May 30 A U.S. judge has ruled a payday lending
operation affiliated with a Native American tribe is liable for
engaging in deceptive practices and violating federal law by
failing to disclose loan terms, a victory for the Federal Trade
U.S. District Judge Gloria Navarro in Las Vegas ruled on
Wednesday no jury could find that loan documents at issue in the
case against Kansas-based AMG Services Inc were not likely to
She also granted the FTC a summary judgment against the
other defendants in the case, including Scott Tucker, a race car
driver the agency contends controls AMG and other online payday
lenders the FTC says are related to the company.
In a 2012 lawsuit, the FTC accused the defendants of
deceptive practices, including failing to disclose the true
costs of loans to borrowers and falsely threatening consumers
with arrest or prosecutions if they failed to pay.
It was one of two lawsuits brought by the FTC against a
payday lender that claimed an affiliation with Native American
tribes exempted them from state laws because of their sovereign
Payday lenders provide short-term loans, generally $500 or
less, tied to borrowers' paychecks. The loans carry high charges
ranging from $10 to $30 for every $100 borrowed, according to
the Consumer Financial Protection Bureau.
Critics say they take advantage of low-income borrowers by
charging high fees, while lenders argue they provide a valuable
service by providing short-term loans between pay periods.
Referring to a loan note disclosure document used in the
payday loans under scrutiny in the case, Navarro said "no
reasonable factfinder could conclude that the document was not
likely to mislead consumers."
U.S. Magistrate Judge Cam Ferenbach previously had
recommended Navarro rule for the FTC.
A spokeswoman for the FTC had no immediate comment. Lawyers
for AMG and Tucker did not immediately respond to requests for
The ruling came less than a month after Reuters reported
AMG, which is chartered under the laws of the Miami Tribe of
Oklahoma, had received a grand jury subpoena as part of a
criminal investigation by the office of Manhattan U.S. Attorney
The criminal probe as well as the FTC's case against AMG
come amid increased scrutiny of online payday lenders by
authorities including the FTC, Justice Department and the CFPB.
According to the FTC, more than $40 million that AMG and
related companies collected from borrowers was transferred by
Tucker and his now-deceased brother to racing team Level 5
Motorsports for sponsorship fees.
The defendants have denied wrongdoing. In 2013, AMG, Tucker
and most of the other defendants reached a partial settlement,
though other claims moved forward.
In March, Navarro held that the defendants were not immune
from the FTC's enforcement powers despite their affiliations
with Native American tribes.
The case is Federal Trade Commission v. AMG Services Inc, et
al, U.S. District Court, District of Nevada, No. 12-00536.
(Reporting by Nate Raymond in New York; Editing by Noeleen
Walder and Paul Simao)