A groundbreaking federal settlement with an Overland Park-based online payday lending company will bring some badly needed relief to consumers who were deceived by businessman Scott Tucker and AMG Services Inc.
Fortunately, the agreement with the Federal Trade Commission is only the latest step in a government crackdown on online lenders who gained vast personal fortunes through outrageous schemes to drain the banking accounts of mostly low-income people. In part because of Tucker’s ostentatious success, the Kansas City area became an early hub for the predatory industry.
In the largest ever FTC settlement with a payday lender, announced last week, two of Tucker’s companies, AMG Services and MNE Services of Miami, Okla., agreed to pay $21 million as refunds to customers and to forgive $285 million in outstanding fines and loans.
The $21 million is disproportionately small for the money Tucker is believed to have made from his disreputable businesses. But he remains a defendant in more FTC litigation, as do other of his entities, including Level 5 Motorsports, Tucker’s world-class auto racing team. The FTC alleges he transferred more than $40 million from his payday loan companies to his racing operation.
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Level 5 last year put a collection of sports cars and other equipment up for sale, soon after a federal grand jury in New York subpoenaed AMG as part of a separate criminal investigation said to involve possible wire fraud, racketeering and money laundering.
Tucker deserves no sympathy. The FTC alleges his companies made him a fortune by dinging customers for fees and interest rates they weren’t told about up front. A $300 loan could end up costing close to $1,000. When state regulators tried to stop Tucker, he arranged to become an “employee” of sovereign Indian tribes. He used profits from his businesses to finance his race car fleet, a private Learjet and an $8 million vacation home in Colorado.
Tucker’s get-rich-quick story attracted a host of local imitators, some of whom are now fighting legal actions brought by federal agencies.
These people found willing help within the region’s upper business and civic echelons. Missouri Bank & Trust, based in Kansas City, is one of several banks nationwide to have been sued for allegedly helping online payday lenders break laws by processing their transactions. The bank says the claims are without merit but has ceased working with the controversial businesses.
Even some local schools and churches turned a blind eye as newly super-rich parishioners financed capital projects with donations gained from usurious businesses.
The struggles of Tucker and other area payday lenders should be considered a warning against embracing blatantly unethical practices. As Tucker is learning along with his customers, quick cash can come at a great cost.