The Federal Trade Commission filed its second complaint against a payday lender in the past month, this time in U.S. District Court in Las Vegas.
The commission charged on Monday that several affiliated online lenders, including 500FastCash and OneClickCash, violated federal lending regulations by assessing borrowers far more than advertised in finance charges. Although the lawsuit involves people and entities tied to race car driver Scott Tucker, based in Johnson County, Kan., the case came here because six companies out of 17 defendants have Las Vegas or Henderson addresses.
The commission said that agencies have received at least 7,500 complaints from borrowers about the lenders, not only because of the amounts they had to repay but the subsequent arrest threats if they refused.
The lending entities could not be reached for comment.
The commission has asked for an injunction to halt the practices, contending that they violate the Truth in Lending Act and the Electronic Fund Transfer Act, plus unspecified damages. Court papers contend that at least $40 million in loan proceeds and finance charges were funneled into Level 5 Motor Sports to pay for Tucker's racing.
The commission alleged that, as an example, a $300 payday loan was promoted as coming with a $90 finance charge, based on full repayment on one transaction. A payday loan typically carries a term of less than one month, designed to tide a cash-strapped borrower over to the next paycheck, and comes with stiff fees and interest rates. One borrower in the complaint had a loan with an annual percentage rate calculated at 684 percent.
But, the commission said, the lenders would spread the repayment over a longer term and collect charges each time. As a result, the $300 loan grew to a $975 repayment, including principal.
A law that enacted the Nevada Legislature in 2007 has capped annual percentage rates at 36 percent.
Several of the Tucker entities were incorporated under tribes in Oklahoma and Nebraska. Payday lenders have argued that this removes them from the jurisdiction of state lenders, but the commission contended that they are still subject to federal law.
Contact reporter Tim O'Reiley at firstname.lastname@example.org or 702-387-5290.