In a relatively new twist on payday lending oversight, small lenders claiming ties with tribal entities cannot claim sovereign immunity when it comes to extending loans and the interest rates tied to those loans.
As reported by Courthouse News Service, sovereign immunity does not “shield” payday lending firms that are owned by the Otoe-Missouri Tribal Nation. That’s the upshot of a ruling by Connecticut state banking department officials. The two lenders, Great Plains Lending and Clear Creek Lending, are not classified as tribal arms.
And in an extension of that ruling, Chief John Shotton does not have such immunity, either, and thus is not immune to financial penalties levied as a result of the aforementioned two firms’ loans. The companies were extending loans below $15,000 with interest rates ranging from a little under 200 percent to as much as 448 percent. The state of Connecticut, at a threshold of less than $15,000, has rate caps at 12 percent.
The ruling, noted the legal website, also contended that the two payday lenders were established after the tribe, its chief and American Web Loan were looking to evade interest rate caps mandated by state law.
As has been widely reported, the Obama administration has offered up a proposed rule seeking to curb high interest rate products, such as auto loans and payday loans. The regulations would extend beyond the state level. Lenders must also assess whether borrowers have the ability to repay loans.