"There is now a new kind of payday lending menace terrorizing consumers. The lending laws set up by the government are such that they are not applicable to ‘tribal enterprises’. In the light of this fact some Internet based high interest payday lenders have set themselves up as tribal enterprises thereby exempting them from government regulation. These lenders are now claiming that they are entitled to tribal nation sovereignty which allows them to function outside federal oversight.

Policy makers and industry pundits argue that this is nothing but a cheap trick to bypass federal rules and regulations, and have free reign to exploit the generally unsuspecting consumers. Authorities say that these lenders are using the tribal population as a front for their otherwise illegal operations. Consumers who have fallen victim to the misdealing of tribal lenders saw a spark of hope when the Consumer Financial Protection Bureau was set up. Experts predicted that the new bureau will have legislative power over tribal payday lenders. It is also highly probable that the actions of the bureau could set off a long drawn legal battle with the complexities of tribal immunity.

The tribal lenders are not limited by state laws or even borders for that matter. A consumer in California reported that she had been charged $1,057 interest in 5 months by a tribal payday lender. The principal value of the loan was $300. According to the lawsuit filed in Oklahoma, where the lending company is based, the consumer had been charged interest at the rate of 1200%. Another such case has been reported in Nebraska where a tribal payday lender allegedly affiliated to the Miami Nation of Oklahoma charged 521% interest on a loan. The company even threatened to have her arrested on a fraud charge."

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Steven Doyle: The phantom menace of tribal payday lenders (Online News Today 2/25)