A life of stealing started with the snatching of a candy bar and transformed into an illegal multi-million dollar online payday lending scheme that allegedly defrauded thousands of people. At least that’s what federal prosecutors say led to charges against a Pennsylvania man recently.
Philly.com reports that the 58-year-old man was charged with racketeering, conspiracy, and mail fraud for his part as the alleged mastermind of a payday lending operation that made short-term loans in all 50 states, many times in violation of usury laws in Pennsylvania and other states.
Many states, including Pennsylvania, have laws that limit interest rates – generally to 36% – on loans so much that payday lending and other predatory financial products are effectively banned.
According to recently unsealed court documents, from 1998 to 2002 the man owned, controlled, financed and/or worked for multiple businesses that issued short-term payday loans, often in violation of these state laws.
Prosecutors alleged that the man engaged in a number of deceptive practices to evade usury laws including paying a federally insured bank – which is not subject to state laws – to pretend it was the actual lender; relocating operations to a state considered “usury friendly;” and paying thousands of dollars to an Indian tribe to pretend that it was the loan lender.
Through these practices the man and at least three co-conspirators pilfered tens of millions of dollars from consumers, mainly through the collection of fees for the loans.
Typically, the loans issued by the man’s operation came with finance charges or fees between 10% and 30% of the amount borrowed, according to Philly.com.
While these charges may not seem like much, it certainly adds up. For example, if a borrower obtained a $500 loan, they would generally pay between $50 and $150 in order to obtain the loan. When coupled with interest charges during the two week span of a typical payday loan, the annual percentage rate would be much higher, often between 260% and 780%.
In one case, he allegedly incorporated his business under the names of family members in Utah, then forged their signatures on company documents. When banking regulators began investigating that operation, he moved the business to Delaware where it operated under several names but offered the same type of loans.
According to prosecutors, the man took steps such extensive steps to conceal his involvement in the business because of a past tax evasion charge. At the time of his 1997 conviction, the man told the judge that his life of stealing began as a young boy when he took a candy bar, put it in his pocket, and never paid for it.
A lawyer for the man declined to provide comment on the case.
The man also faces charges for helping his two sons run another multi-million dollar telemarketing scam that allegedly tricked more than 70,000 people into buying worthless credit cards.
Prosecutors say the men sold the credit cards, marketed as general-purpose, for $79.95 each. In all, the scheme brought in about $7.5 million. The man’s sons pleaded guilty to earlier charges regarding the scam and are awaiting sentencing, Philly.com reports.
Jenkintown man accused of scamming 70,000 victims [Philly.com]
by Ashlee Kieler via Consumerist