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Internet-based, short-term lenders have various routes for setting up business, but most of their options expose them to potential legal challenges.
October 1 -
Online payday lenders have been tying up with Native American tribes in a bid to exert sovereignty claims as a way around interest rate caps. This week's move by New York's Benjamin Lawsky reflects regulators' increased focus on shutting down this fast-growing piece of the payday loan market.
August 9 -
New York state is asking more than 100 banks to choke off access to the automated payments system that unlicensed online lenders use to debit the checking accounts of consumers.
August 6 -
At least nine lenders have halted operations in the three weeks since state regulators began pressuring banks to cut off their access to the payments system.
August 28 -
The state has reached a settlement with five payday lenders under which they would be prevented from collecting on certain loans and pay restitution to customers, Eric Schneiderman's office announced Monday.
September 30
A federal court has ruled that state regulators have the authority over online lenders that operate from Native American land.
The U.S. District Court for the Southern District of New York ruled Monday that the state can block payday lenders from making loans to state residents even when loans are originated from offices on tribal land. Judge Richard Sullivan denied a request for preliminary injunction filed by the Otoe-Missouria Tribe of Indians, arguing that the loans fall under the state's authority because they affect the state's residents.
"The undisputed facts demonstrate that the activity the State seeks to regulate is taking place in New York, off of the Tribes' lands," Sullivan wrote in the opinion.
In August, Benjamin Lawsky, the superintendent of New York's Department of Financial Services,
At the same time, the DFS asked for the assistance of the National Automated Clearing House Association, as well as
The case was filed in August by a group of federally recognized Indian tribes in Oklahoma and Michigan, who sought to permanently prevent New York from interfering with their online-lending business, arguing that the DFS' action is a violation of their territorial sovereignty as granted in the Constitution.
The tribes also said that the regulator's actions would cripple their ability to provide their members with basic services. Online lending is one of the tribes' largest revenue streams and accounts for a large percentage of the tribes' budget for government services, they said.
"The State's aim is to protect New York consumers from predatory loans in New York, and the detrimental effect of the enforcement action on the Tribes is merely a collateral consequence of the laws' goal," Sullivan wrote.
New York's regulators have been the most active of any state's in seeking to curtail online lending that violates the interest rate cap. On Monday, New York Attorney General Eric Schneiderman ordered five firms that collect debt for payday lenders to
