A federal court in the state of Nevada has been fully briefed on a Federal Trade Commission complaint that alleges two American Indian tribes in Oklahoma are operating payday loan companies that mask hidden fees, violate lending practices and falsely threaten customers with arrest or imprisonment for failing to pay their bills.
The lawsuit, filed in April in U.S. District Court for the District of Nevada, names several defendants, including the Miami Tribe of Oklahoma’s AMG Services and Tribal Financial Services, and the Modoc Tribe of Oklahoma’s Red Cedar Services.
Messages seeking comment from the Miami Tribe were not returned on Thursday. A spokeswoman for the Modoc Tribe said it had “no comment.”
The FTC is alleging that the lending operations have claimed in state legal proceedings that they are affiliated with Native American tribes and are therefore immune from legal action. The FTC, in its lawsuit, states that the defendants’ claims of tribal affiliation do not exempt them from complying with federal law.
The FTC has asked the federal court for a preliminary injunction to stop the defendants’ “deceptive lending and collection” tactics while the agency pursues its case against the defendants in an effort to pay back borrowers who it says were cheated. The court has not yet decided whether to grant an injunction, a spokesman for the FTC’s consumer protection division said Thursday.
The FTC’s complaint alleges that the defendants’ misrepresentations and false threats violated the Federal Trade Commission Act. The complaint also alleges that the defendants violated the Truth in Lending Act by failing to accurately disclose the annual percentage rate and other loan terms, and that they violated the Electronic Fund Transfer Act by illegally requiring consumers to pre-authorize electronic fund transfers from their accounts.
The FTC says that on a typical $300 loan, borrowers were told they would have to pay only $90 in interest. The FTC alleges that the lender would automatically “renew” the loan every two weeks, so that the borrower would have to pay $975 on the loan.
The FTC complaint alleges that a web of defendants, including AMG Services Inc., three other Internet-based lending companies, seven related companies and six individuals, violated federal law by deceiving consumers when providing and collecting on payday loans.
One of the defendants who allegedly controlled the lending companies is American Le Mans Series auto racer Scott Tucker, who lives in Leawood, Kan. According to documents filed with the court, Tucker and his co-defendant and brother, Blaine Tucker, allegedly transferred more than $40 million collected from consumers by the lending companies to another company Scott Tucker controls, Level 5 Motor Sports, for “sponsorship” fees that benefit his automobile racing.
Tucker became wealthy from the payday-lending business he started. When state investigators probed the company’s practices, Tucker came up with a plan to sell the business to the Indian tribes while continuing to run the company and to collect most of its profits, according to court records.
In response to the allegations, an attorney for Level 5 Motorsports and Scott Tucker issued this statement: “We are disappointed that the FTC has taken the action of filing a lawsuit, but we will defend the allegations through the legal process and begin the kind of dialogue appropriate for such a regulatory filing.
“An FTC filing is not a finding or ruling that anyone has actually violated a statute or regulation. It is simply a lawsuit based on untested allegations. The FTC has sued the likes of Microsoft, Google, Apple, Citigroup, Coca-Cola and Facebook, and the reality is most actions resolve in settlements based on an agreed understanding of the facts. We will proceed accordingly and in good faith to address the recent filing.”
According to an FTC release, the agency files complaints when it has “reason to believe” that a law has been violated and when it appears to the commission that a proceeding is in the public interest. The commission vote authorizing its staff to file the complaint was 4-0.
The defendants’ tactics have generated more than 7,500 complaints to law enforcement agencies over the past five years, the FTC said.
FTC
THE FEDERAL TRADE COMMISSION works for consumers to prevent fraudulent, deceptive and unfair business practices, and provides information to help spot, stop and avoid such practices. To file a complaint in English or Spanish, people may call 877-382-4357.
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Two Oklahoma tribes' payday loan operations cited in FTC complaint
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