Last year, the Commissioner of Business Oversight issued several alerts warning consumers that it has received complaints with respect to unlicensed firms offering payday (deferred deposit) loans in California. The common thread in each of these alerts is that the lender claims to be wholly owned by a Native American tribe and that the lender is therefore not subject to regulation by the Department. The alert ends by “advising consumers that using a licensed payday lender benefits the consumer by providing protections against exorbitant fees and costs and recourse should there be a dispute with the lender.”

The Department has been aware of this activity for some time. Seven years ago, the Department (then, the Department of Corporations) filed a lawsuit against several lenders alleging that they were providing payday loans over the Internet to California residents in violation of the California Deferred Deposit Transaction Law, Cal. Fin. Code § 2300 et seq. Initially, the Department succeeded in obtaining a preliminary injunction, but this was vacated by the Court of Appeal. Ameriloan v. Superior Court, 169 Cal. App. 4th 81 (2008). After an evidentiary hearing, the trial court dismissed the case for lack of subject matter jurisdiction. Now it was Department’s turn to appeal.