Exclusive: U.S. prosecutor probes payday lending in debt scam crackdown BY NATE RAYMOND

(Reuters) - The top federal prosecutor in Manhattan said on Thursday his office was taking a close look at payday lending as part of a broad crackdown on wrongdoing involving the handling of consumer debts.

In an exclusive interview with Reuters, Manhattan U.S. Attorney Preet Bharara said his office has added payday lenders to the list of potential targets of investigations involving the consumer-debt arena that have already ensnared debt collection and debt relief businesses.

"That's absolutely something we are and will be looking at as well," he said.

The comments by Bharara, whose office is more often associated with prosecuting crime on Wall Street and terrorism, came amid a series of prosecutions by his office of businesses that target consumers struggling with debt.

On Wednesday, a Manhattan federal judge sentenced the owner of New York debt settlement company Mission Settlement Agency, Michael Levitis, to nine years in prison for a fraud scheme that victimized 1,200 people.

A day earlier, Bharara announced charges against seven people associated with Georgia-based debt collection company Williams Scott & Associates LLC who authorities said engaged in a multimillion-dollar scam that victimized more than 6,000 people.

In the interview, Bharara said his office is working with two U.S. agencies, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), to increase the number of prosecutions of debt-related scams.

He declined to identify potential targets, though he said he intended to announce more cases in the coming months.

"What puts people out of commission is a criminal charge and taking them off the street all together," he said.

Payday lenders provide short-term loans tied to borrowers' paychecks that carry high charges ranging from $10 to $30 for every $100 borrowed, according to the CFPB.

Critics say payday lenders take advantage of low-income borrowers. Lenders counter they provide a valuable service.

In May, Reuters reported that a federal grand jury had as part of an investigation by Bharara's office subpoenaed AMG Services Inc, a Kansas-based company the FTC previously accused of being at the center of a deceptive payday lending scheme.

The status of that investigation is unknown. Bharara's office declined comment, and lawyers for the defense did not respond to requests for comment.