(Bloomberg) – In nearly two decades of payday lending, Charlie Hallinan stayed one step ahead of state laws while amassing a fortune — one high-interest loan at a time.
Now U.S. prosecutors are preparing a racketeering case against him, gathering evidence in an attempt to show he conspired to evade usury laws, according to four people with knowledge of the matter, who asked not to be identified because the proceedings are secret. One of the payday lenders Hallinan partnered with faces a potentially lengthy prison term after pleading guilty Wednesday to racketeering charges.
Hallinan, who’s 75 and a resident of Philadelphia’s Main Line, was among the first to start offering payday loans over the phone in the 1990s, allowing him to operate in states that have tried to ban the costly cash advances. He pioneered two tactics — now nicknamed “rent-a-bank” and “rent-a-tribe” — that payday lenders have been using for years to stymie state regulators. The industry he helped create has since shifted to the Internet and now makes about $16 billion of loans a year, charging rates that often top 700 percent annualized.
With state regulators unable to stop the elusive online lenders, federal prosecutors are turning to a racketeering law created to crack down on the Mafia. A grand jury in Pennsylvania has been investigating Hallinan for more than a year, the people said. Adrian Rubin, Hallinan’s former business partner, was charged there in June with racketeering conspiracy.