A federal appeals court on Wednesday ruled that Think Finance and an online tribal payday lender must comply with state interest rate and licensing laws, in the first appellate case to address whether borrowers can sue tribal officials for injunctive relief.
The Second Circuit found that online tribal lender Plain Green violated state and federal laws by charging interest rates in excess of caps imposed by the state of Vermont. The court also ruled that arbitration clauses imposed in tribe’s loan agreements were “unenforceable and unconscionable.”
Plain Green, owned by the Chippewa Cree Tribe of the Rocky Boy’s Indian Reservation in Montana, had hired Think Finance and its subsidiaries to fund and service its online payday and installment loans.
“Plain Green is a payday lending entity cleverly designed to enable Defendants to skirt federal and state consumer protection laws under the cloak of tribal sovereign immunity,” the judges wrote in a 28-page ruling. “Tribes and their officers are not free to operate outside of Indian lands without conforming their conduct in these areas to federal and state law.”
The case involved two Vermont residents, Jessica Gingras and Angela Given, who took out loans in 2011 and 2013, respectively, at interest rates ranging from 60% to 370%. Neither borrower repaid the loans. Instead, they sued alleging that Think Finance and the tribe agreed on loan terms to circumvent stringent state usury laws.
Lauren Saunders, associate director of the National Consumer Law Center, said in a statement that the decision “sounds the death knell for tribal payday lending.”
The court ruling could also force Think Finance to settle an outstanding 2017 lawsuit filed by the Consumer Financial Protection Bureau that alleged the company illegally collected on loans that are void under state usury caps. The CFPB found that Think Finance deceived consumers and illegally debited money from consumers’ bank accounts that was not legally owed.
Neither the CFPB nor Think Finance responded to a request for comment.
