North Dakota-Based Payment Processor Pleads Guilty To Facilitating Illegal Payday Lending Across The United States
PHILADELPHIA – Intercept Corporation, d/b/a “InterceptEFT” (“Intercept”), a privately held corporation headquartered in Fargo, North Dakota, has pleaded guilty to an Information charging the company with operating an illegal money transmittal business, announced United States Attorney Louis D. Lappen.
Intercept was a “third party payment processor” which processed electronic funds transfers for its clients through the Automated Clearing House (“ACH”) system, an electronic payments network that processed financial transactions without using paper checks. Among Intercept’s clients were numerous business entities that issued, serviced, funded, and collected debt from short-term, high-interest loans, commonly referred to as “payday loans,” because such loans are supposed to be repaid when the borrower received his or her next paycheck or regular income payment. Payday loans are effectively illegal in more than a dozen states, including Pennsylvania, and are highly regulated in many other states.
Various payday loan companies hired Intercept to move large sums of money between the bank accounts of the payday loan companies and their borrowers. These money transfers included the funding of payday loans by the companies to the borrowers, and the collection of loan proceeds from the borrowers to the payday loan companies. Among the payday loan companies that employed Intercept to collect payday loan debt from borrowers who resided in states where such loans were illegal, and in states where there such loans were regulated, were payday companies owned, operated, controlled, and financed by Charles M. Hallinan (recently convicted of illegal payday lending by a federal jury in the Eastern District of Pennsylvania), Scott Tucker (recently convicted of illegal payday lending by a federal jury in the Southern District of New York) and Adrian Rubin (who pleaded guilty to illegal payday lending in the Eastern District of Pennsylvania).
Intercept used the ACH system to transfer funds to and from the bank accounts of borrowers located across the United States, including hundreds of thousands of customers who lived in states that outlawed and/or regulated payday loans. No later than May 2008, Intercept was made specifically aware that one of Intercept’s payday lending clients made a payday loan in violation of Connecticut law. Subsequently, in June 2009, Intercept was again notified that one of its payday lending clients made an illegal payday loan, but this time, the loan was in violation of California law. In 2012, Intercept was instructed by its bank to stop processing payments for payday lending companies for loans made to borrowers in states where such loans were prohibited or restricted. And in August 2012, a payday lending client specifically notified Intercept’s leadership that payday loans were being made in states that outlawed payday lending, including in Pennsylvania. Yet Intercept continued facilitating payday lending operations for its clients in states that outlawed and/or regulated payday loans until at least August 2013.
In total, Intercept processed hundreds of millions of dollars of payments for its payday lending company clients, and earned millions of dollars in profits, as a result of assisting payday lenders in making illegal loans and collecting unlawful debt.
As a result of its criminal conviction, Intercept must pay forfeiture to the United States in the amount of all funds involved in or traceable to the charged offense (and no less than $500,000), a potential corporate fine of up to $500,000, and a $400 corporate assessment.
The case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service, and the U.S. Postal Inspection Service. It is being prosecuted by Assistant United States Attorneys and Mark B. Dubnoff and James Petkun.