When you ask “What Regulations Govern Tribal Payday Lenders Online?” you’re asking a heavy question. In fact, to put this question into the proper context it’s necessary to provide a scenario that allows one to be a bit objective while putting this discussion into perspective.
So let’s say you’re in a financial bind. You’re short of cash, up to your neck in bills and simply waiting for the next payday means nothing because the money is spent before it even gets in your bank account. An extra $2500.00 right now would be a real blessing! Fortunately – low and behold – you see an advertisement on TV praising a online lending company that offers fast cash advances to help people just like you who are feeling the latest economic crunch. You breathe a sigh of relief because this advertisement – typical of online payday lenders – underscores the company’s minimum required repayment plan while completely ignoring the high interest or automatic renewal. More on this in a second.
The Fine Print
The online payday lender in this scenario is actually a tribal lending institution. Depending on which side of the fence you ride this is either a good or a bad thing. But the fine print basically states that tribal payday lenders that coordinate internet payday load “within Indian Country” can claim tribal sovereignty and are basically immune from for state consumer protection laws capping interest rates.
Getting back to the anonymous individual in our pseudo-story, he quickly signs on the dotted line and gets his money but is oblivious to the fact that he is paying an interest rate of over 200%. The tribal payday lender can dictate it’s own terms because of the tribal sovereignty mentioned earlier. And because the lender’s terms include automatic deduction from the individual’s bank account he’ll be paying off this loan for a long, long time.
Protection or Lack of Same
Which brings us back to the original question of “What Regulations Govern Tribal Payday Lenders Online?” and how maybe now you can see that it really is a heavy question that is difficult to dissect. A good example is that In New York and most other states, loans under $25,000 with interest rates exceeding 16% are illegal and rates over 25% are criminal violations.
A counter-justification might go like this: if tribal internet payday lenders were providing services within the perimeters of what constitutes the tribal land and ONLY to its people than possibly you’d have no argument here. But using tribal sovereignty and lending to anyone who is in enough financial straits to hooked — well that’s when everything gets complicated.
For its part the lending tribes have formed an advocacy group called the Native American Financial Services Association “to protect and advocate for Native American sovereign rights and enable tribes to offer responsible online lending products,” which basically calls any action to block unregulated interest rates “a threat to all natives.”