Payday Lending, Predatory Lending, and Tribal Lending: What’s The Difference?

Payday lenders and online lenders charge high and often illegal interest rates to consumers. Sometimes the interest rates on these loans exceed 300 percent, 500 percent, or more. Often these consumers are already facing financial hardship. Obtaining a payday or high-cost installment loan frequently makes things worse in the long run, not better. That’s because payday or tribal lenders often require access to a borrower’s bank account, force the borrower to provide title to a vehicle as security, include excessive and high rates and fees, or push borrowers towards refinancing the loan again and again (charging fees and interest each time). Frequently these loans are specifically marketed towards people who are facing financial stress.

Sometimes payday lenders claim that state or federal laws don’t apply to their loans because they are organized under the laws and jurisdiction of a Native American tribe or foreign country. This is often referred to as tribal lending. For example, the “rent-a-tribe” model is a predatory payday loan strategy in which some payday and online lenders will partner with a protected Native American tribe to falsely operate under umbrella of tribal sovereignty. In this arrangement, the lender will list the tribe as the supposed owner of the lending business, or claim it is an economic development arm of the tribe.  The lender will then make loans that violate state law but claim it is immune to things like state interest rate caps or usury bans.

In practice, the non-tribal entities handle the business operations, including funding, marketing, collections, and other services, and control a majority of the profits. While the tribe may receive some revenue or compensation, usually in the form of a fee or small percentage of the loan profit, the lender is essentially “renting” the tribe’s name and legal immunity to try and shield itself from applicable state laws.  The tribal lending industry has been the subject of a significant amount of critical media attention exposing its abusive lending practices.

Georgia law provides some potentially strong protections against payday lending or predatory lending businesses – even those claiming immunity. Barnes Law Group has filed class actions on behalf of victims of payday lending and other forms of high-cost lending and obtained great results on behalf of its clients. While each case is different if you received a payday or high-cost loan or have suffered as the result of predatory lending practices, you can contact us to have your case evaluated.