TheStreet: Payday lenders a growing business in Indian Country
Posted: Wednesday, July 6, 2011
"The unique nature of Native American reservations, as lands that operate as "tribal enterprises" with sovereign rights, has led to a rise in so-called payday loan businesses chartered there.
Proponents and opponents alike of such loans, and similar alternative financing offerings, are watching to see whether the Dodd-Frank Act and its slate of financial reforms will rein in such enterprises that have mostly escaped the reach of state regulators and consumer lending laws.
The argument waged by these online payday lenders is that the sovereign-nation status of tribal lands offers them immunity to state payday loan regulation such as interest rate restrictions.
Online payday loan facilitators, increasingly squeezed -- if not outright banned -- in many states, have tried to work this legal claim into a loophole. By incorporating their business on tribal land via negotiations that net the tribe or its chief a stipend, lenders look to skirt state laws and the tribe earns much-needed revenue. It's seemingly a win-win relationship -- aside from those stuck with triple-digit interest rates.
Critics say the connection to reservations is tenuous at best, describing the partnerships as "rent-a-reservation." Once little-known to many, the controversy surrounding payday lenders on tribal land was the subject of a comprehensive report by the nonprofit Center for Public Integrity."
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Tribal-Land Payday Loans Spark Reservations
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