Last July, the Minnesota State Attorney General, Lori Swenson, took to court California-based CashCall, in what Swenson described as an Internet-based "rent-a-tribe" scheme. Furthermore, Swenson laid blame on CashCall and its subsidiaries of charging illegally high interest rates on their consumer loan products, all the while fraudulently insisting that the loans are subject to tribal sovereign immunity as defined by federal law, because the actual loans are made by a South Dakota company called Western Sky Financial -- which is owned by a member of an American Indian tribe.

And just this past January in another lawsuit against CashCall, New York Attorney General Eric Schneiderman announced that his office had settled a lawsuit which amongst other things accused CashCall of illegally charging borrowers 100% percent plus interest rates. 

The settlement in New York provided up to $35 million in debt relief, along with $1.5 million in penalties. Similar to the Minnesota Attorney General action against CashCall, Western Sky Financial, and their owners, all were sued for purporting a scheme to consumers. The owners of Western Sky Financial are the Cheyenne River Sioux Tribe, which is based in Timber Lake, South Dakota. Sadly, the tribe had to lay off nearly all of its employees and suspended it operations in connection with the online lending platform after the settlement was reached.

According to Jennifer Weddle, a lawyer with law firm Greenberg Traurig, who also co-chairs the firm's national American Tribe Law practice group, stated in April 2014:

"Indian tribes are exercising their sovereignty. They continue to provide for their citizens, using the resources available to them to subsist and build their economies. This is nothing new, yet, a controversy exists because some do not like one particular mechanism of tribes' sovereign action---in this case making short-term, small-denomination loans to consumers around the country via the Internet." 

While the latter statement might appear to gloss over the inherent problems that payday type loans cause for American consumers, whom ironically are most often marketed and targeted to those of color, the legal argument for the justification of high interest loans has a disgusting underside, in terms of hurting those that are most vulnerable in society --- but for no other reason than the slickness of their lawyers, who are able to legally skirt state usury laws. This is difficult to comprehend. 

The royal irony here is that the American Indian, a people so disconnected from the American Dream has decided to utilize a loophole in the law to financially exploit those that are the least able to fend for themselves.  

Earlier this year, both houses of Congress considered amending the Truth and Lending Act and to pull back the reins of tribal lending. However, those talks failed to make it out of session.  But rather, and from a consumer lending perspective, it can be opined that Congress has purposely not acted to constrict tribal authority in any way.

To quote Mrs. Weddle: "By establishing, regulating, and operating lending enterprises, tribes are exercising their sovereignty--sovereignty that predates the United States and holds deep roots in the nation's earliest jurisprudence.”

Disclaimer: Mr. Potter, via Potter Equities, LLC, performed and was compensated for providing subject matter expert consultant work, in the field of mortgage banking for CashCall in 2012 and 2013.