The Federal Trade Commission is claiming victory in a lawsuit brought against payday loan firms that have been chartered by tribal governments.

The FTC Act does not mention tribes or their entities. But a federal magistrate is recommending that the law be imposed on the tribally-chartered loan firms under the principle of general applicability.

"As the FTC Act is one of general applicability, is silent on the issue of applicability to Indian tribes, and none of the defendants argue that a Donovan exception applies, that is the end of the inquiry, and the FTC Act applies to Indian Tribes, Arms of Indian Tribes, and the employees of the Arms of Indian Tribes," Judge V. Cam Ferenbach wrote in his July 16 report.

Donovan refers to Donovan v. Coeur d'Alene Tribal Farm, a case from 1985 in which the 9th Circuit Court of Appeals held that laws of general applicability can be imposed on tribes unless certain exceptions are met. The FTC filed suit in Nevada, which falls in the 9th Circuit.

The recommendation will be now be presented to the federal judge that has been handling the case. As part of the proceedings, the FTC reached a partial settlement in which the payday loan firms will stop making "threats of arrest and lawsuits" against consumers and will agree to secure consumer approval in advance before making electronic withdrawals from their bank accounts.

Turtle Talk has posted documents from the case, FTC v. AMG Services.

Get the Story:
Magistrate Judge's finding: Payday lenders covered by FTC Act even if affiliated with American Indian Tribes (FTC Blog 7/22)