Payday loan tycoon’s record $1.3B FTC fine upheld by appeals court, with concerns

‘Dirty Money’ (Official trailer)

Scott Tucker of Leawood, convicted payday lender, is the subject of an episode in a Netflix series called “Dirty Money.”
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Scott Tucker of Leawood, convicted payday lender, is the subject of an episode in a Netflix series called “Dirty Money.”

An appellate court in San Francisco on Monday upheld a lower court’s decision that Kansas City payday loan tycoon Scott Tucker deceived borrowers and must pay a record $1.27 billion to the Federal Trade Commission.

But some of the appellate court judges expressed reservations about the court’s authority to level such a restitution judgment.

Tucker quietly built a business empire in Kansas City extending payday loans with exorbitant rates and fees. The former Leawood resident later parlayed that fortune into a professional race car driving career.

A jury last year convicted Tucker of operating an illegal payday loan business and he’s currently serving a 16-year, eight-month prison sentence. Jurors found Tucker and his lawyer, Tim Muir, guilty of charging illegal interest rates off loans that had misleading terms, among other offenses.

Prior to his criminal conviction, the FTC sued Tucker and his businesses, claiming that his company’s loan terms were deceptive.

In 2016, a federal judge in Nevada found the FTC’s arguments persuasive and ordered Tucker and his businesses to pay $1.27 billion, the largest amount the FTC had won in a litigated case. Tucker was also ordered to keep out of the payday lending business.

Tucker appealed the decision shortly afterward.

A panel of three 9th Circuit Court of Appeals judges heard arguments from Tucker’s attorneys and the FTC. The judges largely agreed that loans from Tucker’s businesses were misleading. The opinion, written by 9th Circuit Judge Diarmuid O’Scannlain described a confusing and cumbersome method of repaying a loan.

The loan terms described in large print how a $300 loan would cost a borrower $390. But that’s only if consumers took a number of unusual steps to pay the loan in full to avoid renewing the loan. Without reading or fully understanding the fine print and then taking a number of steps to pay the loan, the opinion said, borrowers risked paying up to $975 for a $300 loan through renewals and rollover fees.

But one of the three judges, Carlos Bea, wrote in a separate opinion that he read the loan terms, understood them and believed that the question of whether the terms were “likely to deceive” a borrower should have been left to a jury or a judge in a trial setting. The Nevada judge hearing Tucker’s case ruled in the FTC’s favor on summary judgment.

O’Scannlain, in a separate opinion, also questioned whether courts could order restitution judgments under the FTC Act. He suggested that a full panel of 9th Circuit revisit Tucker’s case, an indication that the case stands a good chance at getting another look before the appellate court.

Tucker, 56, is currently in prison in Leavenworth. The Bureau of Prisons assigned him to a prison in Colorado to serve his sentence, but he’s remained in Leavenworth while a criminal tax case is pending against him in Kansas — one in which he and another lawyer are accused of not reporting millions of dollars in income.

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