Predatory Lenders “Rent-a-Tribe” For Legal Immunity in High Interest Schemes

Brian Nettles, Esq.

We’ve blogged about the ugliness of payday lending before–it’s a lucrative business that preys on vulnerable consumers.

In a nutshell, payday lenders offer loans to consumers who do not have savings or cannot qualify for bank loans. This may sound like a good deed, but high interest rates make it anything but philanthropic. Payday lenders seek out this struggling class of consumer because it the least likely to be able to pay back loans on time. To hook them in, they offer short term loans with high interest rates. These loans are often small or moderate in value and given for the short term. This gives the impression that they are manageable, but interest rates, some as high as 36%,

Attorney Brian Nettles

Attorney Brian Nettles

do serious damage fast.

In a short amount of time, interest fees will surpass the amount of the loan. In other words, say you took out $500 to pay for a medical bill or the rent. The interest rate on that short term loan may leave you owing $600 in fees and $500 for the loan. This forces borrowers to “roll-over” their loans–in other words, they continue to borrow in order to stay afloat, while also sinking deeper into debt.

Payday lenders make billions off of this scheme. Because it is so obviously unfair and abusive, state laws have been set to rein it in–but “chameleon” lenders find ways to dodge the rules. A recently discovered technique is to gain tribal immunity. Payday lenders claim to be part of an American Indian tribe and to employ tribal members. With this positioning, they can claim immunity from state business laws, including laws that forbid payday lending (instead, they face tribal arbitration). However, a large amount of evidence suggests that the “tribal” payday lenders are not actually run by tribal members or for the benefit of any tribe. Instead, they are non-Indian, privately-controlled companies that likely do not employ tribal members or conduct any work on reservations (Public Justice).

Aptly named the “rent-a-tribe” model, this scheme is offensive to the rights of consumers and American Indians. Exploiting the name of the tribe on paper, non-Indian businessman give little to nothing back to the tribe. At the center of two cases, is a single private, non-Indian owner who allegedly uses payday lending funds and immunity to purchase Learjets and finance a race car company–all the while, the “owners,” the Miami Tribe of Oklahoma, continue to live in poverty (Public Justice).

Thankfully, new federal-level efforts for consumer rights against predatory lending are taking place as well as investigation into the “rent-a-tribe” scheme. It is high time that predatory lenders are held accountable for exploiting groups plagued with poverty and injustice. As Public Justice highlights, predatory lending is predatory lending. It should never be exalted as business opportunity to uplift the poor–especially when it does the opposite.

To learn more about this issue, visit Public Justice to read “Payday Lending: Boon or Boondoggle for Tribes?” 

Have you suffered for a payday loan spiral? You are not alone. Share your story with the Consumer Financial Protection Bureau or file a complaint to help us hold payday lenders and their scheme accountable.


If you or a loved one is struggling and considering a payday loan, you may want to reconsider. Visit paydayloaninfo.org for advice on other options and ways to get back on your feet financially.

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