The Otoe-Missouria Tribe, located in Oklahoma, and the Lac Vieux Desert Band of Lake Superior Chippewa Indians, located near the Wisconsin-Michigan border, are suing a New York regulator in a bid to preserve their ability to make online loans to New York residents.
The tribes sought an injunction against Benjamin M. Lawsky, superintendent of New York’s Department of Financial Services, in U.S. District Court. Lawsky recently ordered 35 online and tribal lenders to stop offering “illegal payday loans” in his state on the grounds that the loans violate a state cap on consumer interest rates. He also has asked banks and the group that oversees an electronic payments system to cut off access to the lenders. The tribes claim that their sovereign status under federal law allows them to avoid state statutes.
Matt Anderson, spokesperson for the New York State Department of Financial Services, said payday lenders are suing to make "predatory loans," which can trap consumers in "endless cycles of debt." However, the tribal lending industry argues that it provides a financial service in remote and impoverished locations.