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Tribes Sue New York Regulator for Payday Loan Order

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Yesterday the Otoe-Missouria Tribe, located near Tulsa, Oklahoma, and the Lac Vieux Desert Band of Lake Superior Chippewa Indians, based in southern Michigan, sued a New York regulator for blocking their online-lending operations from serving New York State residents, reported the Wall Street Journal.

The Otoe-Missouria runs American Web Loan Inc and Great Plains Lending LLC, and the Lac Vieux tribe operates

In early August, Benjamin M. Lawsky, superintendent of New York's Department of Financial Services, ordered 35 tribal lenders to stop offering "illegal" payday loans in New York, claiming they violate a state-imposed cap on interest rates charged to consumers.

Lawsky additionally urged more than 100 banks and an industry-run group overseeing an electronic payments network to cut off access to those lenders.

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But the tribes are refusing to comply with the New York financial regulator's attempt to block their legal businesses. Both Nations argue the state has no authority to impede on their sovereignty.

“The states have no authority to regulate these tribes in a way that limits their sovereign rights,” David Bernick, a lawyer with Boies Schiller & Flexner LLP, who represents the tribes, told the Journal. “That is a bedrock principle of law.”