Two build­ings linked to pay­day lender sold at auc­tion

For­mer Chat­tanooga pay­day lender pleaded guilty to usury vi­o­la­tions in 2016

Chattanooga Times Free Press - - FRONT PAGE - BY MIKE PARE STAFF WRITER

Two Chat­tanooga build­ings tied to Carey V. Brown, who built one of Amer­ica’s big­gest pay­day lend­ing em­pires be­fore it fell ear­lier this decade, were sold at auc­tion Tues­day for $2.4 mil­lion.

The build­ings, at 1516 River­side Drive and 5962 Brain­erd Road, had been for­feited ear­lier this year to the U.S. Depart­ment of Trea­sury in the wake of a 2016 guilty plea by Brown and two of his com­pa­nies to break­ing usury laws in New York.

Zach Morris en­tered the win­ning $2 mil­lion bid for the River­side Drive build­ing. He said he was rep­re­sent­ing a lo­cal group of busi­ness peo­ple, whom he de­clined to name. It wasn’t cer­tain what will be done with the 43,872-square-foot struc­ture, he said.

Also, Chat­tanooga busi­ness­man Man­soor Cha­raniya bid $410,000 for the Brain­erd Road build­ing, which is about 12,000 square feet in size. He, too, was un­de­cided about the fu­ture use of that struc­ture.

Mike Lewis of CWS Mar­ket­ing Group had opened bid­ding on the River­side Drive prop­erty, part of a 4.5-acre site, at $4 mil­lion.

He said the gov­ern­ment has the right to re­ject bids, but added “they want it off the books.”

Ac­cord­ing to the fed­eral gov­ern­ment com­plaint that sought the for­fei­ture of the two build­ings, when an on­line bor­rower wanted money from a Brown com­pany, the per­son was re­quired to agree that the trans­ac­tion ac­tu­ally was tak­ing place in An­guilla, Bri­tish West Indies.

But the com­pany main­tained an in­ter­net server at the River­side Drive ad­dress where the Brown com­pany would route elec­tronic in­for­ma­tion rel­a­tive to the on­line loan through An­guilla, ac­cord­ing to the gov­ern­ment doc­u­ment.

In fact, the River­side Drive site held nu­mer­ous com­puter servers. Ex­cept for the su­per­fi­cial in­ter­net rout­ing through the Caribbean, Brown’s com­pa­nies, their em­ploy­ees, banks and bor­row­ers were lo­cated in the United States.

The Brain­erd Road lo­ca­tion served as a call cen­ter for a com­pany that pro­cessed loans for a Brown busi­ness, ac­cord­ing to the fed­eral com­plaint.

Pay­day loans are gen­er­ally de­fined as loans of $1,000 or less typ­i­cally in­tended to be re­paid from the bor­rower’s next pay check. The 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.

In New York state, it was a crime for an un­li­censed lender to charge more than 25 per­cent per an­num in­ter­est on any loan less than $2.5 mil­lion, and Brown was in­dicted in New York in 2014.

In May 2016, Brown ad­mit­ted to New York prose­cu­tors that he broke the law from 2001 to 2013 by lend­ing mil­lions of dol­lars, an es­ti­mated $50 mil­lion to New York­ers in 2012 alone, with in­ter­est rates well in ex­cess of the state’s 25 per­cent an­nual per­cent­age rate cap.

It was es­ti­mated that in 2012, Brown’s com­pa­nies cy­cled $500 mil­lion through its Chat­tanooga op­er­a­tion. That year, the com­pany counted gross profit of $150 mil­lion in fees and in­ter­est, ac­cord­ing to es­ti­mates.

As part of his guilty plea, Brown agreed to pay $9 mil­lion in fines and resti­tu­tion, as well as serve 250 hours of com­mu­nity ser­vice and three years of pro­ba­tion.

Brown had shut down his pay­day lend­ing em­pire in 2014 un­der reg­u­la­tory pres­sure.

STAFF FILE PHOTO

The Brighthouse Build­ing at 1516 River­side Drive, is seen in 2015.

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