A federal judge in Nevada has ordered Leawood businessman Scott Tucker and others to pay the Federal Trade Commission $1.266 billion after finding that they ran a payday loan enterprise that systematically deceived its consumers.
U.S. District Court of Nevada Judge Gloria Navarro’s judgment, posted late on Friday, also bars Tucker from any future involvement in the consumer lending business.
The judgment found that consumers of Tucker’s payday loan businesses were harmed because of the misleading loan terms that the FTC said caused recipients of a $300 loan to be on the hook for $975 due to poorly crafted loan disclosures and automatic repayment schedules.
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“Here, Scott Tucker did not participate in an isolated, discrete incident of deceptive lending, but engaged in sustained and continuous conduct that perpetuated the deceptive lending since at least 2008,” Navarro wrote in her ruling.
Friday’s judgment comes as the largest penalty to date among several payday loan figures in the Kansas City area, which has become a nerve center for the industry. In a separate case, an administrative law judge last week recommended that Mission Hills businessman James Carnes pay $38.2 million in restitution, along with a $5.4 million civil penalty, for his role in running Integrity Advance, another payday loan operation accused by the Consumer Financial Protection Bureau of duping its consumers.
The Nevada ruling against Tucker is not his only legal problem. Tucker also faces criminal charges in New York after a grand jury in February accused the Kansas City native of running $2 billion payday loan enterprise that exploited 4.5 million consumers.
Tucker’s attorney was not immediately available for comment on Saturday. He had denied wrongdoing in the FTC case and has pleaded not guilty to the criminal charges against him. That trial is scheduled for April 2017.
Tucker grew up in Kansas City and attended Rockhurst High School and later attended Kansas State University. He first reached prominence locally as a professional race car driver who drove Ferraris in competitions in the U.S., Europe and the Middle East. A Star story in 2009 described how Tucker, 46 years old at the time, watched a sports car race on television just a few years prior and took an interest in racing.
Tucker and his brother Blaine,started a short-term lending business in 1998 called National Money Service, according to court records. In the following years, the lending business grew into several different business entities. Starting in 2003 and until 2008, court records say, Tucker brought the businesses to three American Indian tribes in Nebraska and Oklahoma, offering the tribes a cut of the lending business revenues if the tribes allowed Tucker to establish offices on tribal land.
In 2012, the FTC brought charges against Tucker, his brother Blaine Tucker and several business entities on claims that the payday loan operations charged usurious interest rates. The federal consumer watchdog also accused Tucker and others of establishing their businesses on American Indian reservations as a way to offer consumer loans while sidestepping state regulations on interest rates.
There’s no federal law establishing interest rates on payday loans and tribal lands are generally immune from state regulations.
But Tucker’s business, authorities have said, only nominally operated on tribal lands. The bulk of the operation occurred in Overland Park, where his various companies and trade names employed 600 workers.
The FTC had said the payday lending business made Tucker wealthy, affording him, among other things, the opportunity to fund a professional race car team and buy an $8 million house in Aspen, Colo.
Tucker fought the FTC’s allegations, arguing in court filings that his companies extended loans on terms that reflected the industry standard for short-term credit and that that he did not know his businesses violated federal law and that he did not intend to deceive consumers.
But Navarro disagreed with Tucker’s position. Her ruling pointed to evidence, including emails from his subordinates, that showed consumers often complained to the businesses about the confusing nature of their loans.
In one example, a manager for one of the lending companies sent Tucker an email that proposed a new loan repayment model because “90% of the issues we have with customers stem from them not understanding our process of renewals and paydowns.”
Navarro’s $1.266 billion order affects Tucker, the estate of his brother Blaine, who committed suicide in 2014 and various corporate entities under their control, including AMG Capital Management, Black Creek Capital Partners, Level 5 Motorsports, LeadFlash Consulting and Broadmoor Capital Partners.
Navarro also ordered Tucker’s wife to pay the FTC $19 million, an amount that represents money she acquired from the lending businesses. And an entity Tucker controls called Park 269, which owns the couple’s Aspen residence, was also ordered to pay $8 million to the FTC.
The penalties against Tucker are the stiffest brought down so far against local payday lending moguls.
Last year the Federal Trade Commission settled claims against Tim Coppinger and Frampton Rowland III, two Kansas City men accused of running a fradulent payday loan scheme. Both Coppinger and Rowland are subject to $32 million and $22 million in suspended judgements, respectively.
Richard Moseley Sr., another Kansas City-area payday loan figure, was indicted by a grand jury in New York earlier this year.
Carnes, the Mission Hills businessman, faces steep financial penalties.
Carnes was accused by the the Consumer Financial Protection Bureau late in 2015 of deceiving customers through his payday lending business, Integrity Advance. On Tuesday , administrative law judge Parlen McKenna found that the CFPB had proved several of its allegations against Carnes and the company.
McKenna recommended that Integrity Advance and Carnes were jointly liable to pay $38.1 million in restitution. In addition, McKenna recommended that Carnes pay a $5.4 million civil penalty while Integrity Advance pay an $8.1 million penalty.
Earlier court filings in the Carnes case indicated that Integrity Advance had little left in its corporate bank accounts. Carnes sold certain assets of his payday loan business to a Dallas company for $50 million in 2012.