Court of Appeal rules against online tribal lender
A federal appeals court ruled on Wednesday that Think Finance and an online tribal payday lender must comply with state interest rate and licensing laws, in the first appeal case to determine whether the borrowers can sue tribal officials for an injunction.
The Second Circuit found that online tribal lender Plain Green had violated federal and state laws by charging interest rates above the limits imposed by the state of Vermont. The court also ruled that the arbitration clauses imposed in the tribe’s loan agreements were “unenforceable and unreasonable.”
Plain Green, owned by the Chippewa Cree tribe of the Rocky Boy Indian Reservation in Montana, had engaged Think Finance and its subsidiaries to fund and manage its payday and installment loans online.
“Plain Green is a smart payday loan entity designed to allow defendants to circumvent federal and state consumer protection laws under the guise of tribal sovereign immunity,” the judges wrote in a 28-page decision. “Tribes and their officers are not free to operate outside Indian lands without conforming their conduct in those areas to federal and state laws. “
The case involved two Vermont residents, Jessica Gingras and Angela Given, who took out loans in 2011 and 2013, respectively, at interest rates ranging from 60% to 370%. None of the borrowers repaid the loans. Instead, they went on to claim that Think Finance and the tribe agreed to loan terms to circumvent the state’s strict usury laws.
Lauren Saunders, associate director of the National Consumer Law Center, said in a statement that the decision “spells the end of tribal payday loans.”
The court ruling could also force Think Finance to settle a pending 2017 lawsuit filed by the Consumer Financial Protection Bureau, which alleged the company illegally collected canceled loans under state usury caps. The CFPB found that Think Finance deceived consumers and illegally debited money from consumers’ bank accounts that was not legally due.
Neither CFPB nor Think Finance responded to a request for comment.