WASHINGTON Two American Indian tribes so far have failed to prove that New York's top banking regulator exceeded his authority in cracking down on out-of-state payday lenders last year, an appeals court panel ruled this week.
The Otoe-Missouria Tribe of Indians and Lac Vieux Desert Band of Lake Superior Chippewa Indians argue their sovereignty shields them from state usury limits. Therefore, they say, Financial Services Superintendent Benjamin Lawsky lacked the legal backing to force the lenders to cease making loans to New York consumers. They sued along with their affiliated lenders and sought a preliminary injunction to stop Lawsky's order.
"Plaintiffs bore the burden of proving that the challenged transactions fell within their regulatory domain, and the district court held that they failed to establish a sufficient factual basis to find in their favor," three judges on the 2nd U.S. Circuit Court of Appeals said in the decision on Wednesday. "Because this conclusion was a reasonable one, the district court did not abuse its discretion in denying the injunction."
In August 2013, Lawsky ordered 35 online lenders including those owned by the plaintiffs to stop issuing payday loans to New York consumers that violated the state's usury caps. He also asked banks to stop processing payment transactions for the lenders.
Despite the denial of the plaintiffs' request for a preliminary injunction, the case has still continued in the U.S. District Court for the Southern District of New York.
"With the benefit of discovery, plaintiffs may amass and present evidence that paints a clearer picture of the 'who,' 'where,' and 'what' of online lending, and may ultimately prevail in this litigation," the appeals court panel said. "But at this stage, the record is still murky, and thus, the district court reasonably held that plaintiffs had not proven that they would likely succeed on the merits."