DOJ Attacks Tribal Payday Loan Lending Model

JDSupra-DOJ Takes On Tribal Lending: Inside The Indictments Law

DOJ Department of Justice Focuses on Tribe Sovereign Nation Lending Model

Between attacks by the CFPB and the Department of Justice, the tribe payday loan lending model is being heavily scrutinized. When set-up correctly, and when the tribe experiences a true beneficial interest in the lending enterprise, the “Sovereign Model” can still make sense.

Additionally, let’s not forget the latest disruption caused by Madden vs Midland and the old theme “rent-a-bank! I’ve written about this before so let’s get back on track with The DOJ.

[PS: My conclusion? Those of us having a “bricks-n-sticks” footprint will not only prevail BUT profit handsomely IF we “stick to our knitting.” Our small dollar loan borrowers are still hesitant to plug all their personal information into a lengthy website application and wait to hear back from a call center employee for loan approval.]

From JDSupra [Read original below]: “In recent months, the attention of the tribal lending industry has focused on the Consumer Financial Protection Bureau’s emerging role in regulating short term loans from sovereign tribal nations, but a new and even more powerful player has recently emerged that could play a role in shaping future discussions: the U.S. Department of Justice.”

“The DOJ’s entrance into this arena was led by none other than the famed “Sheriff of Wall Street,” Manhattan U.S. Attorney Preet Bharara.”

“On Feb. 10, 2016, Bharara announced charges against Scott Tucker and colleagues for allegedly operating an illegal $2 billion payday lending enterprise. The indictment in that matter alleges that Tucker recruited Native American tribes to provide the appearance that his companies were tribally owned, and thus protected by sovereign immunity from state lawsuits and regulators.”

“This indictment was followed on April 7, 2016, by an indictment in the Eastern District of Pennsylvania claiming that Charles Hallinan and colleagues allegedly used tribes in a similar manner to protect illegal lending operations.
This article examines the structure of loans in question, the relationships between lenders and tribes that have been alleged to be mere pretense, and the specific charges brought by the federal government.”

“Loan Structure”

“Several states prohibit payday loans, or have usury limits, that in effect, prohibit payday loans in their jurisdiction; these are known as “prohibited payday loan states.” There are also states that restrict payday lenders by placing licensing requirements on those lenders, and capping interest rates at particular levels, these are known as “restricted payday loan states.”

“The Tucker payday loan companies and the Hallinan payday loan companies did business in prohibited payday loan states, and failed to… Here’s the FULL ARTICLE from JDSUPRA:”


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