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December 8th, 2020
Nearly all states have enacted usury laws that limit the amount of interest a company may charge on a loan. To evade these laws, payday lenders originated their loan products in the name of national banks, who were exempt from state interest-rate caps under national banking laws. Under these arrangements, the bank served as a conduit for the loans in exchange for a fee, but the payday lender funded, serviced and collected the loans — a tactic known as “rent-a-bank.” When state and federal regulators began cracking down on these rent-a-bank arrangements a decade ago, the payday lenders developed a solution — they adapted the structure to use Native American tribal entities as the conduit to ostensibly cloak otherwise illegal loans in tribal sovereign immunity. Hence, the new structure has been dubbed “rent-a-tribe” lending. These loan agreements state they are governed by tribal law (and not federal or state law) and often require anyone disputing the loans to arbitrate their claims on tribal lands before a tribal panel. However, the tribes are not really the lenders. Very often, a rent-a-tribe enterprise is created through multiple entities that are operated by a single entrepreneur with no lineage to the tribe.
The loans feature abusive and illegal interest rates. For example, Bordas & Bordas’ client obtained a loan from “tribal lender” American Web Loans (known as “AWL”) in the principal amount of $700, payable in 20 biweekly installments of $190. According to the terms of the loan, the total amount of interest agreed to be paid over the payment schedule was $3,084 (approximately 4.4 times the amount borrowed). This consumer made several installment payments required under the terms of the loan. Almost all of the payments made were applied to interest. In fact, despite making payments in the amount of $1,514.56, only $34.95 was actually applied to the principal. Thus, after paying more than double the amount borrowed to AWL in just four months, this consumer shockingly still owed $665.05 or 95 percent of the original loan amount. Pursuant to the terms of its standard agreement, AWL charged an annual interest rate of nearly 600 percent. The interest charged is typical of rates charged by AWL and other tribal lenders to consumers. After learning of these outrageous terms, Bordas & Bordas brought a class action lawsuit on behalf of its client and a class of consumers throughout West Virginia. This lawsuit challenges the legality of the rent-a-tribe loans and seeks to enforce West Virginia’s longstanding public policy against usurious loans.
This case involves a rent-a-tribe enterprise created and operated by Mark Curry, an entrepreneur with no lineage to the Otoe-Missouria Tribe. The lawsuit alleges that Curry’s companies made millions of dollars through loans issued in the name of American Web Loan —an entity formed under the laws of the Otoe-Missouria Tribe for the dual purpose of avoiding state and federal laws and concealing the role of Curry’s companies. Although American Web Loan is held out as the “lender” of the internet loans, the Otoe-Missouria Tribe had minimal involvement in the operations and received a mere one percent of the net profits from the loans. On the other hand, according to the lawsuit, Curry’s companies reaped nearly all the profits; provided the infrastructure to market, fund and collect the loans; and controlled the tribal companies’ bank accounts.
On behalf of a class of West Virginia consumers, Bordas & Bordas seeks to cancel these illegal loans, recover illegal loan payments and penalties from AWL, Curry and others participating in this scheme. If you have been subjected to this or other types of abusive lending schemes, Bordas & Bordas would like to speak with you and will continue to protect consumers in the communities we serve.
