What most critics of payday loans don’t realize is that tracking down and thwarting predatory lenders is so difficult because those particular lenders aren’t trying to follow the law. Those that are, the major lenders like Cash America and Advance America, are publicly traded, approved by the BBB, and are too big to hide; therefore they have an incentive to provide quality products and services.
These upstanding and legitimate businesses are having their reputations marred by hundreds of con artists who are trying to take advantage of people by offering online at ridiculous, usurious interest rates. Since the Dodd–Frank Wall Street Reform and Consumer Protection Act and the Consumer Protections Bureau went into effect, both the new agency and state governments across the country have made shutting down illegal lenders a top priority.
This high level of scrutiny has forced lenders to alter their business plan, and many have turned to partnerships with Native American tribes in order to make use of their tribal sovereignty to keep offering payday loans with illegal interest rates. These lenders don’t submit information to local and state governments, and they lurk in the shadows of the Internet where they are hard to track, and can quickly shut down shop and open elsewhere using a different domain name.
Just last month, CFPB head Rob Cordray admitted that his agency was somewhat handcuffed when trying to weed out these illegal online lenders: the combination of privacy laws, Internet information laws, and state laws regarding cash advances simply present too many roadblocks for the agency to make much headway on the issue at the moment.
While the CFPB might be hamstrung in taking action of their own at the moment, one thing they can do is refuse to come to the aid of payday lenders who are being targeted and brought to justice by state regulatory departments and attorney general’s offices.
In September, the agency rejected three tribal-affiliated lenders who asked the CFPB to prevent federal investigators from looking into their practices. In similar fashion. A New York Judge from Manhattan’s Federal District court has dismissed the claims of two tribal-affiliated lenders who are being pursued by the New York Department of Financial Services, and their superintendent Benjamin Lawsky.
The judge upheld Lawsky’s claims that the tribe’s immunity status is not being questioned, but that their sovereignty does not apply to business taking place outside their reservation and within the jurisdiction or the government of the state of New York. Hopefully this will become the new trend in shutting down illegal and predatory lenders: the state tracks them down and charges them, and the judicial system refuses to help them continue their scams.