The Federal Trade Commission filed an injunction today in a federal court to halt the practices of a payday lending operation it describes as deceiving borrowers out of millions of dollars and threatening consumers.
The FTC alleges that the head of the operation, race car driver Scott Tucker, used his partnerships with Indian tribes to shield his business from state laws.
A September 2011 CBS News investigation in partnership with the Center for Public Integrity tied Tucker to online payday lenders including 500fastcash; Ameriloan and USFastCash that are owned by Indian tribes.
"We took action because these companies are engaging in deceptive practices," said Malini Mithal, Assistant Director of the FTC's Bureau of Consumer Protection, "We are very interested in stopping Tucker and their company's conduct and benefiting consumers as best as we can."
A call to Tucker's attorney was not immediately returned but in prior statements Tucker denied all wrongdoing.
"They just make your life miserable," said one woman who did not want to be identified but had complained about harassment from lenders tied to Tucker to the North Carolina Department of Justice. "I make decent money," she said, "I hate that I took that route but I had a son who was mentally ill and I was just trying to get ahead."
In the complaint, the FTC alleged the payday lenders piled on undisclosed and inflated fees. In one example, the FTC alleged the companies told a consumer that a $500 loan would cost $650 to repay. But instead the company attempted to charge the consumer $1,925. When the borrower balked, he was told by a representative of the company, he would be arrested.
In addition, the FTC said, "Tucker and his brother allegedly transferred more than $40 million dollars collected from consumers by the payday lending companies to...benefit Scott Tucker's automobile racing."
In court documents, the FTC included copies of checks from the payday lending umbrella company - AMG Services - to a personal concierge service, private jet services, luxury home construction, landscaping, hand crafted cabinetry as well as over $3 million in sponsorships for Tucker's car racing company Level 5 Motorsports from various Tucker companies.
The complaint targets not only Tucker but his wife and brother as well as his attorney. Court documents indicate the FTC is pursuing a dozen companies connected to Tucker.
Tucker has evaded the pursuit of attorneys general in numerous states including a seven year legal battle with the Colorado Attorney General - all the while using his partnership with Indian tribes to shield his businesses from state laws. Indian tribes aren't subject to state laws, but are subject to federal law.
Rick Brinkley, who runs the Better Business Bureau in Eastern Oklahoma, told CBS News his office had received more than 2,000 complaints about online tribal lenders connected to Tucker, "If they become affiliated with a tribe and able to avert state and local laws, then in my opinion, apparently loan sharking is legal in this country."
Tucker's lending operation is not the only one of its kind. CBS News found an at least 30 online lenders partnered with American Indian tribes.
Payday loan consultant Allen Parker counsels payday lenders on setting up partnerships with tribes. His presentation "Sovereign Model" lists the benefits of the partnership. On the first page it includes the following: "Because a federally recognized tribe has sovereign immunity, it is exempt from all state regulations and cannot be successfully sued, including by a state attorney general."