"Godfather Of Payday Lending" Stripped Of $64 Million, Sentenced To 14 Years

“In this industry, to build a big book, you have to run afoul of the regulators” -Charles M. Hallinan

A former Main Line investment banker known as the "Godfather of payday lending" for preying on low-income borrowers was sentenced Friday to 14 years in federal prison and stripped of over $64 million in assets, reports philly.com.

Lawyers for 77-year-old Charles M. Hallinan argued that the prison term might as well be a "death sentence" given his age and declining health, however District Judge Eduardo Robreno gave no quarter as he rendered his verdict after a jury convicted him of 17 counts, including racketeering, international money laundering and fraud. 

“It would be a miscarriage of justice to impose a sentence that would not reflect the seriousness of this case,” Robreno said. “The sentence here should send a message that criminal conduct like [this] will not pay.”

In all, government lawyers estimate, Hallinan’s dozens of companies made $492 million off an estimated 1.4 million low-income borrowers between 2007 and 2013, the period covered by the indictment.

Robreno’s forfeiture order will strip Hallinan of many of the fruits of that business, including his $1.8 million Villanova mansion, multiple bank accounts, and a small fleet of luxury cars, including a $142,000 2014 Bentley Flying Spur. In addition, the judge ordered Hallinan to pay a separate $2.5 million fine. -philly.com

When given the opportunity to address the court before his sentence was handed down, Hallinan remained silent. 

Hallinan's case calls into question the legality of business tactics engaged in by predatory lenders across the country - such as Mariner Finance, a subsidiary of former Treasury Secretary Tim Geithner's private equity firm Warburg Pincus. 

Many of the loans Hallinan made had exorbitant interest rates which greatly exceeded rate caps mandated by the states in which the borrowers live, such as Pennsylvania's 6% annual cap. 

In court Friday, Assistant U.S. Attorney Mark Dubnoff argued that there was little difference between the exorbitant fees charged by money-lending mobsters and the annual interest rates approaching 800 percent that were standard on many of Hallinan’s loans. -philly.com

“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,” Dubnoff said. “He was charging more interest than the Mafia.”

Hallinan “collect[ed] hundreds of millions of dollars in unlawful debt … knowing that these businesses were unlawful, and all the while devising schemes to evade the law,” wrote Assistant U.S. Attorneys Sara L. Grieb and Maria M. Carrillo.

Hallinan's attorneys argued that Hallinan should receive house arrest after a recent diagnosis of two forms of aggressive cancer.  

“What is just, under the circumstances?” Jacobs asked. “If there is going to be a period of incarceration, one that makes it so that Mr. Hallinan doesn’t survive is not just.”

Judge Robreno largely ignored the plea, though he did give Hallinan 11 days to get his medical affairs in order before he has to report to prison.

Hallinan's orbit

Many of those whose careers Hallinan helped to launch are now headed to prison alongside the "godfather" of payday lending, "a list that includes professional race car driver Scott Tucker, who was sentenced to more than 16 years in prison in January and ordered to forfeit $3.5 billion in assets," reports Philly

Hallinan’s codefendant and longtime lawyer, Wheeler K. Neff, was sentenced in May to eight years behind bars.

Hallinan got into the predatory lending business in the 1990s with $120 million after selling his landfill company to begin making payday loans over phone and fax. He rapidly grew his empire of dozens of companies which offered quick cash under such names as Instant Cash USA, Your First Payday and Tele-Ca$h.  

As more than a dozen states, including Pennsylvania, effectively outlawed payday lending with laws attempting to cap the exorbitant fee rates that are standard across the industry, Hallinan continued to target low-income borrowers over the internet.

He tried to hide his involvement by instituting sham partnerships with licensed banks and American Indian tribes so he could take advantage of looser restrictions on their abilities to lend. But in practice he limited the involvement of those partners and continued to service all the loans from his offices in Bala Cynwyd. -philly.com

He bet his lifestyle on the fact that we would not catch him. He lost that bet,” said U.S. Attorney for the Eastern District of Pennsylvania, William M. McSwain. “Now, it’s time for Hallinan to repay his debt with the only currency we will accept: his freedom and his fortune, amassed at his victims’ expense.”