Pennsylvania’s “Godfather of Payday Lending” Sentenced to 14 Years in Prison

Inside Subprime: July 12, 2018

By Lindsay Frankel

Charles Hallinan, known as the “godfather of payday lending” by colleagues, recently received a 14-year prison sentence for his illegal loan activities. A federal jury found him guilty of 17 charges that included racketeering conspiracy and other fraudulent business practices in November.

Throughout his career, Hallinan operated dozens of payday lending businesses that caused financial harm to hundreds of thousands of desperate borrowers. In addition to his prison sentence, U.S. District Judge Eduardo Robreno required that Hallinan pay a $2.5 million fine and forfeit his Villanova mansion and luxury cars.

Between 2007 and 2013, Hallinan’s companies took advantage of an estimated 1.4 million financially-strapped individuals, raking in $492 million in illegal debt collection. He was able to circumvent state laws by involving Native American and First Nation tribes to establish sovereign immunity. In practice, Hallinan operated his businesses without input from these alleged partners. Hallinan also educated other criminals about his payday lending model, including Scott Tucker, a former race car driver and businessman who was sentenced to 16 years in prison after a federal jury found him guilty of similar charges.

The charges were brought against Hallinan during a 2016 Obama-era crackdown on payday lenders. Payday loan businesses advertise “quick fix” loans for people with bad credit, but the high interest rates and fees associated with these loans have brought criticism to the industry. These loan products are typically used by low-income families who already struggle to make ends meet, and the mounting interest on payday loans can perpetuate an ongoing cycle of debt for these families.

As a result, several states have laws prohibiting payday lending, and many others impose limits and restrictions to protect borrowers. More restrictive states tend to have lower average annual interest rates, according to Pew Charitable Trusts. Payday loans in Ohio have the highest average annual interest rate in the nation at 591 percent.

By evading state laws, Hallinan was able to charge interest rates in excess of 780 percent. U.S. Attorney Mark Dubnoff noted that “The only difference between Mr. Hallinan and other loan sharks is that he doesn’t break the kneecaps of people who don’t pay his debts… He was charging more interest than the Mafia.”

Hallinan’s lawyer plans to appeal the decision, which he claims is unjust due to Hallinan’s age and declining health. But Robreno was intent on sending a message about payday lending crimes. “It would be a miscarriage of justice to impose a sentence that would not reflect the seriousness of this case,” Robreno said. The decision should also serve as a reminder to consumers to pursue other options besides payday loans, since this is not the first case brought against payday lenders engaged in fraudulent practices.

To learn more about payday loans in the United States, check out these related pages and articles from OppLoans: