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The Native American Tribes respond to Director Cordray

Posted in Payday Lending

Chris Willis’ recent post referred to the fact that Director Cordray during the Q&A session after his speech to NAAG disparaged Internet payday loans being made by certain Indian tribes. Here is an unofficial audio transcription of the exchange between the Colorado Attorney General, Director Cordray and Julie Brill, a FTC Commissioner:

John Suthers: In Colorado we have been fighting a seven-year court battle with frustrating results over online payday lending, where, companies, to avoid state regulation are affiliating, and I use that word loosely, with Indian tribes . . . [an] internet relationship where they’re paying just . . . 1% of the net revenues or something like that to the tribe for the ability to call themselves a tribal entity. And we’ve had some very frustrating results with the Colorado courts in terms of trying to pierce this situation because of tribal sovereignty. And I think there are some capabilities that the federal government would have in the sovereignty area that the states have not been able to overcome. And so I would really – because – it’s a model that could go into any kind of area where the states regulate to avoid state regulation by claiming protection from tribal sovereignty so I’m really hoping that we can work together on that problem. I think it’s a growing one.

Richard Cordray: So – so I’ll take a crack at that . . . So John, we are aware of and we’ve been following the fight you’ve been waging in Colorado courts and it is something that we recognize at the Bureau and the Federal Trade Commission also recognizes [that this is] an area we can be particularly helpful, because our legal research has . . . confirmed what you just said. If there is, legitimately, a tribal entity that can oust a state of effective jurisdiction to enforce laws against that entity, it does not oust the federal government. So that may be one, where when you’re having that problem you should turn to us, and let us work on it. The FTC has already brought at least one action . . . If in fact that entity is not truly a tribal entity but it’s just a sham arrangement then the courts would have some opportunity to look through that and, and see it for what it is. However, for you to have to litigate that and go through the courts [who] may or may not see it that way, when the downside is that they will tell you that they can’t do anything about it is certainly frustrating and needless, so I think that this is an area where you should look to us for help . . .

John Suthers: The most frustrating part about is the Colorado Supreme Court placed upon us the burden, before we could ever get any documents from the tribal entity and so we haven’t been able to get any documents from them . . . It’s been incredibly frustrating.

Julie Brill: We completely empathize with this situation – you know, the problem that you’re going through – I do, I agree with Rich, there might be some tools that we at the federal level might have to assist you. This is one of the areas that I think you’ll see a lot of cooperation going forward between the new Bureau and the Federal Trade Commission. As I mentioned earlier it’s one of the working groups that we have going now, payday lending and obviously, how the actors have moved online and into tribal relationships is going to be an important part of that discussion. We’re seeing similar activity in affiliate marketing, and kind of whether it’s tribal or having an international element to it . . .

It did not take long for the tribes to respond. Barry Brandon, Executive Director of the Native American Fair Commerce Coalition stated: “Director Cordray does not appear to understand that tribes are full partners in online lending businesses, and regulate business practices through the enactment of tribal laws and the implementation of regulatory authorities to provide consumer protections. Native American online lending businesses are providing sorely needed economic development on the reservation, while serving thousands of consumers nationwide with short term financing required to help address emergency needs.”