The office of American Web Loans in Red Rock, Oklahoma, owned by the Otoe-Missouria Tribe. Photo by Jane Daugherty.

The 2nd Circuit Court of Appeals has dealt a blow to tribes whose online lending businesses are under attack in New York.

The Otoe-Missouria Tribe of Oklahoma and the Lac Vieux Desert Band of Lake Superior Chippewa Indians of Michigan went to federal court when the New York Department of Financial Services issued a cease and desist order against them. The tribes claimed that the state lacked the authority to regulate their businesses.

A federal judge declined to issue an injunction requested by the tribes and noted that they failed to show that their loan transactions occurred in Indian Country. That could have weakened the state's stance in the matter.

On appeal, the 2nd Circuit raised the same issue. The court said it was "unclear" whether tribal and state interests were actually clashing because the activities at issue do not occur on any reservation.

"New York borrowers never traveled to tribal lands or other jurisdictions; they signed loan contracts remotely by keying in an electronic signature," the unanimous decision stated. "Borrowers listed their New York addresses on applications, and provided lenders with routing information for their personal bank accounts in New York."

'Much of the commercial activity at issue takes place in New York," the court stated later in the opinion. "That is where the borrower is located; the borrower seeks the loan without ever leaving the state, and certainly without traveling to the reservation. Even if we concluded that a loan is made where it is approved, the transaction New York seeks to regulate involves the collection as well as the extension of credit, and that collection clearly takes place in New York."

Turtle Talk has posted briefs from the case, Otoe-Missouria Tribe v. NY State Department of Financial Services.

2nd Circuit Decision:
Otoe-Missouria Tribe v. NY State Department of Financial Services (October 1, 2014)

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Tribes seek expedited appeal in New York online lending suit (10/08)
Judge rebuffs tribal online lenders in case against New York (10/01)
Otoe-Missouria Tribe sees benefits from Internet lending firms (09/16)
Tribal online lenders off to court in lawsuit against New York (09/11)
Otoe-Missouria Tribe defends online payday lending business (08/14)