A year-long investigation of payday loans has led to New York prosecutors in Manhattan bringing criminal charges against 12 companies and their owner, Carey Vaughn Brown. They are accused of enabling payday loans that violate the state’s limits on interest rates through a "systemic and pervasive usury scheme."
Brown allegedly assembled “a payday syndicate” that controlled every facet of the loan process. Prosecutors say the corporate structure had the simple goal of making expensive loans even in states that outlawed them. Brown is said to have accomplished this by incorporating the online payday lending arm, MyCashNow.com, in the West Indies, in an attempt to put the company outside of U.S. regulatory oversight. Other subsidiaries were incorporated in states with little payday or corporate regulation, such as Nevada.
The payday lending operation started with borrowers applying for loans on websites like MyCashNow.com, after which their personal information was passed to another company, also owned by Brown, that originated the loans. Yet another company owned by Brown collected payments from borrowers. Interest rates on loans tied to Brown’s companies ranged from 350 percent to 650 percent, according to prosecutors. They do not know how much was lent to New Yorkers; but one company in the syndicate reported that in 2012, it received about $50 million in proceeds from loans made to borrowers in New York, where interest rates are capped at 25 percent.