"In the battle to shield themselves from lawsuits and government oversight, some high-interest payday lenders have found unlikely allies: Native American tribes.
In legal fights in California, New Mexico, West Virginia and Colorado, a group of Internet-based payday lenders have argued they are immune from lawsuits and regulation because they are “tribal enterprises.” They claim they enjoy tribal-nation sovereignty, which allows them to operate outside state oversight — even when they’re making loans to non-Native Americans living far from Indian lands.
State regulators and consumer lawyers say that the lender-tribe marriages are ruses designed to allow non-Native American companies to skirt consumer-lending laws. The tribes, they claim, are being used as fronts for the lenders.
An ex-employee of one tribal-affiliated lender testified the company secured post office boxes on tribal land to protect itself from attacks by consumer lawyers and government regulators. He claimed a manager told him: “They don’t touch us on Indian reservations.”
Affiliating with tribes is just one method some payday lenders have used to skirt existing laws and oversight. Others have operated online payday lending sites from offshore headquarters. And still others have claimed that borrowers are actually paying for Internet access with a rebate. In Texas, payday lenders get around state interest-rate limits by calling themselves credit service organizations set up to help consumers repair their credit records."
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Debt Deception: Fights Over Tribal Payday Lenders Show Challenges of Financial Reform
(The Center for Public Integrity 2/7)
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