'Godfather of payday lending' sentenced to 14 years in U.S. prison

[July 07, 2018]  By Nate Raymond

(Reuters) - A Pennsylvania businessman known as the "godfather of payday lending" was sentenced on Friday to 14 years in prison for conspiring to collect on hundreds of millions of dollars in illegal high-interest loans issued to thousands of people.

Charles Hallinan, 77, was sentenced by U.S. District Judge Eduardo Robreno in Philadelphia after a federal jury in November found him guilty on charges including racketeering conspiracy, mail fraud and wire fraud, prosecutors said.

Prosecutors had sought up to 19-1/2 years in prison for Hallinan, who they said owned and operated more than a dozen payday lending businesses and through his crimes harmed hundreds of thousands of financially-desperate people.

Robreno also ordered Hallinan to pay a $2.5 million fine.

Michael Rosensaft, Hallinan's lawyer, said he plans to appeal. Rosensaft also expressed concern about how Hallinan, who suffers from cancer and a heart condition, would be treated in prison.

The charges against Hallinan were filed in 2016 amid a crackdown by prosecutors during President Barack Obama's administration on abusive practices by payday lenders.

Such companies offer small loans that are to be repaid in a short time, often from the person's next paycheck, but critics say borrowers have to pay overly high interest rates and fees.

Prosecutors said Hallinan from 1997 to 2013 operated and financed numerous payday lending companies with names like Easy Cash and Apex 1 Processing that issued and collected debt from loans whose annual interest rates could exceed 780 percent.

More than a dozen states effectively prohibit payday lending, while many others impose limits on payday loans.

To evade state laws like those, Hallinan sought to hide his involvement in his companies by paying two Native American tribes and one First Nation tribe in Canada to be "straw" lenders in order to claim sovereign immunity, prosecutors said.

From 2007 to 2013, Hallinan sought to collect more than $690 million of illegal debt and successfully collected $492 million, prosecutors said.

They said Hallinan also taught others about his "rent-a-tribe" model of payday lending, including a "criminal protege," Scott Tucker, a race car driver accused of running a $3.5 billion illegal online payday lending enterprise.

Tucker was sentenced in January to more than 16 years in prison after a federal jury in Manhattan found him guilty of charges including conspiring to commit racketeering.

Wheeler Neff, a Delaware lawyer accused of helping Hallinan, was convicted alongside Hallinan was sentenced in May to eight years in prison.

(Reporting by Nate Raymond in Boston; Additional reporting by Jonathan Stempel in New York; Editing by Alistair Bell)

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