Payday lending pioneer indicted in U.S. on racketeering charges

Reuters News
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Posted: Apr 07, 2016 1:58 PM

By Nate Raymond

(Reuters) - A Pennsylvania businessman considered a pioneer in the payday loan industry was indicted on Thursday for engaging in a racketeering scheme, as part of a wider U.S. crackdown on abusive lending practices.

Charles Hallinan's payday lending businesses generated more than $688 million from 2008 and 2013, according to prosecutors. He was charged in an indictment filed in federal court in Philadelphia for conspiring to violate federal racketeering laws.

The indictment also charged Wheeler Neff, a Delaware lawyer whose clients included Hallinan, and Randall Ginger, a Canadian citizen who was a hereditary chief of the Mowachaht/Muchalaht First Nation in British Columbia.

Hallinan, a resident of Villanova, Pennsylvania, and Neff, 67, are expected to appear in court in later on Thursday, a spokeswoman for U.S. Attorney Zane Memeger in Philadelphia said. Ginger, 66, will appear at a later date, she said.

Hallinan's lawyer declined comment. A lawyer for Neff did not immediately respond to requests for comment. Ginger's attorney could not immediately identified.

The charges came amid U.S. efforts to crackdown on abusive practices by payday lenders, which provide small extensions of credit that borrowers agree to repay in a short time, such as when they next receive a paycheck.

The companies say they help struggling consumers, but critics say borrowers end up with large debt loads due to high interest rates, fees and loan rollovers. Fourteen states and the District of Columbia prohibit payday loans.

Federal prosecutors in Manhattan in February charged Scott Tucker, a race car driver who they say ran a $2 billion payday lending enterprise that exploited 4.5 million consumers. Tucker, who previously worked with Hallinan, has pleaded not guilty.

According to Thursday's indictment Hallinan owned, operated, financed, or worked for more than a dozen payday lending businesses from 1997 and 2013, issuing loans with annual interest rates often exceeding 700 percent.

Prosecutors said Hallinan and Neff conspired to evade state laws criminalizing such loans by paying three native tribes including Ginger's to pretend they were the actual lenders in order to claim sovereign immunity.

During a class action against by Indiana borrowers against one of Hallinan's companies, Apex 1 Processing, prosecutors said Hallinan offered to pay Ginger $10,000 every month to pretend that he owned Apex 1 and that Apex 1 had no assets.

The case settled for $260,000, just pennies on the dollar compared to the $10 million the lawsuit could be worth, prosecutors said.

(Reporting by Nate Raymond in New York; Editing by Tom Brown)