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Lenders Offering Short Term Finance Loans Online Are Often Tribal Lenders

Every time you turn around today it seems like you see another payday loan establishment. Just about everyone knows, too, that the rates on these loans are exorbitant and they sometimes cause an endless cycle of debt for consumers. So, most states have adopted legislation to try to limit payday loans affect on the consumer’s finances.

This type of loan, also referred to as short-term finance loans, is supposed to be for financial emergencies and is not just an easy way to borrow money as some people, unfortunately, use it. It is intended, instead, for emergencies, and, if used properly, serves a need. So, there is some debate about whether stricter regulation of this form of lending will do more harm than good and deprive the poor of much-needed capital in emergency situations.

Now, there seems to be a new kid on the block in this business–tribal lenders. These tribal lenders are making their loans online and claiming sovereign immunity to skirt the stricter state laws. In this manner, they are availing themselves of the far more lenient federal regulations.

Then, there are also lenders that claim tribal immunity that are not completely operated by a tribe. Instead, they are operated by existing lenders who have partnered with the tribes to avoid usury laws, small loan regulation, and laws regulating these loans. Thus, these quasi-tribal lenders are able to avoid the stronger state protections and make loans under federal regulations.

An internet-based payday lender formed, funded, and run by a tribe for its sole benefit is rare. Most often, a non-tribal lender arranges a deal with a tribe where the tribe receives a percentage of the profits for a monthly fee. The financial agreement between the tribe and lender is a closely guarded arrangement, but it is believed by some that the percentage for the tribe sometimes goes as low as one or two percent of the loan profits.

So, you have to wonder why the Native American tribes would get in bed, so to say, with these lenders.

At times, the tribes have been characterized as greedy for making these loans, but this is almost completely false. There is also the misconception of tribes getting rich from casinos and not paying taxes. This, too, could hardly be further from the truth.

Poverty prevails among Native Americans more than any other American group. Many tribes live in rural areas with limited natural resource development, unemployment at 50% in many areas, and limited quality healthcare.

Many are concerned that increasing sovereign immunity to non-reservation business enterprises will cause the Supreme Court and Congress to begin to limit sovereign immunity, especially when the immunity extends to non-Indians. This would, indeed, be a step in the wrong direction for tribes who got into this business in the first place to help their communities and economic development.

The one bright spot for tribes in recent history has been economic development. Many think this may make the poverty and social problems that accompany the tribes more tolerable. It would be a shame to see this trend reversed by the limiting of sovereign immunity extended to the Native Americans who deserve it.

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