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Payday Lenders Partner With Native American Tribes To Circumvent Consumer Protection Laws

Payday lenders across the country are making deals with Native American tribes to circumvent consumer protection laws, according to a new study.

“The first case I worked on, I thought was a new, isolated case,” said Leslie Bailey, staff attorney at Public Justice, a non-profit group. “As we continued the case and research, we realized there was this huge movement in the payday lending industry.”

Due to tribal sovereignty, tribal businesses cannot be sued for violating state consumer protection laws.

“So payday lenders – that were already established with no tribal members – one of their business leaders would approach a tribe and offer to make a deal,” Bailey said.

According to the Pew Research center, one-in-four Native Americans are living in poverty, and tribes are often not able to generate enough revenue from their land and resources on reservations.

“But what we started seeing in case after case was the tribe was getting an incredibly small percentage of the profits,” Bailey said. “Were talking about companies that are making millions of dollars, CEOs making millions of dollars and the tribe would often get one percent.”

“I think [tribal councils] thought it was low risk and they thought any money was better than no money,” she said.

The Navajo Nation, Gila River, Tohono O’odham and Hopi tribes did not return request for interview on this story.

The payday lending companies examined in the Public Justice Report were regularly making loans with interest rates well above state and federal regulations – sometimes up to 700 percent.

“This is clearly breaking most consumer protection laws and some federal laws and [the companies] knew they were going to get sued,” she said.

“They would come into the courtroom with these business records that looked legit – it looked like it was a tribal business,” said Bailey. “And so the suits were going away and the tribal sovereignty argument was working.”

But then came the case of billionaire payday loan mogul and race car driver Scott Tucker.

Tucker was recently sentenced to more than 16 years in federal prison for illegal loan practices affecting 4.5 million customers.

His company, CLK Management, was affiliated with the Miami Indian tribe of Oklahoma, and ran Ameriloan, Cash Advance, One Click Cash, Preferred Cash Loans, United Cash Loans, US FastCash, 500 FastCash, Advantage Cash Services and Star Cash Processing.

The federal prosecutor in his trial alleges Tucker paid the tribe $120,000 to use its name while his payday loan businesses made more than $3.5 billion.

“One the courts actually look behind these tribal documents at where the money is coming from and going, [the courts] are starting to realize they have been duped and need to pay attention,” Bailey said.

The study also profiled the Arizona-based LLC Cash Cloud.

“In a lot of cases it’s the tribal leadership that’s making the decision on behalf of the tribe,” said Bailey. “But in the Cash Cloud example the tribal leaders took one look at this deal and said ‘no way’ and then a rogue tribal member went behind their back and made a deal with the business to allow them to use the tribe’s name and later when the actual tribal leaders were interviewed, they had no idea their tribal name was being used.”

The high-profile Scott Tucker case and his sentencing raised public awareness of this trend and could lead to the practice’s end, said Bailey.

“But … payday lenders are notorious for coming up with loopholes of how to evade consumer protection laws and have come up with some very clever tactics over the years,” said Bailey. “So it really takes a lot of vigilance.”

Claire Caulfield was a reporter and Morning Edition producer at KJZZ from 2015 to 2019.