Feds Crack Down on Payday Loan Pioneer Using Mafia-Busting Law



Susanne.Posel-Headline.News.Official- payday.loans.fbi.shadow.banking.crash.2008_occupycorporatismSusanne Posel ,Chief Editor Occupy Corporatism | Media Spokesperson, HEALTH MAX Brands

 

The Department of Justice (DoJ) charged Charles Hallinan, the operator of several payday loan corporations including Easy Cash, My Payday Advance and Instant Cash USA, with 2 counts of racketeering conspiracy because Hallinan and his partner, Wheeler Neff, violated Pennsylvania and other states’ usury laws in order to generate $688 million over the course of 5 years.

Between 2008 and 2013, the 2 “defraud nearly 1,400 borrowers who had sued one of their companies by convincing them to settle their lawsuit for far less than they could have earned, claiming the company was owned by a third man who had little to no assets.”

Hallinan owned more than 12 payday loan operations from 1997 to 2013. These locations collected debts, and issued short-term loans. Customers were charged an excess of 700% on all transactions.

In order to avoid state usury laws and regulations, Hallinan bribed 3 Native American tribes to impersonate himself and his partner for thousands of dollars.

The prosecution alleges that Randall Ginger was paid $10,000 per month to pretend to own Apex 1, one of Hallinan’s payday stores. Ginger claimed his was a chief of one of the Native American tribes.

Payday loans have become a portal for larger corruption to occur.

Republicans who have received campaign contributions from the payday loan industry have fought to keep the Consumer Financial Protection Bureau (CFPB) from adopting new regulatory rules that protect Americans from predatory lending.

The payday loan industry is also known as shadow banking and it is a system that was created to avoid a run on the banks, according to Federal Reserve Governor Jeremy Stein at a meeting for the 2014 American Economic Association (AEA) conference.

Stein explained how the shadow banking system (SBS) was integral to the stock market crash in 2007 that cost the US a stable economy.

The central banker said: “Shadow banking money is much more run prone than bank money. A stable deposit franchise gives a bank the ability to ride out transitory valuation changes of the sort that might come from noise-trader shocks or fire sales, without being forced to liquidate assets at temporarily depressed prices.”

While the “banks have government insurance for the deposits they hold and are relatively well capitalized compared to other financial institutions thanks to the regulation that comes along with that insurance. It’s other financial institutions, generally called shadow banks that are much more prone to runs.”

Shadow banking is an unregulated alternative and comes in several forms, including:

• Advanced check cashing stores
• Crowd-funding websites
• Money-market funds
• Repurchase agreements

Stein said that “part of the reason for this instability is that non-bank financial institutions often give investors the option to seize collateral in a transaction at a moment’s notice.”

During a run on the bank, investors pull their money out of non-traditional banks as the perceived economic downturn looms in the distance.

Stein commented: “Compared with shadow banks, traditional banks pay more to have a more stable funding structure” in the form of insured deposits. That stability allows them to invest in assets such as long-term fixed-income securities and hold onto them during bad times, rather than selling them at fire sale prices.”

Stein posed the question: “Does the private sector allocation kind of get it right in terms of the mix between the shadow banking and banking system or do you want to have regulation or policy kind of pushing one way or the other?”

The CFPB have been very vocal Bureau about why the shadow banking industry has enjoyed unsupervised functionality. The agency estimates that the $46 billion payday loan or cash advance industry has no oversight, refuses to give full disclosures of interest and fees involved, and takes an annual percentage of an excess of 300% against borrowers.

For example, shadow banking refers to a loan of $500 or less wherein the borrower “provides a personal check dated on their next payday for the full balance or give the lender permission to debit their bank accounts. The total includes charges often ranging from $15 to $30 per $100 borrowed. Interest-only payments, sometimes referred to as rollovers, are common.”

Because of this and for other reasons, the CFPB has suggested regulating shadow banking because of their dubious practices and products.

The Consumer Federation of America (CFA) counts 32 states in the US that “permit payday loans at triple-digit interest rates, or with no rate cap at all.”

Shockingly 80% of payday loans are rolled over within 14 days while an estimated 50% of these loans are “in a sequence at least 10 loans long.”

Source Article from http://feedproxy.google.com/~r/OccupyCorporatism/~3/66AANSgsl-s/

You can leave a response, or trackback from your own site.

Leave a Reply

Powered by WordPress | Designed by: Premium WordPress Themes | Thanks to Themes Gallery, Bromoney and Wordpress Themes