What Are Tribal Loans? Are They Legal?
Payday lending is a practice of granting unsecured payday loans without using traditional and lengthy verification methods. Lenders (especially tribally run ones) do not require borrowers to provide any evidence or data on their credit history. They do not address any consumer reporting firms to track customers’ credit records, as they operate on the "tribal loans no teletrack direct lender" basis. Therefore, a payday loan is often regarded as an alternative to a bank loan for those, who have failed to pay back on time and now cannot borrow due to their spoiled credit records.
Payday lending offices began to emerge in response to an increasing demand for quick cash from citizens facing unexpected financial trouble. Those may result from car accidents, health issues and other events that entail financial burden. To many of them (particularly, those with poor credit histories), a payday loan is what seems to be a helping hand in the hard times.
Payday lenders have few requirements. Mostly, the request information about borrowers’ income and contact information just to stay in touch with them. Usually, a borrower gets the needed cash sum shortly after applying for a payday loan, often on the same day (hence the name).
In the USA, the history of payday loans started around the early 1990s. The industry boomed throughout the late 1990s and 2000s and spawned a controversy over extremely high triple-digit annual percentage rates and high occurrence of abusive and criminal acts against borrowers who failed to pay back on due dates.
Payday Loans Legal Aspects
In the USA, payday loan lending is regulated both at the federal and state level. The U.S. government began to take steps to curb payday lending, when abuse took menacing proportions. The first major milestone was a law regulating the involvement in payday loan practices of servicemen and their relatives (2007). Later, the 112th Congress introduced the SAFE Lending Act obliging lenders to abide by statutes and laws in states, where borrowers reside. In 2010, the Consumer Financial Protection Bureau was established in keeping with the Dodd-Frank Wall Street Reform Act and the Consumer Protection Act (2010). The main purpose was to protect borrowers against abuse and authorize the Bureau to regulate payday lending and payday loan practices.
Before the introduction of these acts, payday lending had been regulated primarily at the state level. Each state was free to establish its own statute to regulate payday lending practices. It should be noted that state governments do retain a good share of these powers so far. The majority of states were (and are) quite permissive about payday loans and choose not to impose strict barriers on interest rates or permitted number of loans per unit of time. Therefore, many lenders feel free to set very high annual interest rates.
Some states apply more stringent measures against payday lenders and put caps on interest rates and numbers of rollovers. This has helped many low-income individuals and families avoid the financial trap created by extortionate triple-digit rates. There are states, where payday loans have been banned altogether.
The arm of the tribe. Do you have to pay back tribal loans?
In the USA, tribal communities enjoy a number of advantages over regular citizens. The Internet, has helped many storefront payday lenders switch to the online mode. This helps them target customers even in states where payday lenders are less welcome or outlawed. Also, Indian tribesmen (including the United Keetoowah Band of Cherokee Indians) exercise the doctrine of tribal sovereign immunity, which exempts them from stringent law enforcement and gives them the freedom to run payday lending businesses at their own discretion. To make it easier for borrowers, they apply the tribal loans no teletrack direct lender approach, which guarantees that customers’ credit histories will not be tracked.
It is noteworthy, that Indians’ rights are stipulated in the U.S. Constitution, and tribes do retain quite a number of their original rights (e. g. possession of the soil). Like all other federally recognized tribes, Keetowah is a sovereign political entity, and its sovereignty is determined by the federal law rather than the local state law.
Can Tribal Loan Companies Sue You?
Although the Supreme Court did attempt to limit the immunity, the Congress continues to express loyalty to tribal communities and to ensure that corporate tribal entities (including payday lenders) do exercise the rights of the arm of the tribe and therefore remain immune to suits and other law enforcement acts.
Keetowah is just one of the Oklahoma tribes, which participates in payday lending and other businesses. The exemptions and immunities, which tribal communities enjoy, are there to compensate for their seclusion, stressful history of their integration into the American society, geographical challenges, lack of natural resources, difficulty integrating into urban life, etc.
The tribal sovereign immunity allows tribes to run businesses in the form of the arm of the tribe, which provides a legal basis for their involvement in otherwise restricted business segments, such as payday lending. A company’s compliance with a number of criteria to qualify for the status is determined with the help of a system of tests determined by the federal courts of appeal. Although different courts set different criteria for tribes’ entitlement to sovereign immunity, there are some universal criteria. Whether or not a business qualifies for the arm-of-the-tribe status, depends on:
- Creation of a tribal business: it should be established in keeping with the tribal law;
- Tribal control: the tribe’s ownership of and influence on the business, as well as top management’s membership of the tribe;
- Benefits for the tribe (financial and/or non-financial), its contribution to the tribe’s self-sufficiency and well-being;
- The role of tribal immunity in the tribe’s economic development.
The Congress’s and federal courts’ continuous effort to keep Indian tribes immune is related to U.S. authorities’ effort to help tribes set up their own businesses, integrate into the national economy, and, most important, generate sufficient profit to fund their own governments. They are even allowed to partner with non-Indian businesses without losing the immunity (providing that they meet respective arm-of-the-tribe test criteria). This should help tribesmen, particularly Keetoowah, to overcome economic and social detachment and learn new things from non-Indians and integrate into the modern business environment.
Is payday lending an arm of the tribe?
As follows from the above, in order for a tribe to retain sovereign immunity when running a business, with or without partnering with non-Indian entities, a business should meet at least the four arm-of-the-tribe criteria. As long as there is a strong legal basis in the USA for payday lending companies, plus the sovereign immunity, and as long as they meet the four universal criteria, a lawfully operating tribal payday lender can be recognized as an arm of the tribe. All tribes exercise the right to choose what they believe is the most profitable way of running a business in keeping with the tribal and federal law.
Soothing the old wounds
In the early 1800s, several major tribes, including Cherokee, were forcibly relocated from their lands in the Southeastern United States, which they had inhabited from time immemorial. The whole thing began with the acceptance of the Indian Removal Act in 1830. Over the twenty years that followed, about 100,000 Indians were forced to move to areas west of the Mississippi River. As the tribesmen moved to their designated reserve, many of them died from disease, starvation and exposure to harsh outer influences. Later, the removed tribes became assimilated by the United States, which was gaining power, and many of them lost their identity.
Today’s authorities, in an effort to build a democratic society, have done a lot of work to rehabilitate Native Americans. The sovereign immunity appears to be part of the U.S. government’s effort to compensate for the hardship, which Native Americans had to face after 1830. This is just one of the numerous advantages, which they have over non-native U.S. citizens when it comes to running a business. The government is taking tremendous effort to rebuild Indians’ national identity and status.
About the Keetoowah Band of the Cherokee Tribe: origin and history
Keetoowah is a band of the big Cherokee Indian tribe. It is eponymous to Kituhwa Mound – the town, around which Cherokee tribesmen originally settled. It is located near what today is Bryson City, North Carolina. The tribe was divided into several bands, and there was tension between them. Keetoowah people believe that they are the Western Cherokee – a branch of the old tribe, which used to settle in present-day Tennessee, North Carolina, South Carolina, Alabama, and Georgia. There they received their sacred fire and laws.
Today’s Keetoowah tribesmen trace their origin back to the Old Settler Cherokees, who moved to present-day Oklahoma in 1828 and later came to grips with the main body of Cherokees. In 1938, Cherokee and some other tribes faced the Trail of Tears, which was part of the forced removal of Indians from their homeland under the 1830 Indian Removal Act. During the Civil War, the two branches were on opposite sides of the barricades, and the tension continues until nowadays.
Another wave of hostility occurred after 1907, after the dissolution of the Cherokee nation’s national government, when the entire Cherokee tribe remained under the governance of the Keetoowah people. This continued until after WWII, when President H. Truman instituted a government of the Cherokee Nation. This resulted in a kind of diarchy, and the situation has not changed much since then.
The Keetoowah band was recognized by the Congress in 1946 and formed its constitution and legislation in 1950. Today, the tribe is settled in Tahlequah, Oklahoma, and enrolls more than 14,000 people. Most of them live in Oklahoma. Although the Keetoowah Band of the Cherokee Tribe and the Cherokee Nation of Oklahoma share ancestry, the latter continues to take effort to curb Keetoowah’s sovereignty and rights in the sphere of business and the use of tribal tags.
Payday lender choose to affiliate with Keetoowah
The growing number of citizens’ complaints about payday lenders’ predatory tactics and abuse has prompted the U.S. government to modify the law and impose restrictions on lenders. Many payday lenders consider the new caps and limits too tough and find that the business is no longer profitable. However, there are always ways around it. Various types of companies, including payday lenders, tend to affiliate with Indian tribes, who enjoy sovereign immunity. Once they do, they become shielded by the sovereignty (the arm of the tribe) and are no longer vulnerable to restrictions imposed by state governments.
The Keetoowah Band of the Cherokee Tribe is no exception. Like all other tribes, which let non-Indian enterprises in, they require that:
- A payday lender agrees to run his or her company in keeping with the Keetoowah law and constitution;
- The lender recognizes tribesmen’s ownership rights for the group, and that the top managerial staff be represented by Keetoowah people;
- The lender recognizes tribesmen’s ownership rights for the group, and that the top managerial staff be represented by Keetoowah people; The company shares its profit with the tribe as agreed by the parties and contributes to the tribe’s economy and well-being;
All organizations and businesses, including payday lenders, who would like to affiliate with the Keetoowah Band, should pass an arm-of-the-tribe test. Thus they ensure that they live up to the requirements mentioned above.
The Keetoowah Band of the Cherokee Tribe runs Superior Funding LLC, a lender, on an arm-of-the-tribe basis. The company operates in keeping with the tribal law. Because Keetoowah is a federally recognized tribe, the lender’s work is covered by the sovereign immunity, and it is exempt from many caps and restrictions. However, the company strictly abides by the Fair Debt Collection Practices Act, which is enforced by the Federal Trade Commission. As to the lender-borrower relationship, the company does its uttermost to maintain healthy contacts without any signs of abuse.
Superior Funding LLC does not grant loans to residents of Georgia, New York, Vermont and Oklahoma. Most likely, the company has had to face a proceeding initiated by these states’ residents for providing lines of credit to them without being licensed to do so. Another Keetoowah-run lender - Advantage One Credit LLC, has had tension with residents of Washington, who have sent complaints against the company to the Department of Financial Institutions.
As mentioned above, the sovereign immunity exempts tribally run companies from some state-level limitations and regulations. This creates a controversy, which often leads to continuous litigations and tension. For this reason, these lenders prefer not to provide services in states, whose residents have initiated lawsuits against them.