An Oklahoma tribe is fighting for the right to offer Connecticut consumers payday loans, arguing that state restrictions on its offerings of high-rate, short-term loans are financially damaging.

The Otoe-Missouria tribe is claiming right as a sovereign government to make short-term loans at small, short-term loans with annual percentage rates as high as 448.76%. That percentage far exceeds the state’s 12% cap on such loans.

Earlier this year, Connecticut's Department of Banking imposed fines totaling $800,000 and ordered two online lenders owned by the Red Rock, Okla.-based tribe, Great Plains Lending LLC and Clear Creek Lending LLC, to stop making the loans. John Shotton, chairman of the tribe, was fined $700,000.

Now, the Institute for Liberty, a national nonprofit conservative group supporting the tribe, is counterattacking with a billboard and a Twitter campaign that draws Connecticut Gov. Dannel P. Malloy into the dispute, accusing the Democratic governor of being party to a regulatory action that deprives an impoverished tribe of revenue. Campaign messages, according to the Hartford Courant, pair photos of Native American children with phrases including, "Gov. Malloy, Don't take away my daddy's job," and "Gov. Malloy, Don't take away my future." 

Bruce Adams, the general counsel at the state banking department, said the angle was ironic, given that so-called payday loans dearly cost low-income borrowers who are in desperate need of cash and have no access to more conventional and affordable credit.

It's not the first time tribes have argued in court that that tribe-owned payday lending businesses, like tribal governments, have sovereign immunity - meaning state regulators lack authority to regulate them.

In 2013, the Otoe-Missouria, along with the Michigan-based Lac Vieux Desert Band of Lake Superior Chippewa Indians, filed a federal lawsuit against New York state in response to a state campaign against payday lenders. The tribes dropped the lawsuit last fall, saying the legal battle "consumed considerable resources.” 

Seventeen states and the District of Columbia have enacted double-digit caps on payday loans, according to the Center for Responsible Lending. Consumer advocates say working with Native American tribes is only the most recent tactic payday lenders are using to get around those caps and other state usury laws.

More than a dozen tribes, including the Otoe-Missouria, have gotten into online payday lending in recent years and federal and state regulators have begun cracking down on many players in the payday loan ecosystem. The tribes say rights granted to them by the U.S. mean they can lend money at rates topping 700% a year, even in states that ban the short-term loans.

Shotton has said his business follows federal and tribal laws and that regulators, such as those in Connecticut, are ignoring legal protections regarding Native Americans' sovereign rights. He said his impoverished tribe needs the profits to fund affordable housing and after-school programs. 

Connecticut’s action earlier this year followed an October court victory against the tribe for New York’s banking regulator when a U.S. appeals court ruled against the Otoe-Missouria and another tribe that sued to establish their right to make high-interest online loans.

Thirty-five online lenders, including at least four companies owned by tribes, were ordered to stop offering loans in New York that exceeded the state's interest rate cap of 25%. New York regulators also sent letters to Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co and 114 others banks asking them to cut off the payday lenders critical access to borrowers' checking accounts.

The tribes sued, arguing Lawsky overstepped his jurisdictional bounds in trying to regulate business activity that takes place place on Native American reservations in Oklahoma and Michigan.

Other regulators have raised questions about whether some payday websites are really owned by tribes. Pennsylvania’s attorney general sued Think Finance Inc. in November for using tribes, including the Otoe-Missouria, as a cover for an “illegal payday-loan scheme.”


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