Professional racecar driver Scott Tucker and companies he owns reportedly owe the Federal Trade Commission $1.27 billion over deceptive payday lending practices.
According to a report, a federal judge in Nevada ruled Tucker and his companies deceived payday lending borrowers about the costs associated with their loans. Chief Judge Gloria Navarro of the federal court in Las Vegas in a decision last Friday (Sept. 30) claimed Tucker was “specifically aware” customers didn’t understand the terms of their loans and was “recklessly indifferent” toward how the loans were marketed.
“Scott Tucker did not participate in an isolated, discrete incident of deceptive lending but engaged in sustained and continuous conduct that perpetuated the deceptive lending since at least 2008,” Navarro wrote in the decision. The judge also prevented Tucker from engaging in any consumer lending practices.
Tucker faces separate criminal charges in Manhattan, where he is accused of operating a $2 billion payday lending scheme that allegedly exploited 4.5 million consumers. That trial is slated for April 17. Tucker pleaded not guilty in that case.
The controversy around payday loans stems from two connected but separate areas. The first are the fees. Borrowers pay fees of an average of $50 per loan, and borrowers end up taking out a lot of loans. The average payday loan borrower is not one-and-done, according to Pew research, and instead takes about eight loans and pays an average of $520 in interest and fees (over and above the about $375 they keep rolling over and reborrowing). Payday loan opponents argue that the business model is built on preying on consumers in desperate need and are onerous debt traps meant to ensnare the vulnerable. They also claim that payday lenders are disingenuous when they talk about $50 fees, since their business models are actually built on rollover lending and the fee bonanza that comes from continual renewals. The lenders don’t want their customers to use their products responsibly, opponents argue; they, in fact, depend on the idea people won’t.
Proponents, however, have noted that expensive money in a crisis — and payday loan borrowers are almost always borrowing to pay a bill of some kind — is far better than the alternative of no money in a crisis, especially since more than half of Americans don’t have enough in the bank to cover an $400 emergency repair.