Consumer Finance Insights
February 10, 2016

Payday Lender Indicted for RICO, TILA Violations

On February 10, the U.S. Attorney for the Southern District of New York announced the unsealing of a criminal indictment charging the owner of and attorney for a payday lending company.  The defendants were charged with violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Truth in Lending Act (TILA) for the nationwide internet payday lending operation, which the indictment alleged systematically charged illegal interest rates up to 700% in excess of state usury laws.  The defendants allegedly generated over $2 billion in revenues between 2003 and 2012.  They have been arrested and will be presented in the U.S. District Court for the District of Kansas.

The indictment also alleges that, beginning around 2003, the defendants entered into sham business relationships with certain Native American tribes, claiming that the tribes owned and operated the payday lending business to avoid suit.  The U.S. Attorney announced a non-prosecution agreement with two such tribal corporations, which agreed to forfeit $48 million in illegal proceeds from the defendants’ payday lending enterprise.  A tribal representative had allegedly assisted the defendants by filing false declarations in multiple state court actions, allowing the defendants to avoid several state enforcement actions that sought to enjoin their business.

Each defendant was charged with conspiring to violate RICO and three counts of violating RICO, each of which carries a 20 year maximum sentence, and five counts of violating TILA, each of which carries a 1 year maximum sentence.  The indictment also seeks forfeiture of various proceeds and property from the defendants.

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