A U.S. grand jury has subpoenaed AMG Services Inc. as part of a criminal probe by the office of Manhattan U.S. Attorney Preet Bharara. The regulator says the company is involved in a deceptive payday-lending scheme and is facing possible wire fraud, money laundering, and racketeering charges.
The investigation is one of the first federal criminal probes launched in a recent enforcement crackdown against payday lenders. Regulators like the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau have been increasing their scrutiny of the industry, which reportedly pulled down $9.3 billion in revenues in 2012.
This latest probe follows an April 2012 lawsuit lodged by the FTC against Kansas-based AMG and various lending companies affiliated with the firm as well as race-car driver Scott Tucker, who allegedly controls the companies. The lawsuit accuses the firms and Tucker of failing to disclose the true costs of loans, falsely threatening consumers with arrest for failure to pay, and other deceptive practices.
AMG gained national media attention for its payday lending practices even before the FTC case. The agency claims AMG and its allegedly related companies operate online payday lenders such as 500FastCash, AmeriLoan, OneClickCash, UnitedCashLoans, and USFastCash. More than $40 million collected from borrowers by AMG and those firms was transferred by Tucker to Level 5 Motor Sports for sponsorship fees for his racing, according to the FTC. While AMG reached a partial settlement in July 2013, other claims moved forward -- including allegations that the firm deceived consumers about the cost of their loans. In January, U.S. Magistrate Judge Cam Ferenbach in Las Vegas recommended that a federal judge find the defendants guilty of deceptive acts and practices and of violating the Truth in Lending Act. A decision from U.S. District Judge Gloria Navarro later said the defendants were not immune from FTC enforcement powers despite their claims that AMG was owned by the Miami Tribe of Oklahoma.