Cash Advance

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When people face problems with their cash flow or need money fast, a cash advance can be an ideal solution. Cash advances can be obtained legally through banks, ATM machines and credit cards for a fee and a sizable interest rate between 20-25 percent on the temporary loan. Another way to obtain a cash advance is through a purchase at a retail outlet such as a grocery store. Usually, there are no fees for the service and as long as a purchase is made, the buyer will receive cash back up to the daily cash limit for the establishment. The Deseret News profiles one of the owners of a Salt Lake City convenience store, who dabbled in illegal cash advances through purchases that amounted to $1.3 million in illegal food stamp benefits.

The story states that the 37-year old store owner allowed customers to make purchases including prohibited food, non-food items and cigarettes with their Electronic Benefit Transfer (EBT) cards. He or other store clerks would then split half of the remaining card balance in cash between the customer and the convenience store bank account. (Fifty percent is a pretty steep interest fee.) Court documents show that the amount of items eligible for purchase at the convenience store with Supplemental Nutrition Assistance Program (SNAP) benefits over the three year period in question was $175,000. The actual amount that was redeemed by the convenience store during that time was approximately $1,371,600. (That’s quite a difference.)

It was determined by prosecutors and defense attorneys that the store owner played a minor role in the scheme, receiving about $1,000 over a year. The fraudster was sentenced to three years of probation and ordered to perform 50 hours of community service at a food bank. (Lucky for him!) Three other defendants in the case made plea agreements and are awaiting sentencing. They will forfeit $617,000 as part of their agreements.

Cash advances can be expensive for borrowers, who may need to pay off debts, assist family members in crisis or pay for emergency medical services. On the other hand cash advances are beneficial to lenders because they can make a lot of money from fees and interest in a short period of time. In this particular case, this convenience store did not abide by SNAP rules – EBT cards cannot be redeemed for cash. It is in the best interest of merchants, who accept EBT cards, to play by the rules to avoid steep penalties such jail time or the risk of a ”going out of business” sign.

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Downtown Store Owner Sentenced in Food Stamp Fraud Scheme,” written by Dennis Romboy and published in the Deseret News on September 9, 2013.

SALT LAKE CITY – One of the owners of a downtown convenience store accused of illegally redeeming $1.3 million in federally subsidized food benefits for cash received probation Monday.

Abdul Subur Mumtaz Mullahkehl, 37, admitted he allowed customers at AJ’s Kwik Mart, 268 S. Main, to redeem their food stamp cards for cash with a nominal purchase of food or nonfood items, including cigarettes. Store clerks would give customers about half the card value in cash and put the rest in a bank account to share.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.