Race car driver and financier Paul Tucker has been charged with operating a $2 billion payday lending scam that duped millions of working people into entering into loans with illegal interest rates as high as 700%.
The U.S. Department of Justice said Tucker, 53, concealed the true costs of the short-term loans that he made to 4.5 million Americans from 1997 to 2013. In one example cited in a federal indictment, customers borrowing $500 were told they would make $650 in payments but ended up paying $1,925.
The scheme allegedly generated more than $2 billion in revenue, with Tucker spending more than $100 million on personal expenses including his racing of Ferraris in professional competitions.
Starting in 2003, state regulators tried to crack down on Tucker but, according to the indictment, he evaded liability by claiming his business was owned and operated by Native American tribes that were immune from state lawsuits or regulators.
Both Tucker and his corporate lawyer Timothy Muir were arrested in Kansas City, Kan., on Wednesday. As part of a non-prosecution agreement, two tribal corporations controlled by the Miami Tribe of Oklahoma agreed to forfeit $48 million in proceeds from Tucker’s enterprise.
“This deceptive and predatory scheme to take advantage of the most financially vulnerable in our communities has been exposed for what it is — a criminal scheme,” U.S. Attorney Preet Bharara said in a news release.
Tucker’s lending enterprise did business through such entities as Ameriloan, One Click Cash, US FastCash, and 500 FastCash.
For a loan of $500, the Truth-in-Lending Act disclosure provided that the “finance charge” would be $150 and that the “total of payments” would be $650. But in reality, borrowers allegedly ended up paying $1,425 in fees and interest because Tucker structured the loan to prolong the payback, automatically withdrawing funds from borrowers’ bank accounts with every new paycheck — but usually counting payments as entirely or mostly “interest.”
The disclosure “materially understated the amount the loan would cost, including the total of payments that would be taken from the borrower’s bank account,” prosecutors said.