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Payday Lending A Tribal/State Battle?

The squabbling over the connection between payday lenders and tribes has taken an interesting turn as it has now been framed as a tribal sovereignty/states’ rights battle by a pair of opposing statements released by a Native group and a payday trade organization. The Native group has come out for the controversial tribal/lender connection while the trade group has said Internet-only alliances with tribes don’t conform to its best practices code.

The Native American Fair Commerce Coalition (NAFCC) says the tribal/payday lender affiliations, derided by some as “rent-a-tribe” arrangements to get around state rules, are strictly a matter of tribal sovereignty.

The Coalition stated on July 11 that “Native American tribes are free to engage in commerce unhindered by bias or discrimination. We believe that those seeking to deny Native Americans their business development and entrepreneurial rights are on the wrong side of this issue, and on the wrong side of history.”

The group also said “the NAFCC is therefore committed to the protection of Native American sovereign immunity and views any campaign to single out Native American-owned businesses that operate under the laws of the United States to be nothing short of discriminatory.”

The Washington, DC-based group, founded in 2010 according to its Facebook page, is made up of many Oklahoma tribes “committed to protecting the sovereign rights—well settled in U.S. law—of Native Americans to pursue business opportunities that provide economic opportunity for Native Americans nationwide.”

In the opposing corner is the Community Financial Services Association of America (CFSAA), based in Alexandria, Virginia. The payday lender trade group, founded in 1999, said on July 7 the tribal/payday lender affiliations “are solely a practice of some Internet-based lenders who choose not to license themselves in the states in which they operate, but rather rely on the law of the sovereign nation.”

CFSAA said its “best practices require that all our member companies that offer payday advances through the Internet must be licensed in the state in which the customer resides and that they comply with all applicable state laws.” This “ensures strong consumer protections wile preserving access to short-term credit.”

A study done earlier this year by the Washington, DC-based Center for Public Integrity alleged that Internet-only lender/tribal arrangements were “rent-a-tribe” arrangements to get around state rules and potential lawsuits, an update from earlier “rent-a-bank” arrangements in states that had fewer restrictions on this kind of lending.