Feds Target Payday Lenders Claiming Affiliation With Tribes, Asserting Immunuity From Legal Action, Suing Borrowers In Local Tribal Courts

The Federal Trade Commission recently announced:

• The Federal Trade Commission has taken action against a payday lending operation that allegedly piled on undisclosed and inflated fees, and collected on loans illegally by threatening borrowers with arrest and lawsuits. The FTC has asked a federal court to stop the allegedly illegal business tactics while the agency pursues its case against the defendants.



• Like other payday lenders in recent years, this operation has claimed in state legal proceedings that it is affiliated with Native American tribes, and therefore immune from legal action. However, the FTC alleges that the defendants’ claims of tribal affiliation do not exempt them from complying with federal law.



• This is the second time in seven months that the FTC has brought suit against a payday lender that has used a tribal affiliation defense against actions by state authorities. The FTC recently expanded its first such case, against Payday Financial, LLC, adding charges that the operation illegally sued debt-burdened consumers in a South Dakota tribal court that did not have jurisdiction over their cases.

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• According to documents filed by the FTC, over the last five years, the defendants’ deceptive and illegal tactics have generated more than 7,500 complaints to law enforcement authorities. In many cases, the defendants’ inflated fees left borrowers with supposed debts of more than triple the amount they had borrowed. In one typical example, the defendants allegedly told consumer Eric Barboza that a $500 loan would cost him $650 to repay. But the defendants attempted to charge him $1,925 to pay off the $500 loan, and threatened him with arrest when he balked at paying that amount.

For the FTC press release, and links to available court documents, see FTC Charges Payday Lending Scheme with Piling Inflated Fees on Borrowers and Making Unlawful Threats when Collecting (Defendants Charged Many Consumers More than Three Times the Amount Borrowed).