About two dozen Native American tribes have launched short-term online lending operations and are also considering online gaming. Barry Brandon, executive director of the Native American Financial Services Association, says that some of the legal and political battles that tribes fought over Indian casinos are now being fought over online lending. Both cases involve tribes seeking to use sovereign powers to enter an industry.
The Lac du Flambeau, a Vilas County tribe, has launched three online payday lending companies since May and established infrastructure for an Internet casino in case online gambling is legalized nationally or in Wisconsin. Both the New York Department of Financial Services and the nonprofit Center for Responsible Lending (CRL) view tribal online payday lenders as attempts to circumvent state regulators. "Payday lenders have pursued various schemes for evading state law, of which partnering with tribes is the latest iteration," CRL wrote last month in a friend of the court brief filed in a New York lawsuit. "New York rightly seeks to stop this abuse."
The Lac du Flambeau's three lenders -- one of which offers loans with an annual interest rate of over 400 percent -- will not make loans in Wisconsin or several other states, particularly those with more aggressive regulators. Wisconsin regulators are trying to determine what jurisdiction they may have over these lenders.