Tribe Payday Loans

An Additional Layer of Legal Protection
By Allen Parker

As we are all aware, the Wall Street Journal did a story back in February on payday loan companies using a tribal relationship strategy to avoid payday loan state-by-state licensing. Attacks on these relationships by state attorney generals have resulted in the relationships being upheld as extensions of sovereign immunity.

The recent Dodd-Franks legislation targeted payday loans under its consumer protection provisions. While my understanding is that the new federal agency will respond on a complaint only basis rather than go after payday loan companies proactively, this becomes another reason for payday loan companies to pursue the sovereign model.

Why? Because the practices of payday loan companies without the protection of sovereign immunity are subject to state-by-state regulations, legal attack and now consumer protections pursuant to federal law.

Tribal joint ventures between payday loan companies and federally recognized tribes, however, extend the tribe’s sovereign immunity from legal recourse to the joint venture.

Moreover, new tribal lobbying groups such as the Native American Fair Commerce Coalition and Native American Financial Services Association have arisen to protect these joint ventures under the aegis of protecting sovereign immunity.