Public Justice, working as counsel to Americans for Financial Reform, announced today that it has won a motion to unseal court documents showing how AMG Services, Inc., the payday lending business owned by magnate Scott Tucker, deceived borrowers about the total amount their loans would cost. The carefully orchestrated scheme netted Tucker and his associates at least $1.32 billion out of the pockets of hard-pressed borrowers.
The documents expose a variety of techniques used by AMG, over a four-year period, to suck borrowers into payment arrangements designed to keep them in prolonged high-cost debt, while deliberately hindering their ability to understand the total fees, timeline, and other terms being imposed on them by default.
The documents were filed in court as part of the Federal Trade Commission’s 2012 action against the company, but sealed from public view until the motion to unseal was granted in October. The court had found that the company violated federal consumer laws, but large portions of the supporting evidence had been sealed.
“These documents reveal startling details about how this scheme was perpetrated and how customers were bilked out of over a billion dollars,” said Public Justice Thornton-Robb Attorney Gabriel Hopkins. “Exposing how this payday lender operated will aid consumers and policymakers alike, informing more effective regulation to prevent future abuses.”
“Exceptional as this case is in some ways, it involves practices common to many payday lenders,” said Lisa Donner, Executive Director of Americans for Financial Reform. “For example, AMG relied on direct access to customers’ bank accounts: in other words, its loans were issued on the basis of the lender’s ability to collect, not the borrower’s ability to repay. And AMG had an incentive to discourage borrowers from repaying principal, because its business model depended on their failure to do so.”
“These documents provide yet further evidence that the payday lending business model is rife with unfair and abusive practices that significantly harm borrowers, which underscores the importance of state and federal regulatory action to stop abusive payday lending practices.” said Center for Responsible Lending Senior Policy Counsel Ellen Harnick.
AMG led borrowers to believe their loans would cost a certain amount. Then it quietly placed them on a repayment plan that was, in fact, far more expensive. Under AMG’s plan, a $300 loan would cost a consumer $960; a $500 loan would cost $2,575; a $1,000 loan, $6,650.
The details of the plan—and how to choose a different one—were hidden in a tangle of tiny hyperlinks and check-boxes on the company’s website. The unsealed documents show that the company actually instructed its customer service representatives not to explain these options to borrowers in a straightforward way.
Evidence also suggests that AMG customers who refused or could not pay were pursued with aggressive loan-collection practices, including phone calls, threats to sue, and even warnings that non-payment could lead to arrest.
The documents expose the disingenuous nature of AMG’s relationship with Native American tribes, intended to help the company evade the law by hiding behind a claim of tribal sovereign immunity. It was Tucker who approached the tribes, pitched the arrangement, provided all the capital, and assumed all the risk, giving the tribes only a tiny fraction of the revenues.
Finally, the documents paint a vivid picture of how some of the extraordinary profits of this lending scheme were used. AMG was the sole corporate sponsor of Tucker’s auto racing career, to the tune of $60 million. Funds were also used to pay his personal taxes, to fund luxury travel, and to finance a company (controlled and owned by the Tucker family) whose sole purpose was to purchase and maintain an $8 million mansion in Aspen, Colorado.
Scott Tucker is a currently under investigation in connection with a possible criminal indictment in the Southern District of New York.
Local counsel in this matter was Craig B. Friedberg of Las Vegas, Nevada.