Native American Tribes Could Be Victim to Payday Lenders

By Tom Bacon

Something old, something new – native american tribes and the internet - are being used by high-risk, high-interest rate payday lenders to evade strict Washington State laws which limit such loans.
The Washington Department of Financial Institutions is frustrated by its inability to control payday lenders which are increasingly hiding behind indian tribe sovereign immunity.

In just the past two weeks, the DFI has issued warnings about three such lenders - all claiming the state can't touch them because they're owned by federally recognized tribes.

But the agency has filed a test case against five different lenders in South Dakota - all of which list the same home office business address, and all of which are run by a man who claims to be an enrolled member of the Cheyenne River Sioux Tribe. Washington state regulators, however, say that the company is not owned or operated by the tribe.

Deborah Bortner, who runs the Consumer Services Division of the state Department of Financial Institutions, said the companies claim to operate on the indian reservation, and make borrowers subject to tribal laws and jurisdiction. In fact, she said, all such quick loans are made in Washington state, which makes the lenders subject to much tougher state laws.

Bortner's office also cited unscrupulous and illegal collection tactics allegedly made by three other tribally connected on-line payday lenders that are not licensed in the state - threats, bullying, warnings of legal action and re-possession.

She flatly said that any small loan made by unlicensed entity to a person in Washington State is uncollectible and unenforceable. Bortner acknowledged that the state is relatively powerless to oversee or control payday lenders which are in fact owned by tribes.

But she said her agency will vigorously go after on-line hucksters who claim tribal protection, but who actually pay the tribes small fees to use their names.
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