By Nate Raymond
NEW YORK (Reuters) - A U.S. grand jury has subpoenaed a company that a federal regulator has said is at the center of a deceptive payday lending scheme, a source familiar with the matter said.
AMG Services Inc was subpoenaed as part of a criminal probe conducted by the office of Manhattan U.S. Attorney Preet Bharara. The grand jury is looking at possible violations of statutes covering wire fraud, money laundering and racketeering, the source said.
The criminal investigation comes as regulators, including the Federal Trade Commission and the Consumer Financial Protection Bureau, put payday lenders under increasing scrutiny. The industry posted $9.3 billion in revenues in 2012, according to investment advisory firm Stephens Inc.
The scope of the investigation is unclear, including whether it is targeting individuals, AMG, or both but it appears to be one of the first federal criminal probes launched in a recent enforcement push against payday lenders.
It follows an April 2012 lawsuit by the FTC against Overland Park, Kansas-based AMG and various lending companies the agency says are related to the firm, as well as Scott Tucker, a race car driver the agency contends controls the companies.
The FTC lawsuit accuses the companies and Tucker of deceptive practices, including failing to disclose to borrowers the true costs of loans and falsely threatening consumers with arrest or prosecutions if they failed to pay.
The defendants have denied wrongdoing. Tucker maintains he is only an employee of AMG, which says it is owned by the Miami Tribe of Oklahoma.
A lawyer for Tucker, Paul Shechtman, declined comment on the existence of a probe. Attorneys for AMG Services did not respond to requests for comment. A spokeswoman for the tribe had no comment. James Margolin, a spokesman for Bharara, declined comment.
Payday lenders provide short-term loans, generally of $500 or less, that are tied to the paychecks of borrowers. The loans carry high charges ranging from $10 to $30 for every $100 borrowed, according to the Consumer Financial Protection Bureau, which is among the agencies probing the industry.
Critics say payday lenders take advantage of low-income borrowers by charging high fees. Lenders counter they provide a valuable service by enabling borrowers to obtain short-term loans between pay periods.
About 18 states and the District of Columbia prohibit high-cost payday lending, according to the Consumer Federation of America, a consumer advocacy organization.
Many online lenders such as those in the AMG case claim affiliation with Native American tribes, which they say exempts them from state laws because of their sovereign status.
AMG Services has stood out among payday lenders, garnering national media attention for its practices even before the FTC filed its case. CBS news and The Center for Public Integrity did an investigative report on the firm and Tucker in 2011.
In a complaint filed in April 2012, the FTC said AMG and its allegedly related companies operate online payday lenders, including 500FastCash, AmeriLoan, OneClickCash, UnitedCashLoans and USFastCash.
In addition to Tucker, a race car driver who competes nationally for Level 5 Motorsports, the suit also named his brother Blaine.
Court records produced in the FTC lawsuit show that, from September 2008 to March 2011, AMG Services had bank deposits of more than $165 million.
According to the FTC, more than $40 million collected from borrowers by AMG and allegedly related companies was transferred by the Tuckers to Level 5 Motor Sports for sponsorship fees benefiting Scott Tucker's racing.
The company employed 606 people in 2011, according to the FTC, although Kansas state records show it laid off 159 workers last September as the case proceeded.
AMG reached a partial settlement in July 2013, but other claims moved forward, including 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 that the defendants engaged in deceptive acts and practices and violated the Truth in Lending Act.
The ruling was followed by a decision from U.S. District Judge Gloria Navarro, who said the defendants were not immune from the agency's enforcement powers despite their affiliation with the Miami Tribe.
The judge wrote in a March 7 ruling that the Federal Trade Commission Act "grants the FTC authority to regulate arms of Indian tribes, their employees, and their contractors."
Two days after the decision, the case took an unexpected turn when Blaine Tucker died in what police called a suicide. Tucker left an "apologetic" note behind for his family, but it did not mention any investigation, said Bill Burke, a detective with the police department in Leawood, Kansas.
An online obituary described Blaine Tucker as a kind and humble Kansas City area businessman who often entertained others at sporting events and concerts and supported multiple local charities.
Scott Tucker, 51, was previously convicted of making a false statement to a bank and using the mail for a scheme to defraud. He was sentenced in 1991 to a year in prison.
Today, Tucker is described on his website as a businessman and investor who began his racing career in 2006 and has competed in the Ferrari Challenge Series and 24 Hours of Daytona.
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, Amy Stevens and Andre Grenon)