Supreme Court fines Scott Tucker $1.3 billion

The U.S. Supreme Court on Thursday unanimously sided with Kansas City payday loan mogul Scott Tucker in an appeal of a $1.3 billion fine in a civil case brought by the Federal Trade Commission.

AMG Capital, one of Tucker’s payday loan companies, has sought to overturn a 2016 ruling by a Nevada federal judge who agreed that Tucker and his companies should pay $1.3 billion in restitution to borrowers defrauded.

The fine against Tucker and his companies was the largest ever obtained at the time by the FTC in a litigious case. But Thursday’s High Court ruling invalidates the FTC’s fine and its ability to seek restitution in court in the future, unless Congress grants the agency that power.

Tucker was convicted in a separate criminal case for running a payday loan business that federal prosecutors said exploited 4.5 million borrowers for $3.5 billion. He is currently serving a sentence of more than 16 years in prison. His conviction also included a forfeiture order requiring him to relinquish any proceeds or assets acquired as a result of his crimes.

Judge Stephen Breyer wrote in an opinion for the court that the FTC does not have the authority to seek restitution in federal courts in cases where consumers have been defrauded. The ruling significantly restricts the power of the FTC, a federal consumer watchdog agency.

Acting FTC Chairwoman Rebecca Kelly Slaughter said in a statement that “the Supreme Court has ruled in favor of crooks and dishonest corporations, leaving average Americans to pay for illegal behavior.

“With this ruling, the Court has deprived the FTC of the most powerful tool we have to help consumers when they need it most. We urge Congress to act quickly to restore and strengthen the powers of the agency so that we can reinstate aggrieved consumers.

A call to Tucker’s attorney was not immediately returned.

Breyer’s notice said the FTC could still seek restitution in cases it pursues through its own administrative process.

But the FTC had in recent years sought restitution in court, a faster route for the agency.

The FTC said Thursday it had secured $11.2 billion in consumer refunds over the past five years using the route the Supreme Court had just struck down.

The FTC has already tried to convince Congress to affirm its ability to seek restitution. On Tuesday, the agency presented testimony to the U.S. Senate Commerce, Science, and Transportation Committee urging Congress to consider passing legislation allowing the FTC to sue directly in federal court for violations of the FTC Act and recover ill-gotten gains.

US Senator Jerry Moran, a Republican from Kansas, who sits on the Commerce Committee, said in a statement to The Star that the FTC has an obligation to prevent harmful business practices that harm Kansans.

“I will work with my colleagues on the Commerce Committee to provide the FTC with the necessary authorities to complete this dusty task and seek financial restitution if necessary,” Moran said.

U.S. Senator Roy Blunt, a Republican from Missouri, who also sits on the Commerce Committee, could not immediately be reached for comment.

Tucker was sued by the FTC in 2012 after a lengthy investigation into his payday loan businesses. Tucker, who lived in Leawood, started in the payday loan business in the late 1990s after serving a year in prison for an unrelated financial scam in the early 1990s.

Tucker made millions from his work in payday loans, enough to fund a professional auto racing team for himself and others.

The FTC accused Tucker of running a deceptive payday loan company that tended to mislead customers with confusing loan terms. Payday loans are marketed as small, short-term loans that borrowers expect to pay back when they get their next paycheck. Critics say the industry is ripe for abuse with interest rates that trap often desperate borrowers in cycles of debt that are hard to break.

The FTC argued, and a federal judge later agreed, that Tucker’s firms deceived borrowers by offering confusing loan terms that resulted in high interest rates and borrowing costs.

The judge ordered that Tucker and his affiliates pay $1.3 billion to the FTC, which the agency would then return to borrowers affected by the misleading loans.

In 2018, the FTC announced that it had recovered $505 million that it had refunded to Tucker’s customers.

On Thursday, it was not immediately clear how much the FTC had recovered from Tucker and his companies, and whether the agency should reimburse them.

Shortly after the 2016 ruling in Nevada, Tucker and his attorney, Tim Muir, were indicted in federal court in New York for staging an illegal payday loan racket. The grand jury indictment said that, among other things, Tucker set up an elaborate corporate structure for his payday loan businesses when he established them on Native American tribal land, which is exempt. any state law limiting interest rates.

While Tucker’s businesses were nominally established on tribal land, they largely operated out of an office tower in Overland Park.

Tucker and Muir were convicted in 2017 and sent to prison in 2018.

Tucker is currently being held in Leavenworth Federal Prison, while a separate criminal tax evasion case against him is still pending.

Tucker also appealed his criminal conviction. So far, these calls have been unsuccessful.

But there had been signs that his appeal of the restitution order in the FTC case might hit the mark.

While the 9th Circuit Court of Appeals sided with the district court on the validity of the restitution order against Tucker, a separate case in another appeals court successfully made a similar argument. against the authority of the FTC.

The Supreme Court agreed to take up the case, given that the courts of appeals had issued divergent opinions. Oral arguments were held in the Tucker case last year.

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This story was originally published April 22, 2021 11:49 a.m.

Steve Vockrodt is an award-winning investigative journalist who has reported from Kansas City since 2005. Reporting interests include business, politics, justice issues and breaking news investigations. Vockrodt grew up in Denver and studied journalism at the University of Kansas.