Payday lender charged 700 percent interest on loans
08 April 2016, 09:18
Philadelphia — The head of a payday lending enterprise accused of charging more than 700 percent interest on short-term loans was indicted Thursday on federal racketeering charges.
Charles M. Hallinan, 75, led a group that preyed on customers while taking in nearly $700 million from 2008 to 2013, according to the indictment.
Hallinan operated under a string of business names that included Easy Cash, My Payday Advance and Instant Cash USA, and defrauded at least 1,400 customers.
He was released on $500,000 bail after pleading not guilty at a brief court hearing Thursday in Philadelphia. His lawyers declined comment on the case.
According to prosecutors, he tried to evade state consumer protection laws by looping in Native American tribes as the supposed lenders so they could claim tribal immunity from state regulations and deflect class-action lawsuits.
Hallinan's companies charged customers about $30 for every $100 they borrowed, costing customers 700 percent interest on an annualized basis, the indictment said.
In Pennsylvania, the law typically caps interest to 6 percent on personal loans, though banks can charge up to 24 percent interest on loans below $25,000, federal authorities said.
They said Hallinan, of Villanova, paid a tribal leader in British Columbia $10,000 a month to pretend that he owned the payday lending enterprise and, amid a class-action lawsuit, to say it had no assets.
Hallinan and co-defendant Wheeler K. Neff also steered at least one other payday lender into a similar tribal agreement, the indictment said. And Hallinan's companies took control of various aspects of the payday lending business, owning firms that also generated leads and performed credit checks, authorities said.
Neff was released on $250,000 bail after his not guilty plea. His lawyers voiced surprise the government would prosecute what they called his legitimate use of the "tribal lending model."
"There are literally dozens of federal and state court cases that support the validity of such a model, including U.S. Supreme Court cases," lawyer Christopher Warren said in a statement.