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Monday, December 11, 2023 | Back issues
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Elderly Payday-Loan Scammer Convicted of $220M Fraud

A senior citizen who extended payday loans at exorbitant 700 percent interest rates faces prison time after a jury found him guilty of a $220 million fraud.

MANHATTAN (CN) - A senior citizen who extended payday loans at exorbitant 700 percent interest rates faces prison time after a jury found him guilty of a $220 million fraud.

The verdict delivered Wednesday evening against Richard Moseley Sr. came after the 73-year-old stood trial for 2 1/2 weeks in Manhattan on charges of wire fraud, aggravated identity theft, and violations of federal anti-racketeering law and the Truth in Lending Act.

Prosecutors showed that St. Louis-based Moseley operated a business called Hydra Lenders that issued unsecured payday loans over the internet between 2004 and 2014 to financially vulnerable customers across the United States.

Struggling to pay for basic living expense, the workers targeted by Mosley signed loan agreements that materially understated how much the loan would cost.

“The loan agreements suggested, for example, that the borrower would pay $30 in interest for $100 borrowed,” the Justice Department said in a statement. “In truth and in fact, however, Moseley structured the repayment schedule of the loans such that, on the borrower’s payday, the Hydra Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched.  As a result, on the borrower’s next payday, the Hydra Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan.”

Prosecutors say these automatically withdrawn “finance charges” occurred payday after payday, with none of the money applied toward repayment of principal.

Only when customers took affirmative action to stop the automatic renewal of the loan did the Hydra Lenders withdrew finance charges from customer accounts, the Justice Department added.

Moseley plans to fight his conviction. “We are disappointed with the verdict and plan of a vigorous appeal,” defense attorney Adam Perlmutter at Perlmutter & McGuinness said. “The law in the area was completely unsettled at the time alleged in the indictment.

“We believe the U.S. Attorney’s Office pursued prosecution in a manner that fundamentally violated Mr. Moseley’s right to due process, and hope to rectify that gross injustice in a higher court,” Perlmutter added.

Prosecutors say Moseley exploited more than 600,000 customers over the course of the scheme, generating about $161 million in revenues over an eight-year period.

The money that Moseley raked in from the fraud afforded himself and his son various “luxuries including a vacation home in Colorado and Playa Del Carmen, Mexico, high-end automobiles, and country club membership dues,” according to a statement from the Justice Department.

Some of the victims had not even authorized loans, prosecutors said, accusing Moseley of making automatic biweekly account withdrawals even when a worker submitted their bank information to inquire about Hydra Lenders’ services.

Hundreds of victims lodged complaints spanning several years that they had never approved or even been aware of the issuance of the loans, the Justice Department said.

Each of the four RICO and fraud counts of which Moseley was convicted carries a possible 20-year sentence. The identity-theft charge carries a two-year sentence, and the TILA count carried a one-year sentence.

U.S. District Edgardo Judge Ramos is scheduled to sentence Moseley on April 27.

After Moseley’s arrest on Feb. 9, 2016, he appeared in federal court in Kansas City, Missouri, and was released on bond.

Moseley’s Hydra Group operated out of Kansas City largely but he tried to sidestep state usury laws and regulatory investigations by making it look like that the Hydra Lenders were located overseas, through nominal business fronts in New Zealand and in the Caribbean island of Nevis.

Assistant U.S. Attorneys Edward A. Imperatore and David Abramowicz handled the case’s prosecution in the Southern District of New York.

A Federal Reserve report estimated that payday storefronts in the United States outnumbered McDonald’s and Starbucks locations combined.

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Categories / Criminal, Trials

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