Native American tribes offer short-term loans. Consumers say they are being gouged.

MILWAUKEE — Ashley Darling was desperate. It was year two of the COVID-19 pandemic, and she had just lost her grocery store job in a small town in western Oregon.

Now, she was behind on her car payment, and some longstanding medical bills were piling up. Stressed out and unsure of what to do, she went online in search for help to pay her bills.

Immediately, an ad from “Loan at Last,” a Wisconsin-based lender run by the Lac du Flambeau Band of Chippewa Indians, surfaced. She was quickly approved for a $700 short-term loan. The money was in her bank account within 24 hours, and she spent it, intending to pay it back within a few months.

Because her home state of Oregon has interest-rate caps on some loans that are made in the state, she didn’t pay much attention to the annual rate on such a small loan. She says the rate was not prominently displayed on the website or the application. 

It wasn’t until she made her first payment that she realized the annual interest rate on the loan was 700%.  

“I about had a heart attack,” Darling, 36, recalled. “That is just insane.”

She eventually used money from her tax refund to pay off the loan, including the high interest. The total paid on the $700 loan: $4,001.

'They made it really easy': Consumer watchdogs raise alarms as more consumers rely on high-interest 'rent-a-bank' loans

“Loan at Last” is one of dozens of tribal-owned lenders operating across the country, often with little oversight from state or federal regulators who monitor all other banks and lending institutions. There are at least a dozen such lenders in Wisconsin, primarily operated by the Lac du Flambeau Band of Chippewa Indians and Lac Courte Oreilles Band of Lake Superior Chippewa. Both tribes did not respond to multiple requests for comment by phone and email about their lending practices and Darling’s allegations.

Typically, tribal lenders offer short-term loans at interest rates well above 100%. They operate much like payday lenders but are not regulated like them.  

Tribal lenders say they are exempt from state and federal lending regulations because they are sovereign, federally recognized nations, which they disclose in fine print on their websites and loan contracts.

But whether and how tribal lenders should be regulated increasingly has been a point of debate at the center of dozens of federal and state lawsuits over the last decade. No clear answer has surfaced from the litigation, leaving many consumers unaware that Native American tribes even make loans and that they often come with extraordinarily high interest rates.

The national office of the Better Business Bureau does not track complaints about tribal lenders specifically but considers complaints related to the tribal loans as payday lender complaints and financial services complaints. Both have increased since 2015, according to the organization’s data.

The BBB received 15,367 payday lender complaints in 2021, a 51% increase over 2015. Complaints against consumer finance companies nationwide has more than tripled since 2015, with 116 complaints that year to 400 in 2021, according to the BBB.

Several borrowers of tribal loans say they find it hard to distinguish between state-regulated payday lenders, some of which have interest-rate caps depending on the state they are operating in, and tribal lenders, which have no caps. Both kinds of lenders market their loans online and offer a fast approval process.

Although tribal lenders say they disclose the terms of their loans, including their interest rates, to consumers up front, several borrowers interviewed by the Journal Sentinel, a part of the Paste BN Network, say the interest rates were never stated on the websites and were not prominently noted or visible on the contracts.

“They didn’t specify what the interest rate was on it, and I didn’t know,” Darling said. “Because it’s a tribal loan, they get away with it.”

The Consumer Financial Protection Bureau, a federal agency that educates consumers about high-interest, online loans, would not make an official available for an interview and did not respond to written questions on tribal lending.

'A great sense of relief': Good Samaritan pays off predatory loan debt of Arizona man featured in Paste BN

The Native American Financial Services Association, a trade group that lobbies Congress on behalf of tribal lenders, also did not respond to interview requests and questions. But on its website, the group says its members disclose the loan terms, including the interest rates and repayment schedules, before lending. The association disputes that tribal loans are akin to predatory payday loans.

Tribes should have sovereignty to lend money as they wish, according to the association, which believes e-commerce businesses are an essential tool in helping tribes become economically independent.

“For hundreds of years, our people have fought for our right to self-determination and the power to enact our own laws and be governed by them,” according to the association’s website. “Tribes continue to fight to protect their rights today, particularly in this new, uncharted e-commerce frontier.”

Wisconsin does not regulate tribal lenders but has seen an uptick in consumer complaints over the last decade, said Mike Lawton, who oversees bank regulation with the state Department of Financial Institutions, which charters and inspects banks and credit unions in the state.

Wisconsin does not have an interest-rate cap on tribal loans and does not require tribal lenders to be licensed.

Most complaints Lawton’s office receives are from out-of-state borrowers who have taken out a loan from a tribal lender based in Wisconsin. He said he has found that most tribal lenders are lending to consumers outside of their home states. The tribes maintain their businesses are legal, and Wisconsin accepts their assertion of tribal sovereignty.

“The big question concerning tribal lenders is whether or not they have to comply with Wisconsin laws and other state laws throughout the country,” Lawton said. “It’s a big mix on whether they have to or not. There is no easy answer.”

In the last 18 months the agency has received 15 complaints from out-of-state residents and five from Wisconsin residents regarding tribal lenders in other states, including Florida and California.

The department passes complaints on to the tribal lenders but usually gets the same response: a form letter from the company affirming the tribe’s sovereignty to lend as it wishes.

Spokeswoman Lisa Schiller of the Better Business Bureau in Wisconsin said her agency started seeing complaints about tribal lending in 2015. Since then, it has received about a dozen such complaints, which it has sent to the lending companies.

“The majority of the complaints are a result of the consumer not understanding the loan they agreed to — and their surprise and dissatisfaction when learning the amount they are required to pay back,” Schiller said. To avoid being taken in, she advises consumers to “research, research, research. Do your research before choosing.”

Generally, tribal lenders are quick to respond to disgruntled customers, referring them to the fine print on the loan contract and the website, Schiller said.

Despite the legal gray area of tribal lending, several consumer advocate attorneys say that tribal businesses, when operating beyond their reservations, are subject to state and federal laws, including interest-rate caps in some states.

Some consumers have been successful in recent years suing tribal lenders and getting their money back. There are several cases pending in federal and state courts across the country. Lac du Flambeau Band of Chippewa Indians is currently being sued in federal court in Virginia for its lending practices.

Last year, a federal judge in Virginia found that lending by leaders of three tribes based in Montana, Oklahoma and Louisiana exceeded Virginia’s cap on interest rates and was illegal. The court ordered the tribal leaders and a private for-profit company working with them to pay millions back to borrowers in Virginia in a settlement.

The U.S. Supreme Court has ruled in several cases, cited by the federal judge in the Virginia case, that a Native American tribe’s claim of “sovereign immunity” did not protect individual tribal leaders from being sued by borrowers for violating state laws.  

Predatory lending practices: What are payday loans and other types of predatory lending?

The Virginia case shows why such lending practices are illegal, said Andrew Guzzo, a plaintiff attorney on the case who has sued tribal leaders who run online loan operations and tracked their lending practices for years.

“When conduct is occurring on their reservation, (tribes) have a lot of autonomy over that,” he said. “So that's why when, even though gambling is, let’s say, illegal in Michigan, that a tribe in Michigan can have a casino on its reservation.”

But when a tribe is doing business over the internet —for example, providing a loan from Virginia to someone in another state — that activity becomes subject to that state’s laws, he said.

In her opinion, most tribal lenders are operating illegally, said Lauren Saunders, associate director of the National Consumer Law Center, a Boston-based nonprofit that advocates for low-income consumers.

Saunders has been working on this issue for over a decade and said if consumers find themselves with a tribal loan that exceeds the interest rates in their states, they should consider stopping payment and revoking any authorization for an automatic debit from their accounts.

In complaints to the Better Business Bureau and interviews with the Journal Sentinel, several borrowers of tribal loans say money was taken from their account even after their loan was paid or more was taken out than what was stipulated on their contract.

Chad Hohenbery of Bartonville, Illinois, said he had been a regular customer of tribal lenders until earlier this year when they delayed cashing his final payment check. His loan, through Greenline Loans, which is owned by the Lac du Flambeau Band of Chippewa Indians in Vilas County, balked at payment by check, instead insisting on automatic bank debits, he said.

Hohenbery, a respiratory therapist, had taken the loan out to pay off a car insurance premium.

He did not want to give Greenline Loans access to his bank account, fearing the lender would take money out of his account without his authorization. The lender eventually accepted a check as payment, he said, only after several weeks of calls and conversations.

“What really made me upset was that each time that I paid back the loans, I paid it back fully in a check, and they were not really happy about that because they were looking at that as not a form of payment in their eyes,” Hohenbery said.

Greenline and the Lac du Flambeau Band of Chippewa Indians did not respond to questions about Hohenbery’s loan.

For Darling, the grocery store cashier in Oregon with the $731 loan at 700% interest, the payback process was also arduous. When paying back the loan, she got sick, ending up in the hospital with a kidney infection while trying to take care of her family as a single mother.

She had been making payments and thought she had paid the loan off, but she hadn’t. She didn’t account for the high interest. She called the company to get a reprieve as the automatic payments were over-drafting her account, but they refused, she said.

She eventually paid the loan off. She said she still gets ads and emails from Loan at Last advertising their business and asking her to take out more money.

“They’re not honest,” she said. “They target people who have low income and are in stressful situations.”

Follow Katelyn Ferral on Twitter: @katelynferral.

About Public Investigator

Government corruption. Corporate wrongdoing. Consumer complaints. Medical scams. Public Investigator is a new initiative of the Milwaukee Journal Sentinel and its sister newsrooms across Wisconsin. .