Editorial: Tribal online lending operations deserve state scrutiny

The state Department of Banking is right to issue both fines and cease-and-desist orders to the online lenders. Connecticut caps such short-term loans at a maximum of 12 percent interest.

Those making the loans are Indian tribes who claim immunity to state laws because the tribes are sovereign nations — the same principle that underpins the existence of Connecticut's gambling casinos.

As for whether tribes may legally set whatever rates of interest they choose, last year the U.S. 2nd Circuit Court of Appeals (whose territory includes Connecticut) decided in a New York case that prohibiting payday loan-making by tribes doesn't violate the Indian Commerce Clause of the U.S. Constitution.

The Washington Post noted that quite often the tribes are just a front, a way for others to circumvent state anti-usury laws. The real lenders, the ones who are raking in the incredible profits, are unscrupulous lenders with no claim to sovereignty.