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Media shines a light on KC’s unsavory usury industry

Late last fall, while driving south down Metcalf Avenue from 71st to 95th street, this examiner noticed a slight change in the usual new/used-car dealer/auto-repair shop/gas station/fast-food roadside scenery. A number of new pawn shops and payday-loan places had popped up, adding a seedy Vegas-y tone to the otherwise bland, heavily trafficked spine of Overland Park, Kan.

Around the same time, a cover story in Kansas City’s The Pitch identified Johnson County, Kan., as a mecca for the payday-loan industry. The article tied the ungodly usury business to local-area churches—specifically to St. Ann’s Catholic Church in Prairie Village, Kan., where many parishioners had become mixed up in the predatory online usury business.

It seems that some St. Ann’s parishioners were growing extremely wealthy on the backs of the desperately poor who frequent payday places and online website. The parishioners flaunted their newfound fortunes by buying mansions in Mission Hills and upscale sports cars. Some of the money also found its way onto St. Ann’s collection plates—as five- and six-figure donation checks.

More recently, the suicide of Leawood, Kan., man Blaine Tucker became front-page news in the Kansas City Star, following a series of Star stories about Tucker and his brother, businessman and race car driver Scott Tucker. The brothers, both St. Ann members, became defendants in a lawsuit filed in Nevada by the Federal Trade Commission (FTC) over the dealings of their payday loan business, AMG Services Inc.

As The Star observed: “One of the FTC complaints against Blaine and Scott Tucker, plus others, claimed they ‘made multiple withdrawals from borrowers’ bank accounts and assessed a new finance fee each time, without disclosing the true costs of the loan....In many cases, the defendants’ inflated fees left borrowers with supposed debts of more than triple the amount they had borrowed.”

Some payday loan companies can charge interest rates up to the beyond-exorbitant rate of 700%, and some borrowers are never able to dig their way out, effectively becoming economic slaves to the loans. A follow-up Star editorial about the suicide opined, “Unfortunately, some of the worst practices have roots in the Kansas City area. The concentration of online lending operations here is not a point of regional pride, but it does point to a wealth of financial, technical and legal expertise and creativity.”

Like many other online payday lenders, Scott Tucker merged his company with a Native American tribe, giving AMG Services regulatory immunity that allowed it to continue its controversial business practices. However, on March 24th, as reported in The Pitch, “Tucker—and by extension the entire online payday-lending industry—got bonked again. A U.S. District Judge ruled in favor of the FTC, affirming that AMG Services is within the reach of FTC enforcement actions, and that the commission has “the authority to bring suit against Indian Tribes, arms of Indian Tribes, and employees and contractors of arms of Indian Tribes.”

According to The Art and Popular Culture Encyclopedia, “A payday loan (also called a paycheck advance) is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. The loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card. Legislation regarding payday loans varies widely among U.S. states. Some jurisdictions impose strict usury limits, limiting the nominal annual percentage rate (APR) that any lender, including payday lenders, can charge; some outlaw payday lending entirely; and some have very few restrictions on payday lenders.”

Last month, Missouri state lawmakers sent legislation to the House that would prohibit a borrower from renewing a payday loan. Under current Missouri law, a payday loan can be no larger than $500 and can run only from 14 to 31 days, but a loan can be rolled over up to six times. The legislation, which senators passed 20-13, also would give buyers more time to pay off a loan, and lenders wouldn’t be able to charge additional fees or interest during that period, which could last up to 120 days.

Senator Scott Sifton, D-Affton, said he was concerned about people who got loans from multiple lenders, which could perpetuate debt. But Sen. Ed Emery, R-Lamar, said that wasn’t a problem for the Legislature. “I don’t believe it’s the government's responsibility to make every one of my bad decisions turn out right,” he said.

In other recent local news, an August 2013 story in The Star reported that Kansas City ranks second in the nation (behind Houston) in the percentage of men—14%—who respond to online sex ads from prostitutes, according to a study by Arizona State University. So far no churches have been implicated in receiving prostitution money—and no state senators have advocated regulatory or free-market solutions for the prostitution business.