Payday lender Carey Brown pleads guilty, to pay fines for compensation fund

Carey V . Brown owned Terrinine, Area 203, and several Internet payday lending sites that have been shut down. Authorities in New York have indicted Brown and his two top employees with multiple counts of criminal usury.
Carey V . Brown owned Terrinine, Area 203, and several Internet payday lending sites that have been shut down. Authorities in New York have indicted Brown and his two top employees with multiple counts of criminal usury.

Chattanooga payday lender Carey V. Brown and two of the companies he once headed have pleaded guilty to criminal usury laws in New York and will pay $6 million in forfeiture fees to victims, according to a plea agreement announced today by Manhattan District Attorney Cyrus R. Vance, Jr.

Brown, the 57-year-old Ooltewah businessman who built one of America's biggest online payday lending business empires before shutting them down two years ago under regulatory pressure, will not face any jail time. But he will be required to perform 250 hours of community service, forfeit $3 million and pay $6 million for a compensation fund to be set up by the New York attorney general.

Two Chattanooga-based companies that previously made payday loans online across the country -Credit Payment Services, Inc. ("CPS") and MYCASHNOW.com, Inc., also are involved in the plea agreement for charges of violating interest rate limits in New York state on its loans.

"Payday loans victimize those least able to afford the exorbitant and completely unrealistic terms of those loans, and often result in a lifetime of debt and credit problems for the unfortunate borrowers," Vance said in a statement announcing the plea deal today. "Recognizing just how much harm payday loans can bring, Google stated this week that it will no longer permit such advertisements on its website. The defendants in this case have admitted to engaging in a scheme to make usurious loans to New Yorkers. With these guilty pleas and the establishment of a compensation fund, we have taken a step toward righting the wrongs brought by some members of this exploitative industry."

Payday loans are generally defined as loans of $1,000 or less that are typically intended to be repaid from a borrower's next paycheck. These loans often carry interest rates exceeding 300 percent of the principal when calculated on an annual basis for the initial term of the loan. Borrowers are often unable to repay the loan after the first two-week period. In such cases, payday lenders routinely extend loans, charging new fees for the extensions.

Many borrowers end up paying double the amount of the principal loan or even more. In New York State, it is a crime for an unlicensed lender to charge more than 25 percent per annum interest on any loan less than $2.5 million.

As part of his guilty plea, Brown admitted that, between 2001 and 2013, he owned, controlled, or was the final decision-maker for MYCASHNOW, an online payday lender that, at BROWN's direction, made loans to customers featuring an annual percentage rate of well over 25 percent. These loans were made around the country, including to customers in New York. BROWN also admitted that, between 2001 and 2013, he owned, controlled, or was the final decision-maker for multiple companies, including CPS, ACH FEDERAL, LLC; CLOUDSWELL, INC., a/k/a BASENINE, a/k/a TERENINE; AREA 203 MARKETING, LLC; SUPPORT SEVEN, LLC; MILLENNIUM FINANCIAL CONCEPTS, INC.; and, later, OWL'S NEST, LLC, all of which, at BROWN's direction, actively supported MYCASHNOW in making payday loans to New York residents.

Co-defendants Ronald Beaver, 57, and Joanna Temple, 60, previously pleaded guilty to attempted criminal usury in the second degree last December.

Read more in tomorrow's Times Free Press

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