hearing last November that it was Tucker who agreed to pay the tribes 1 percent of revenue. So while Judge Hoffman says the business had total revenues of $180,000 a month in 2008, state authorities say the amount was 100 times greater: $18 million a month. The actual agreement remains under seal.

A spokesman for the Attorney General today stood by its account at the hearing.

The state also said at the hearing that Tucker used money from the payday lending business to pay expenses on his private Lear jet as well as to pay $2 million a month to his racing team.

The businesses make loans under trade names, including AmeriIoan, UnitedCashLoans, US FastCash, 500Fastcash and OneClickCash.

The Federal Trade Commission appears to be investigating these businesses, according to court records. Federal agencies are not prevented from taking action against Indian tribes.

Courts debate validity of Indian-owned payday lenders

Miami,Florida,United States — 2011-12-20T09:37:05-05:00

A six-year legal struggle by Colorado authorities to shutter a business making questionable payday loans over the Internet may soon come to an end.

The battle, highlighted in a recent investigation by iWatch News and CBS News, is over whether a deal cut to sell the payday-loan business to an Indian tribe was merely a sham to give “sovereign immunity” to the business while it was being investigated in several states.

New evidence shows that the Miami tribe of Oklahoma reaps as much as $200,000 per month from payday loans it makes over the Internet, even in states where such loans are illegal.

Yet that’s a pittance compared to the $2 million the tribe’s payday-lending business shells out in some months to the auto-racing team of Scott Tucker, a Kansas millionaire and a minor celebrity in the sport of endurance racing. Tucker competes in races such as the legendary 24 Hours of Le Mans.

As reported by iWatch News, Tucker founded the payday-lending business and continues to work at the company now called AMG Services, managing hundreds of workers in Overland Park, Kan. But Tucker claims he sold the business to the Miami tribe in 2008, at a time when regulators in several states were trying to shut it down.

The tribe’s involvement has stalled state regulatory efforts for years. A California appeals court and the Colorado Supreme Court ruled that if the business is genuinely owned by the tribe, it has “sovereign immunity” and cannot be sued in state courts.

Regulators in both states are now back in state court trying to prove that the tribal ownership claims are a sham known as “rent-a-tribe,” in which a tribe buys an outside company only on paper to shield it from state lawsuits.

Although lawyers have revealed the contents of a number of documents in court, the documents themselves have been sealed and cannot be seen by the public. But evidence presented in court includes new details showing that the tribe received little from the payday lender, despite revenues for the business that ran as high as $20 million per month.

Colorado Deputy Attorney General Jan Zavislan said in a Denver court on Nov. 22 that though Tucker claims now to be only an employee of the payday lending business, he appears to have control of the company’s bank account. Zavislan asked how the tribe could claim to own and operate the business if they allow Tucker to “ransack your AMG Services bank account to the tune of tens of millions of dollars.”

Among the personal expenses paid out of various bank accounts for AMG was the cost of operating Tucker’s $13 million Lear jet, property taxes and other expenses on his $8 million Aspen vacation home, as well as a $22 million settlement of a personal lawsuit against him.

By comparison, the Miami tribe gets only 1 percent of the company’s revenue, far less than Tucker, according to evidence presented at the court hearing.

Tribal affiliations with online payday lending have grown rapidly in recent years.

By one estimate, at least 30 online payday lenders now claim they are not required to adhere to state laws because of their association with Indian tribes. Thousands of borrowers have complained to states and the Better Business Bureau that these loans are misleading and predatory, charging up to 800 percent interest.

AMG Services is now under investigation by the Federal Trade Commission, according to records introduced in court. Sovereign immunity doesn’t bar investigations by federal agencies such as the FTC.

The tribe originally said in court that it was doing business as Cash Advance back in 2005, when Colorado’s investigation first started. However, new records show that the Miami tribe cut a deal with Tucker in June 2008 to pay $120,000 for Tucker’s payday-lending business called CLK Management, which at the time was grossing $16 million to $20 million per month. The company then merged and changed its name to AMG Services.

By comparison, the Selling Source, a Las Vegas company that signs up borrowers online for AMG Services, was bought by the private-equity company London Bay Capital in 2008 for $130 million. The Selling Source was smaller than AMG, with monthly revenues in 2007 of about $10 million.

Zavislan argued that the tribe doesn’t really own AMG Services.

“They lent their name to them and they did nothing more than that in exchange for monthly payments,” he said.

However, attorneys for the Miami tribe said the ownership is real. Attorney Conly Shulte said that while the tribes hire contractors to manage the business, business executives and employees of the Miami tribe as well as the Santee Sioux tribe of Nebraska personally approve thousands of loans each month.

“The reason the board minutes don’t describe any of the day-to-day activities ... is because that’s not what board(s) of directors do,” Schulte said. “They govern from the 10,000-foot level.”

District Court Judge Morris Hoffman in Denver asked if a company under investigation could cut a deal to sell itself to an Indian tribe for a small amount and a nominal cut of income just to avoid having to answer subpoenas. Schulte said yes, a business could cut such a deal for sovereign immunity. The amount the tribe pays for the business or the amount of income it agrees to receive is irrelevant, he said.

“The remedy is to go to Congress” to change the sovereign immunity laws, Schulte said.

Zavislan said, “The U.S. Supreme Court has talked about prohibiting, preventing tribal reservations from becoming havens for fugitives. And that’s exactly what would happen if you simply allowed ‘Business A’ to create all kinds of havoc in the real world and then go say, ‘Oops. Sold it to a tribe.’”

The notion that a tribe could “invest in IBM and therefore make IBM immune … is ridiculous,” he said.

The Colorado attorney general began its investigation of the online payday lenders in late 2004, issuing subpoenas to businesses that turned out to be shell companies set up by Tucker. Months later, the Miami tribe appeared in court to say that it was the true owner of a payday lender called Cash Advance, arguing that the state of Colorado had no legal authority to subpoena it.

Zavislan said that new documents, which include email exchanges, show that Tucker went to the tribes in the midst of the investigation to cut a deal. But he said no purchase agreement was actually signed in 2005. He said the new revelations now raise questions about the truthfulness of the tribal officers who filed sworn statements in court.

The case went all the way to the Colorado Supreme Court, which ruled last year that businesses that are arms of a tribe are exempt from court actions and subpoenas. The justices said the burden was on state authorities to prove the business was not a true arm of the tribe before it could issue subpoenas or take any action.

Judge Hoffman is expected to rule on whether the business is an arm of the tribe soon.

Malini Mithal, an official at the FTC, said she couldn’t comment on any pending investigation. However, she said that online payday lending investigations are a high priority at the FTC. Earlier this year, the agency filed a lawsuit against a payday lender claiming to be tribally owned. Mithal said there’s likely to be new cases filed.

IMPACT: Credit union swaps payday loans for friendlier offering

2013-01-22T15:55:48-05:00

A Utah-based lender featured prominently in an iWatch News investigation of payday lending at credit unions has stopped selling the controversial loans and is instead offering a more consumer-friendly product.

Mountain America Credit Union had offered its 320,000 member-owners a “MyInstaCash” loan that topped out at an 876 percent annual interest rate for a $100, five-day loan.

These short-term, unsecured loans are usually due when the borrower receives his or her next paycheck. Consumer groups say lenders charge exorbitant interest and often trap borrowers in a cycle of debt that they can’t escape.

The new "Helping Hands” loan complies with rules set by the National Credit Union Administration that permit federal credit unions to lend at a maximum 28 percent annual rate provided they follow certain guidelines, such as giving customers more time.

"Our intent is to offer a payday lending alternative that will help these members get out of the payday lending cycle," said Sharon Cook of Mountain America, in an emailed response to questions.

Mountain America, a large credit union with $2.8 billion in assets, is one of several that skirted the interest-rate-cap rule by partnering with third-party lenders that financed the loans. Customers were directed to these lenders through a link on the credit unions’ websites.

Those lenders would then turn over a finder’s fee, or a cut of the profits, to a separate business, set up by the credit union.

The third-party lender that backed Mountain America’s payday loans was Capital Finance, LLC, located just a few miles from Mountain America’s headquarters in a Salt Lake City suburb.

But Mountain America wasn’t just a client of Capital Finance. It was also — at least as of this past spring — a business partner.

In a telephone interview in April, Capital Finance executive David Taylor said that Mountain America and another large Utah credit union, America First Federal Credit Union, are part owners along with Capital Finance of “CU Access” — another payday product for credit unions (CU Access appears to make loans that comply with federal guidelines).

Last year, America First dropped its payday loan product, called “e-access” — also backed by Capital Finance — following an investigation by the NCUA.

America First did not respond to repeated requests for comment.

Cook said that Mountain America does not use a third party for its new loans. "We decided that an 'in-house' solution would better meet the needs of our members who choose to use this type of product," she wrote. The "Helping Hand" loan includes financial counseling and education for borrowers and offers longer terms.

An NCUA spokesman said credit unions are permitted to direct customers to payday lenders from their websites in exchange for a commission fee.

Scott Simpson, the head of the Utah Credit Union Association, a trade group, said he was surprised that there was opposition to the loans.

“They are creating an alternative in the marketplace,” he said. “The demand doesn’t stop if these loans go away.”

But Linda Hilton, a Salt Lake City community activist who led a protest against America First’s payday lending, sees it differently.

“They are promoting these loans as payday alternatives, but they are not really alternatives, they are egregious payday products,” she said. “We look at it as a moral lapse of credit unions.”

Other credit unions named in the iWatch story are still making high-cost loans. They include Kinecta Federal Credit Union in California, which actually owns a chain of 48 storefront payday lenders called Nix Check Cashing, where the interest rate is more than 300 percent per year.

This story has been updated.

In trouble from an online payday loan? You might not have to repay it

2012-04-02T17:30:30-04:00

Wayne Coons felt a sense of panic when he realized that the $350 payday loan he got over the Internet was costing him hundreds of dollars more than he thought.

Having borrowed from a storefront payday lender once, Coons thought online loans worked the same way. The man from Puyallup, Wash., expected the lender, Ameriloan, to deduct $457 from his bank account on his next payday to pay off the loan.

But when Coons checked his account two weeks after getting the loan last February, he was shocked to discover that Ameriloan had withdrawn only $105 and that he still owed $450 on his $350 loan. Coons, like many borrowers, had not carefully read the fine print. In fact, Ameriloan was allowed to “renew” the loan every two weeks, withdrawing $105 several more times without a penny of it reducing Coons debt. In all, the $350 loan could cost Coons more than $1,000.

Coons was fortunate. He quickly got in touch with the state Department of Financial Institutions and was told that Ameriloan is not licensed in the state of Washington to make payday loans.

As a result, Ameriloan could not make Coons pay back the loan. He closed his bank account and is off the hook.

“It’s illegal to make a loan without a license,” explained Deborah Bortner, the department’s director of consumer services. “If you’re not licensed, it (the loan) is not collectable and it’s not enforceable.”

The dirty little secret among online payday lenders who violate state laws is that they cannot win in state court, regulators say. Indeed, Bortner said she’s never seen a case where an online payday lender took a borrower to court.

Regulators in some states that license payday lenders routinely advise borrowers to follow Coons’ example. Check with state authorities to see if the loan is illegal, and if it is, close your account.

“If someone makes you a loan that’s illegal, either because they don’t have a license or they violate usury laws, you’re not under any obligation to pay it back,” said Norman Googel, an assistant attorney general in West Virginia.

Googel advises all borrowers who might be tempted to get a payday loan online, “Just don’t do it.”

Rick Brinkley, the head for Better Business Bureau of Eastern Oklahoma, agreed. He’s heard from more than 2,000 consumers who were caught off guard by the terms of online payday loans. When they can’t keep up with the payments, Brinkley said, “They’ve just entered a new world of hell that they weren’t prepared for.”

One problem is that many online payday lenders claim that state laws don’t apply to them. Some lenders say they are beyond the law because they’re based offshore. Others claim to be owned by Indian tribes, giving them the cloak of tribal sovereign immunity. Still others hide their ownership behind an impenetrable curtain of shell companies.

That means that some online payday lenders make loans even in 18 states that essentially ban the practice.

The industry defends this position, arguing that state laws don’t necessarily apply to them. Lisa McGreevy, the president and chief executive officer of the Online Lenders Alliance, said members of her organization utilize “an array of legal business models” and argues that consumers should have a variety of choices when borrowing.

"As the Kansas City Federal Reserve stated in a recent report, restricting short-term loans ‘could deny some consumers access to credit, limit their ability to maintain formal credit standing, or force them to seek more costly credit alternatives.”

The Miami tribe of Oklahoma , which claims to own several online payday lenders, say its loans help people in desperate situations from possibly losing their cars or homes.

Angela Vanderhoff skoffs at this notion. She says she stupidly borrowed $400 from one of the tribe’s lenders and almost lost her car as a result.

“It was the biggest nightmare I’ve ever gone through in my life,” Vanderhoff said.

Because the lender could draw directly from her bank account, Vanderhoff felt she had no control. When she was in an accident, she says she called them to arrange to delay a payment. But instead, the lender tried to withdraw the money anyway – four times in a single day. She ended up having to pay $200 in overdraft fees on top of the interest.

Vanderhoff said she called the lender to try to pay off the loan in full, but her requests were ignored.

Brinkley of the Better Business Bureau says the lenders make it difficult to pay off the loan early. A typical contract will tell the borrower to contact the lender three full business days in advance if you don’t want the loan renewed. Vanderhoff said she’d do that but then later be told that they didn’t have any record of her request or that she didn’t put it in writing.

Borrowers complain that when they fall behind in the payments, they receive constant phone calls from the lender. The lender will even call friends and the boss, names that are required when you fill out a loan application.

The Federal Trade Commission recently got a preliminary injunction order against Western Sky Financial and other tribal payday lenders in South Dakota that were sending letters to employers insisting that they had the right to garnish wages without a court order. FTC attorneys say that tribal lenders “do not have legal authority to garnish the pay of consumers who owe an alleged debt without first obtaining a court order.”

The suit also says it’s a violation of federal law to require automatic debits from a bank account as a condition of getting a loan.

Online payday lending is big business, and it’s grown rapidly as people hard hit by the recession struggle to pay their bills. In 2010, the industry made $10.8 billion in loans, up nearly 90 percent from 2006, according to Stephens Inc., an investment firm that tracks the industry.

The FTC encourages people considering payday loans to consider alternatives, such credit unions or small-loan companies.

Even the Online Lenders Alliance offers consumers advice, such as be sure to read the terms of the loan and don’t agree to any loan that you cannot afford.

HUD cuts to devastate mortgage counseling agencies across nation

2013-01-22T15:55:48-05:00

Housing counselors at Western Tennessee Legal Services were plenty busy, even before one of the region’s largest employers, a Goodyear tire factory in tiny Union City, shut its doors in July.

The plant closing, which put nearly 2,000 employees out of work in a rural part of the state, meant more work for counselors like Emma Covington. Covington said she already takes 18 to 20 calls a day and meets in person with people who need counseling on foreclosures and other housing issues.

Now, like many of its clients, the legal nonprofit will have to make do with less.

Earlier this year, Congress defunded the $88 million grant program administered by the U.S. Department of Housing and Urban Development that helped support more than 7,500 housing counselors across the country, including those at Western Tennessee. Funds run out Sept. 30.

The cuts come at a terrible time, say counseling advocates.

In the second quarter of 2011, more than 3.4 million home mortgages nationwide were 90 or more days delinquent or in the foreclosure process. More than one in five mortgage borrowers owe more on their mortgages than their homes are worth, according to government data.

The counseling money may not be coming back. The House Appropriations Committee recently approved a budget for 2012 that also doesn’t include any HUD housing counseling dollars. A group of senators is trying to restore funding, but even if successful, it is unlikely that funds will reach counselors before next spring, at the earliest.

The looming gap in funding and continued uncertainty about the program’s future means layoffs and reduced hours for counselors at nonprofits across the country at a time when demand for their services is greater than ever.

“These are rough times for our clients and our staff,” said Steven Xanthopoulos, the executive director at Western Tennessee Legal Services. “We are faced with some hard decisions.”

Western Tennessee may lay off as many as four employees when its $1.2 million HUD grant runs out at the end of this month, Xanthopoulos said. Many more counselors could lose their jobs at the 25 rural legal aid groups throughout Appalachia and the Mississippi River delta that the nonprofit supports with its share of the grant money, he said.

The National Council of La Raza supports 50 housing counseling agencies that helped 65,000 families last year with about $1.2 million from HUD. Thirty of those agencies will close their doors if Congress does not restore the HUD housing counseling funding, said Graciela Aponte, a legislative analyst.

“We are in the middle of foreclosure crisis,” Aponte said. “This is devastating for our families.”

HUD grants also support one of the nation’s biggest housing counseling training programs. NeighborWorks America used a $3 million HUD grant to fund 1,200 housing counseling training scholarships to its mobile nonprofit training university last year. When the HUD money goes away, so will those scholarships, a spokesman said.

The program – whose cost is modest, by Washington standards – is being suspended at least in part because HUD is a full year behind distributing the grant money to housing groups.

“HUD has been slow to distribute the money and Congress zeroed in on that,” said Candace Mason, senior director of housing and national grants at the National Foundation for Credit Counseling.

In recent testimony, a HUD official said that the agency has a plan to reduce the distribution timeframe to 180 days.

Some have questioned the effectiveness of the programs but the Government Accountability Office cited several studies that show counseling helps struggling homeowners avoid foreclosure and prevent them from lapsing back into default – especially if the counseling occurs early in the foreclosure process.

One study cited by the GAO found that clients who received counseling were 1.7 times as likely to be removed from the foreclosure process by their mortgage servicer as borrowers who did not. Clients who got loan modifications paid an average of $267 a month less than they would have otherwise, according to the study.

Counseling advocates say there appears to be general antipathy toward HUD, an oft-criticized federal agency, from some members of Congress related to the agencies past failings.

Congress also hasn’t yet provided $45 million mandated by the Dodd-Frank financial regulation law for HUD to set up a new Office of Housing Counseling, which will set counseling standards and dole out grants to agencies.

Here, too, HUD has been slow to act. According to the GAO, a working group at HUD is “in the process of developing a plan” for how to organize that new office, but is unable to say when it will submit it.

HUD already has an office that seems to have a similar function: the Office of Single-Family Housing. HUD officials say the primary change needed to create the new office is the reassignment of staffers who work on housing counseling activities, but also have other responsibilities.

Staffers at the House committees responsible for the funding did not comment for this story.

Foreclosure prevention made up the single-biggest slice of any housing counselor’s workload in 2009 and 2010, according to HUD, with nearly half of all queries coming from homeowners in trouble. What makes the HUD grants so valuable, housing counselors say, is that the money can be spent to help people resolve a variety of housing woes, in addition to foreclosure.

For example, the Federal Housing Administration requires seniors who want a Home Equity Conversion, or reverse mortgage to first receive counseling. Since 2005, more than 486,000 seniors received one of those loans, about 3.6 percent of all counseling activity, according to HUD.

Many of these seniors, especially in rural areas, have nowhere else to turn, said Covington, the Tennessee housing counselor. “People can’t afford to travel to our office much less to Memphis and Nashville,” she said.

Homes on the Hill, a Columbus, Ohio, counseling service, is already operating on a razor-thin margin in terms of both budget and staffing, said executive director Stephen Torsell. Counselors have had their hours cut and clients have faced long waits for an appointment – several weeks in many cases.

The nonprofit receives HUD money through La Raza. The annual grant is quite small—about $75,000 per year—but like other housing nonprofits, Homes on the Hill uses the HUD money to solicit matching funds from private donors.

There is still a chance that Congress will at least partially fund the housing counseling program for 2012. A Senate subcommittee recently signed off on $60 million in funding for 2012, but whether the funding makes it into law is uncertain.

Race car driver Scott Tucker drew an elaborate facade around his payday loan businesses

California,United States — 2013-01-23T14:49:19-05:00

Read the first part of this story here.

A deputy sheriff in Olathe, Kan., ticketed race car driver Scott Tucker late one night in October 2008 after clocking Tucker’s Mercedes-Benz CLS63 going 86 mph in a stretch of Interstate 35 posted at 60 mph.

Two days later, Tucker’s wife, brother and sister-in-law as well as several businesses with ties to the payday loan mogul suddenly donated a total of $4,000 to the campaign of a candidate for local district attorney — the office that prosecutes traffic tickets.

Among the businesses that donated $1,000 to the campaign were two payday loan companies that the Miami Tribe of Oklahoma claims to own.

Weeks later, the ticket was reduced to improper parking, to the surprise of the deputy who ticketed Tucker. The change kept Tucker’s driving record clean.

Whether or not the contributions played a role in ticket being reduced, the episode shows a strange commingling of the interests of Tucker and the Indian tribe. Regulators in Colorado and California are investigating whether Tucker is merely using the tribes to circumvent state laws.

Tucker started a controversial online payday lending business that several states have tried to shut down. Tucker now says Indian tribes own the business and he is just an employee. That arrangement gives the payday lending business the cloak of sovereign immunity and has stymied the efforts of state regulators to stop the company from making illegal loans in their states.

Yet an iWatch News investigation found that Tucker is living the life of luxury and spending a fortune on his racing hobby, while the tribes may only be getting a small piece of the revenue from the business.

The tactic of affiliating with Indian tribes has been widely copied among online payday lenders, frustrating state regulators and drawing the condemnation of payday lending’s storefront brethren.

Storefront lenders generally don’t do business in 18 states that restrict payday lending. And those that have ventured into the online market usually get licensed and obey state laws, said Jean Ann Fox of the nonprofit Consumer Federation of America.

The head of the payday lending trade group Community Financial Services Association of America, D. Lynn DeVault, said that using tribes to avoid state laws violates the association’s standards “and would lead to the automatic expulsion of a company in violation.”

Critics call the tactic “rent-a-tribe.”

Tucker acknowledged Friday for the first time that he works for AMG Services, the paydaylending business that the Miami Tribe of Oklahoma says it owns and operates. He says a confidentiality agreement prevents him from talking about it.

The chief of the Miami tribe, Thomas E. Gamble, defended the business, saying the tribe owns and operates it. Gamble says the business obeys tribal and federal laws but he didn’t say whether it obeys state laws. At least five states have tried through legal proceedings to shut down the business for violating state laws. Several other states have either instructed the business to stop making loans or warned consumers about it.

Tucker, who lives in the upscale Kansas City suburb of Leawood, told a judge that he no longer controls the payday lending business. But iWatch News found evidence in court and public records that Tucker still pulls the strings on the business he founded. The evidence includes:

Among the companies that gave $500 campaign donations to the prosecutor on the same day as several of Tucker’s relatives were two tribal businesses, AMG Services and MNE Services.
AMG Services operates out of an office complex in Overland Park, the same office that Tucker lists as his own in Securities and Exchange Commission filings.
AMG Services pays the property tax on Tucker’s $8 million vacation retreat in Aspen, Colo., according to county records.
One of AMG Services biggest vendors said in a lawsuit that Scott Tucker in 2009 was the owner and chief officer of AMG Services.

Most revealing of all, bank records show Tucker and his brother Blaine were the only the two people able to sign for four payday lending businesses of one tribe. The tribes may only receive a sliver of the revenue from the payday lending business.

Rags to riches story

Scott Tucker’s life is both a rags-to-riches and get-rich-quick story. He grew up in the Kansas City area, graduating from a Jesuit high school and attending Kansas State University for two years, where he studied business administration. Tucker has a criminal past. In April 1988, at the age of 26, he borrowed $50,000 from American Bank of Kansas City, offering a new Porsche as collateral. Court records show that Tucker lied on the application; he had sold the sports car months earlier.

A year later, Tucker wrote a bad check for $1,200 to a moving company hired to transfer two loads of used furniture for a business, according to court records.

In the meantime, Tucker participated in a bogus loan scheme to bilk money out of businesses, court records reveal. While a partner in Oregon ran newspaper and magazine ads throughout the country offering commercial loans, Tucker posed as the president of a seemingly high-powered investment bank in Overland Park called Chase, Morgan, Stearns & Lloyd. The operation was a fraud, collecting more than $100,000 in “advance fees” from at least 15 borrowers without providing any loans.

Tucker ultimately pleaded guilty in federal court to two felony charges of mail fraud and making a false statement to a bank. A Missouri state judge found him guilty of a felony charge of passing a bad check. He was sentenced for all three crimes to serve a year in Leavenworth federal penitentiary, followed by three years of probation. He got out of prison on June 8, 1992.

Then Tucker went into the short-term lending business. In 1997, he met Philadelphia businessman Charles Hallinan, who offered the following account in a lawsuit he would eventually bring against Tucker.

Hallinan was already in the payday lending business. The two hit it off. Hallinan viewed Tucker as a protégé and decided to bankroll another payday lending company with him, making Tucker president of the company and letting him run it from Overland Park. Tucker agreed in writing not to open any competing businesses.

On Sept. 19, 1997, Hallinan agreed to loan Tucker $500,000. Tucker signed the revolving loan note.

A month later, Tucker filed for Chapter 7 bankruptcy. In the bankruptcy records, Tucker did not disclose his new business as president of a payday lending company. Tucker listed a total debt of $583,000, including more than $220,000 owed to the IRS.

The court cleared Tucker of his debts. Though Tucker had promised Hallinan he would not open any competing businesses, Tucker started a new company in 2001 called CLK Management, listing himself as the owner. Soon, Tucker was setting up dummy companies in Carson City, Nev., using them as mail drops for payday lenders he called Cash Advance, Preferred Cash Loans and UnitedCashLoans.

Starting in 2004, Tucker registered new trade names for payday lenders, including AmeriIoan, UnitedCashLoans, US FastCash, 500Fastcash and OneClickCash. Court documents show that by 2005, Tucker had teamed up with Indian tribes, continuing to run the payday lenders out of Overland Park.

CLK Management was becoming a major business. By 2006, it took up two floors of an office complex in Overland Park, and eventually employed as many as 400 workers, according to former employees and court records. One of its web sites claimed that it was making thousands of loans each day.

One former employee who worked there at the time swore in a court statement that the business was using addresses on tribal land for “protection.” William James said no one was allowed to reveal where the company was actually located and that his boss once said, “They don’t touch us on Indian reservations.”

Borrowers complained to state regulators about the loans’ high interest rates and the lenders’ aggressive collection tactics. Regulators in California suffered a major setback when an appeals court ruled that because of the tribal affiliation, the lenders had sovereign immunity. With the corporate shell games and the tribes’ involvement, states were finding it difficult to even prove who was doing the lending.

Some companies locate off shore to try to hide from authorities. With scant effort, Tucker was able to hide CLK Management at an office park in suburban Kansas City.

Colorado AG’s seven-year chase

The Colorado attorney general, John Suthers, had been trying to stop Tucker’s lending businesses since 2004. At first, consumers complained about a lender called Cash Advance based in Carson City. But in a surprise move, two Indian tribes—the Miami and Santee Sioux—appeared in court to claim that they were the true owners of the payday lenders. The tribes said the lending business had no connection to Carson City, though there is irrefutable evidence that Tucker set up those shell companies.

By the end of 2007, the investigation in Colorado was continuing to unfold, where complaints about new online payday lenders poured in. Investigators suspected Tucker was behind these new lenders. The Colorado attorney general subpoenaed CLK Management and Tucker.

CLK’s lawyer responded with defiance. He argued derisively that Colorado’s subpoenas had no power in the state of Kansas.

"I can only conclude in your zeal to pursue CLK you believe there are no limitations on your power,” CLK lawyer Thomas Bath wrote back. "We will continue to ignore subpoenas and orders improperly and unlawfully obtained."

The attorney general wasn’t giving up. In March 2008, his office asked a Denver judge to cite Tucker for contempt of court. Tucker himself didn’t respond in court, but oddly attorneys for the tribes did. This puzzled Denver District Judge Morris Hoffman because the tribes had never mentioned any connection to Tucker or anyone else.

“Are you representing Mr. Tucker?” Hoffman asked tribal attorney Conly Schulte.

“No, your honor,” Schulte replied.

“Is Mr. Tucker part of the tribal entities, or connected to them in any way?” the judge asked.

Schulte stumbled a bit for words, arguing that because any questions challenged the tribes’ sovereign immunity, “I feel obligated to my client to respectfully decline to answer that.”

Hoffman cited Tucker for contempt and two months later ordered a warrant for Tucker’s arrest. In the meantime, the tribes finally acknowledged in a court filing, without ever elaborating on the details, that they had a relationship with CLK.

Because Tucker was cited on a civil—not criminal—contempt charge, he can only be arrested if he sets foot in Colorado. Three weeks later, he did just that. Tucker, who by now was starting his racing career, set a track record in a Ferrari 360 at the La Junta Raceway in Colorado.

The state, not paying attention to Tucker’s racing schedule, missed its chance to arrest him.

With CLK Management now in Colorado’s crosshairs, Tucker would make the situation even more confusing. He filed corporate papers in Kansas claiming that CLK no longer existed, that it had merged with a new company owned by the Indian tribes. The new company was called AMG Services. Tucker said he had no control over the company’s books.

Based on Tucker’s word alone, a Kansas judge ruled that CLK merged with AMG on June 24, 2008. The target of Colorado’s investigation—first Cash Advance, then CLK Management—kept moving.

Partner turns on Tucker

By then, state authorities were not the only ones accusing Tucker of breaking the law. His own business partner, the man who had bankrolled him, accused Tucker of being a thief.

Charles Hallinan had put up the cash for Tucker to run the payday lending business. For years, Tucker had called Hallinan each Saturday at his home in Boca Raton, Fla., to give an update on their company called National Money Service.

According to a lawsuit Hallinan later filed in Las Vegas, Tucker acknowledged to Hallinan that he had created a new company in Overland Park called CLK Management and that Indian tribes were involved. But Hallinan said Tucker led him to believe that CLK Management was just part of their company and that, in truth, they still owned the payday lending business.

By 2006, the weekly calls were replaced by sporadic emails. Hallinan had become suspicious and sent an accountant in May 2008 to look at the books of their company. According to Hallinan’s lawsuit, the accountant discovered the company “had essentially been ransacked and substantially all of its assets, cash and profits diverted.”

Hallinan accused Tucker of stealing the business by moving everything over to CLK Management. Now, it looked as though Tucker might be moving the business again to a new company, Hallinan alleged.

The lawsuit revealed interesting details about Tucker’s relationship with the tribes. Hallinan alleged that Tucker held “significant influence” over the Indian tribes. He released a letter from Tucker that showed that on July 31, 2008, Tucker had completed new “management” and “power of attorney” agreements with the tribes.

What’s more, Tucker’s letter revealed a proposal, as part of a settlement, to share with Hallinan all money from the tribal accounts after an undisclosed amount was paid to the tribes. The lawsuit was settled.

Two companies working for the Modoc tribe recently revealed what the tribe gets paid from the payday lending business. Answering questions in a class-action lawsuit from borrowers in California, the companies said the tribe received between 1 percent and 2 percent of revenues from the loans, even though borrowers pay nearly 800 percent in interest.

But no one from the tribe is even able to sign for several of the tribe’s bank accounts used for payday lending. In the same suit, US Bank disclosed the only two people able to sign checks on four tribal accounts were Scott Tucker and his brother Blaine Tucker. Scott Tucker identifies himself on the accounts as the “treasurer” of the Modoc tribe’s corporation. An attorney for the tribe said recently that Tucker is no longer the company’s treasurer.

The Miami and Santee Sioux tribes are still fighting in a separate class-action lawsuit to keep their financial details secret.

Tucker’s biggest break came from the Colorado Supreme Court last November. The court made it easy for anyone to conspire with an Indian tribe to break state law.

The justices may have had no idea who Scott Tucker was. His name never came up during the hearing. One of the justices asked what the tribes’ connection was to Cash Advance of Carson City, Nev., the name and address given on the original loan documents. But the tribes’ attorney, Conly Schulte, said the confusion was a case of mistaken identity.

“We submit that there is no connection other than the fact that the Nevada corporations used the same unregistered trade names,” Schulte told the justices. “Quite frankly, the name ‘Cash Advance’ is quite common in this industry.”

The attorney for Colorado knew that there was a connection. It was Scott Tucker, who had at first made the loans through a shell company in Carson City to hide his ownership. When that didn’t work, he cut a deal with the tribes. The lawyer from the attorney general’s office didn’t mention Tucker in court because his role wasn’t yet identified in the court record.

At the hearing, the justices described their feelings of being hemmed in by federal law. On Nov. 30, the court announced its decision. The court put the burden on the state to prove whether a business claiming to be an arm of a tribe was lying. State attorneys general read the ruling as a major defeat.

In a partial lone dissent, Justice Nathan Coats argued that the decision opens the door for “criminally unscrupulous predators, especially in the current technological environment,” and makes it “virtually impossible for the state to protect its own citizens against even the most blatant acts of fraud.”

Despite the Colorado Supreme Court ruling, the attorney general there is still trying to shut down Tucker’s operation in his state. And it found new evidence from a lawsuit filed in Las Vegas.

Though Tucker says he has no control over AMG Services, Tucker went to a company that sells leads to online payday lenders in the summer of 2009 and complained that someone was stealing AMG Services’ leads. The owner of the lead company identified Tucker in a lawsuit as the owner and chief officer of AMG Services. In 2008, AMG Services paid the vender $80 million for its leads.

Colorado is continuing to investigate Tucker. While the tribes can claim sovereign immunity, Tucker himself cannot. Since 2008, the state of Colorado has been trying to enforce a subpoena ordering Tucker to appear in a Denver court.

The biggest obstacle has been a local judge in Kansas. Tucker went to Johnson County District Judge Charles Droege to block Colorado’s subpoena. The judge agreed to do it without even asking the Colorado attorney general for a response.

But when the attorney general showed up in Droege’s court, the judge changed his mind. He would enforce the subpoena, but only after giving Tucker six months to go to Denver and resolve the matter in court there. Tucker chose not to go to the Denver court, which had already cited him for contempt and issued an arrest warrant.

After the six months were up, Tucker’s attorneys continued to plead with Droege that Colorado’s subpoena had no power in Kansas. In a stunning reversal of his earlier reversal, Droege agreed and ruled that the attorney general of Colorado had no jurisdiction to issue a subpoena in Kansas. He ordered Colorado to stop trying to enforce the subpoena or to take any action that would cause any “further annoyance, embarrassment, oppression or undue burden” on Tucker.

The judge also blocked an order by the Denver judge that instructs Tucker to stop making loans in Colorado.

States band together

Colorado appealed the decision. Last month the attorneys general of 22 states, led by Kansas, filed a brief in the Kansas appeals court blasting Droege’s decision. They pointed out that the U.S. Constitution requires states to honor the laws and court decisions of every other state.

The states argued that unless Droege’s decision is overturned, “Businesses will be able to commit unlawful acts in [other states] with impunity, as long as all condemning evidence is kept elsewhere.’’ That, the brief said, “renders states incapable of enforcing laws meant to protect their citizens."

Tucker’s story exposes a myriad of challenges for state regulators and the courts in trying to enforce laws against companies operating over the Internet and hiding behind shell companies.

The simple act of setting up shell companies can delay enforcement actions for months. And merely changing a company’s name can make settlement agreements or court orders moot.

Kansas was the first state to go after Scott Tucker. But Danny Vopat, the lead attorney in the case for the Kansas Bank Commissioner, says he never knew that Tucker, living and working in the same state, was actually behind the payday lenders he battled for more than two years. Vopat settled with one of Tucker’s shell companies in Nevada, a shell that no longer exists. Tucker quickly abandoned the trade name Cash Advance. For those reasons, Vopat says it’s unclear that Tucker would violate the settlement agreement if he started lending in Kansas again.

Now with the tribal immunity shield, some states say they don’t have the resources or legal expertise to fight people like Tucker. Deborah Bortner of the Washington Department of Financial Institutions said she consulted with attorneys about tribal payday lenders, who told her “we really don’t have a leg to stand on.”

There is hope of federal action. Tribal immunity cannot stop federal regulators, who have the right to investigate and take action against tribes. And in the financial reform act passed last year, Congress gave the new Consumer Financial Protection Bureau the explicit power to regulate payday loans.

Without a confirmed director, the new consumer agency is limited in its powers. Still, the agency is expected to make oversight of payday loans a top priority. Consumer lawyers who’ve talked to the bureau officials say that the agency is especially concerned about lenders who flout the law, including payday lenders who claim to be affiliated with tribes.

The bureau can’t enforce state laws. But it can subpoena tribal records and then share those documents with state regulators.

Yet industry analysts say that Indian tribes are now clamoring to get involved in payday lending. Frank Cotton, an industry analyst in Atlanta, estimates at least 30 payday lenders are affiliated with Indian tribes. He said the number may even be as high as 60.

Meanwhile, Tucker has a heavy schedule of racing ahead. He recently made the unusual and costly decision to switch in mid-season to a new custom-built vehicle for the Le Mans series.

His publicity machine continues to promote Tucker as the next superstar of the racing world, recently describing him as “a real-life action figure [who] can be found working his magic at racetracks all over the world.”

“With all of his recent success, fans of the three-time champion may have a hard time picturing Tucker in anything other than a driver’s suit, but he was a successful businessman long before he was a race car driver,” Tucker’s publicist said in a press release in July. “Give that man a cape.”

CORRECTION: The original story incorrectly quoted Frank Cotton about estimates of tribal/payday connections. The sentence now reads, "Frank Cotton, an industry analyst in Atlanta, estimates at least 30 payday lenders are affiliated with Indian tribes. He said the number may even be as high as 60."

SLIDESHOW: The house that payday lending built

2011-09-28T15:08:08-04:00