FTC v. AMG Services
In an enforcement action by the Federal Trade Commission against payday lender AMG Services for charging consumers undisclosed and inflated fees, the court found that lenders violated federal law when they misrepresented to consumers how much loans would cost them. We represented Americans for Financial Reform (AFR) as an intervenor in the case, and successfully challenged the sealing of nearly 500 records filed in the case. The court documents released to the public describe the deceptive payday lending practices at issue and the lenders’ allegedly bogus affiliation with a Native American tribe.
The documents show how AMG owners Scott and Blaine Tucker used repayment plan details hidden in a tangle of tiny hyperlinks and check-boxes on the company’s website to charge their borrowers interest rates of 600% or more. During the loan application process, borrowers were led to believe they’d be responsible for repaying the principal of their loan, and a one-time finance charge. They were then required to give AMG direct access to their bank accounts. And while borrowers technically had three repayment options, they were all quietly defaulted to one called “renewal.” Under the renewal option, borrowers paid 30% of the remaining loan principal as a “renewal fee,” which extended the loan for another payment period. The twist was that this renewal fee did not go toward the principal balance. The first four times a borrower “renewed,” AMG debited the renewal fee only (for a total of 120% of the loan balance). Starting with the fifth renewal, AMG debited the fee plus $50 towards the principal balance. That’s how a $1,000 loan magically became a $6,650 bill for a consumer.
These deceptive practices escaped legal scrutiny through the Tucker brothers’ use of Native American sovereign immunity. When their Kansas-based payday lending business CLK Management began to face investigations by state officials in 2003, the brothers began reaching out to tribal governments in Oklahoma, and eventually formed the tribal corporation AMG, which later merged with CLK. The released documents show how this tribal affiliation was a mere facade: On almost every single bank account associated with the lending enterprise, even those purporting to belong to tribal entities, Scott and Blaine Tucker were the only signatories, and moved funds to pay for private plane travel, plastic surgery, an Aspen house, and a motor-sports team. While AMG brought in millions of dollars for the Tucker brothers’ recreational activities, the Native American tribe received a monthly fee of 1% of gross revenues, or about $20,000 a month.