Minnesota's attorney general is suing three consumer lenders owned by an out-of-state tribe, accusing them of using their tribal affiliation to charge borrowers interest rates of more than 500%.
The federal lawsuit is the latest challenge to high-cost loans offered by tribal lenders, which claim immunity from state lending laws as a result of tribal sovereignty. The tribes say the loans bring income to their members, but officials in various states have argued that the high-priced loans are predatory.
Minnesota Attorney General Keith Ellison, a Democrat, said Wednesday that the annual interest rates charged by the three lenders — all owned by a tribal economic development group in Montana — range between 474% and 795%. Those rates are far above the maximum interest rates that Minnesota allows, saddling consumers with predatory loans they can't repay, Ellison said in a press release.
"Let this serve as a warning to any other businesses charging these illegal and outrageous interest rates: If you break the law and cheat the people of Minnesota, we will put a stop to it and hold you accountable," Ellison said.
The three online lenders — Bright Lending, Green Trust Cash and Target Cash Now — are all part of Island Mountain Development Group, a Native American economic development group that's part of the Fort Belknap Indian Community. The group did not respond to a request for comment.
Island Mountain Development Group is among the handful of tribal lenders that have long faced scrutiny, with consumer advocates and some state officials arguing that their loans violate state laws governing interest rates. The lenders argue that they're immune from lawsuits and that their businesses operate under tribal laws.
Ellison's office flagged several cases of Minnesotans that it said "fell victim to the predatory, fraudulent, and usurious lending practices" of those lenders.
One borrower paid $2,000 over five months on a loan of $700 but was told the payments only covered interest. Another sought an $800 loan and was told to pay $4,400 total, an interest rate that amounted to 700%, Ellison's office said.
The lawsuit argues that the companies engaged in abusive practices, violated Minnesota usury laws and violated the federal Racketeer Influenced and Corrupt Organizations Act by collecting on unlawful debts.
The suit, filed in U.S. District Court in Minnesota, is not seeking monetary damages. It states that the attorney general "fully accepts and respects the sovereign status" of the tribe. Instead, the lawsuit is seeking so-called injunctive relief — asking the court, as the complaint puts it, "to stop further violations and harm to financially distressed Minnesota consumers."
Island Mountain Development Group has faced lawsuits in other states, according to
In one federal case in New Jersey, another Fort Belknap Indian Community-affiliated lender asked the judge to dismiss a lawsuit by a borrower who took out $750 in loans. GreatPlains Finance "enjoys sovereign immunity and this Court therefore lacks subject matter jurisdiction," the company wrote in a court filing last year.
The tribe's consumer lending operations are the largest employer in the region and the "most significant source of revenue to fund the Tribe's government services," other than federal assistance, the filing said.
Michelle Fox, the former CEO of Island Mountain Development Group,
"We found something that actually makes money, and we're getting regulated out of business," Fox said.
Lauren Saunders, associate director at the National Consumer Law Center and a critic of high-cost loans, praised Ellison for bringing the lawsuit and said she hopes other states do the same.
Tribal sovereign immunity makes such cases tricky, but Minnesota is following a legal avenue that the Supreme Court laid out in another case, she said.
"By suing them for injunctive relief … they are going about the legal path to shut these lenders down, and I hope we see a lot more lawsuits like this," Saunders said.
