Tribes' Payday Loans Under Scrutiny

April 29, 2013
Los Angeles Times 
payday lending news

More Indian tribes are entering the payday loan business as a way to raise revenue for their reservations, but federal officials suspect that some tribes are paid to offer sovereign immunity that helps non-Indian payday lenders avoid state regulations. Tribes have largely avoided states' attempts to assert their authority over tribal lending operations, but the federal Consumer Financial Protection Bureau (CFPB) may institute a new crackdown. Tom Feltner with the Consumer Federation of America says many tribal lenders are not complying with state laws, which can negatively impact consumers. In one example, Neil Barry took out a loan from a company called Mobiloans to help pay the rent for his small print shop in Reseda, Calif. Months later, however, he is only about halfway toward paying off a $1,000 loan with his Social Security checks; and by the time he is finished, he estimates that he will have paid at least another $1,000 in interest. However, a 100 percent annual percentage rate is only a fraction of what some similar loans can cost. "These online payday loans can have annual percentage rates of 600 percent or more," according to Ellen Harnick of the Center for Responsible Lending. "This is a relatively new way for the industry to get out from under state laws." Payday lenders are prohibited from lending more than $300 at a time under California law and cannot charge more than 15 percent interest; but because Mobiloans is owned by the Tunica-Biloxi tribe of Louisiana, it claims that its sovereign status makes it accountable only to federal law enforcement. It has not yet been determined how much authority the CFPB has over tribal lenders, but director Richard Cordray served notice last year that he believes the agency does have jurisdiction over tribal lenders.
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