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STRETCHING THEENVELOPE OFTRIBAL SOVEREIGNIMMUNITY?An Investigation of the RelationshipsBetween Online Payday Lenders andNative American TribesNovember 2017byKyra TaylorwithLeslie BaileyVictoria W. NiThe Public Justice FoundationThis project was made possible by a grant fromSilicon Valley Community Foundation

TABLE OF CONTENTSI.II.EXECUTIVE SUMMARY . 1A.Purpose .1B.Key Findings .2C.Implications and Need for More Oversight .4BACKGROUND . 5A.The “Tribal Payday” Model .5B.Public Justice’s Anti-Payday Lending Initiative.11C.Acknowledgements .12III.RESOURCES AND METHODOLOGY . 12IV.DATA AND FINDINGS . 15A.No State or Federal Databases Listing “Tribal” Payday Lenders .16B.Al Jazeera America Investigative Series: Payday Nation.171. Raw Data .17Figure 1: Summary Raw Data from Al Jazeera’s Payday Nation .172. Data Specific to California.18a. Summary of Lending Website Data18Figure 2: Al Jazeera’s Lending Website Data Specific to California .18b. California Tribes Referenced by Lending Sites18c. Updating the Al Jazeera Dataset19Figure 3: Updated Al Jazeera Data: California .20C.Tribes with a California Connection Currently Mentioned By LendingWebsites .201. Location of Tribes Mentioned by Researched Lending Websites .21Figure 4: Location of Tribes Purportedly Affiliated With LendingWebsites With Connection to California .212. Size of Tribes .23Figure 5: Membership Size of Tribes Mentioned by LendingWebsites With Connection to California .233. Frequency in Which Tribes Were Mentioned On Lending Websites .24Figure 6: Frequency in Which Tribes Were Referenced By LendingWebsites .24D.Additional Tribal Affiliations Researched .24Figure 7: Summary of Websites Reviewed .25

E.Composition of Lending Websites Researched .25Figure 8: Summary of Websites Reviewed .26Figure 9: Lending Websites Claiming Tribal Affiliation .26Figure 10: Tribe Affiliation Language on Active Lending WebsitesReferencing California Tribes.30F.The Anatomy of a Lending Website .311. General Trends of Lending Websites .322. Contract Terms on Active Lending Websites .33Figure 11: Contract Terms Stated On Active Lending Websites .343. Trends Among Lending Websites Claiming Association with the SameTribe .654. Trademark Data For Active Lending Websites .66Figure 12: Trademark Registration Data for Lending Websites .67G.Data Used to Determine the Scope of Relationships Between Tribes andLenders .701. Availability of Official Tribal Publications Mentioning PaydayLending Involvement .72Figure 13: Summary of Information Available on Tribal Websites .722. Litigation Involving Tribal Payday Lending .76Figure 14: Summary of Litigation By Tribe .77Figure 15: Litigation History Involving Payday Businesses ClaimingTribal Affiliation .833. Alternative Sources of Information Relating To Tribes’ RelationshipTo Payday Lenders .103H.Analysis of Tribal Sources, Media Articles, and Litigation DocumentsDiscussing the Involvement of Tribes in Payday Businesses .1031. Tribal Ordinances, Resolutions, and Codes .103Figure 16: Sources of Tribal Corporation Formation DocumentsPurporting to Create Payday Lending Businesses or TribalDocuments Purportedly Creating Regulatory Agencies, ByTribe .104a. Tribal Documents Purportedly Creating Payday Businesses orApproving of Tribe’s Affiliation with a Payday Lender109Figure 17: Summary of Tribal Documents Purporting to Create PaydayLending Businesses .111b. Tribal Documents Purportedly Creating Tribal LendingRegulatory Agenciesii125

Figure 18: Sources of Tribal Documents Purportedly CreatingRegulatory Agencies .126Figure 19: Summary of Tribal Documents Purportedly CreatingRegulatory Agencies .1302. Tribes’ and Tribal Officials’ Statements About Involvement in PaydayLending .143a. Statements Made in Internal Tribal Documents and toNewspapers, Other Periodicals, and Government Entities144Figure 20: Statements About Payday Business in Tribal Newsletters orTribal Websites .145Figure 21: Tribal Members’ Statements to Newspapers RegardingPayday Industry .149b. Tribal Officials’ Statements in Court Documents161Figure 22: Tribal Declarations Filed in Litigation .163I.California Law and Enforcement Against Payday Lenders .1721. The California Deferred Deposit Transaction Law .1722. Application of the CDDTL to “Tribal” Payday Lenders .1733. Relevant DBO Enforcement .1744. Court and Administrative Decisions Interpreting the CDDTL .177V.SECONDARY ACTORS IN TRIBAL PAYDAY SCHEME . 178A.Lobbying Groups Advancing Tribal Involvement in Online PaydayLending .1781. The Native American Financial Services Association (NAFSA) .178Figure 23: NAFSA’s Board of Directors in 2013 .181Figure 24: NAFSA’s Current Board of Directors .1812. Online Lenders Alliance (OLA) .182VI.B.Lead Generating Websites .184C.“Tribal Matchmakers” .186RELATIONSHIPS BETWEEN TRIBES AND PAYDAY LENDERS –CASE STUDIES . 186A.Summary of Data Collected .187Figure 25: Summary of All Available Data For Each Tribe .189B.Case Studies .1911. Cheyenne River Sioux, Western Sky, and CashCall .1912. Wakpamni Oglala Sioux, FastMoneyStore.net .194iii

3. Miami Tribe of Oklahoma, Miami Nation Enterprises, AMG Services,and Scott Tucker .1964. Otoe-Missouria Tribe, Great Plains Lending, American Web Loan,Clear Creek Lending .2005. Lac Vieux Desert Band, Castle Payday, Big Picture Loans, SovereignLending Solutions, Red Rock Lending, and Bellicose Capital .2036. Habematolel Tribe, ArrowShade, Mountain Summit Financial, SilverCloud, and Golden Valley.204VII. CONCLUSION. 208iv

I.EXECUTIVE SUMMARYOnline payday lenders—particularly after they are investigated by state authoritiesor find themselves defending lawsuits brought by borrowers—are increasingly seekingrelationships with Native American tribes in an effort to benefit from the tribes’ specialstatus as sovereign nations under the law, and thereby avoid liability for violatingconsumer protection laws. It is well-documented that some payday lenders began seekingarrangements with tribes roughly 15 years ago for the purpose of enabling the lenders tocontinue making short-term loans with sky-high interest rates via the internet whileescaping the reach of consumer protection laws. Since then, an increasing number oflenders have formed affiliations with tribes, ranging from relationships that appear toexist only on paper, to business enterprises with varying degrees of tribal initiative andinvolvement.In the course of bringing strategic litigation against payday lenders on behalf ofconsumers who have been cheated in violation of consumer protection law, PublicJustice’s Anti-Payday Lending Initiative was first forced to contend with a “tribalimmunity” defense raised by a payday lender in 2012 in response to a lawsuit. Now, withthe generous grant support from Silicon Valley Community Foundation, we set out toshine a light on the still murky and mysterious world of “tribal” payday lending as itrelates to California. Since 2009, SVCF has made combating predatory payday lendingone of its highest institutional priorities. The result is a first-of-its-kind investigativereport on the connections, claimed and actual, between payday lenders and tribes. Whilethe report would not have been possible without SVCF’s support, its content, conclusionsand work product belong solely to the Public Justice Foundation.In addition to conducting a broad survey of all publicly available evidenceconcerning the relationship between certain Native American tribes and online paydaylenders, this report identifies some recent developments in California and elsewhere thatsuggest the legal landscape may be shifting towards increased accountability andtransparency. Finally, to give readers an understanding of the range of different types ofarrangements between Native American tribes and the payday lenders claimingaffiliations with them, the report concludes with five case studies.A. PurposeDespite the increasing prevalence of lenders claiming to be affiliated with tribes,there is no publicly available national database that documents or tracks theserelationships. To help fill this void, we set out to analyze every available source ofinformation that could shed light on the relationships—both claimed and actual—between payday lenders and tribes. At the request of SVCF, we focused our researchprimarily on lenders and tribes with some connection to California.1

Building on raw data compiled for a landmark 2014 Al Jazeera America(“AJAM”)1 investigative report, our researchers followed every lead, identifying andanalyzing trends along the way, to present a comprehensive picture of the industry thatwould allow examination from several different angles. Where it was possible to drawconclusions from the data, we have done so; but for the most part, we simply present theinformation and let it speak for itself. Indeed, although we reviewed numerous sourcesdiscussing connections between tribe and lender—including court records, investigativereporting, tribal documents, tribal member statements, and lending websites—the picturethat emerges is incomplete and full of fascinating contradictions. It is our hope that thisreport will be a helpful starting point for lawmakers, policymakers, consumer advocates,journalists, researchers, and state, federal, and tribal officials interested in findingsolutions to the economic injustices that result from predatory lending.Because the landscape of tribal payday lending is rapidly evolving, with websitesappearing and disappearing on an ongoing basis, it is not possible to say with certaintythat this report includes every tribally affiliated lender that makes loans to Californiaconsumers. In addition, it is inevitable that some of the information in this report—whichwas based on research conducted from March through December 2016—will soon beoutdated. Nonetheless, the report provides a valuable snapshot of the availableinformation about online payday lenders that claim affiliation with a tribe and that havesome connection to California.B. Key Findings1. The tribes investigated ranged in membership size. We focused our researchon 27 tribes—23 tribes with some sort of California connection and 4 tribes without adocumented California connection that came up repeatedly in our research—and the 100lending websites claiming an affiliation with these tribes. The tribes ranged in size fromjust 24 members to over 30,000 members.2. While the lenders’ websites tended to tout tribal affiliation, most of thetribes’ websites did not mention any affiliation with a payday lender. Twenty of thetribes investigated operated a tribal website, but just four tribal websites explicitlymentioned the tribe’s affiliation with a payday lender. Meanwhile, several lendingwebsites explicitly identified a tribe as an owner of a lending business. Of the 16 tribalwebsites that did not mention an affiliation with a payday lender, six identified othertribal business ventures in which the tribe was actively engaged. None of the tribal1AJAM was an award-winning cable and satellite news channel and website operated by the Al JazeeraNews Network. See AL JAZEERA AMERICA, Awards & /awards.html (last visited Aug. 21, 2017). The network announced thatit would cease operations in April 2016. Al Jazeera America to close down, AL JAZEERA, Jan. 13, 13/al-jazeera-america-to-close-down.html. It shuttered itsweb operations in February 2016. Al Jazeera America, WIKIPEDIA.COM,https://en.wikipedia.org/wiki/Al Jazeera America (last visited Aug. 21, 2017).2

websites listed any tribal lending commission, commissioner, or payday employee withinany tribal department or directory.3. There were many other inconsistencies between what tribes and lenderssaid publicly about their business arrangement. Lenders, both on their own websitesand in the documents they submitted to courts in an effort to show tribal ownership,portrayed the tribe as the primary business operator. They typically claimed that thelending business was formed and is owned, controlled, and operated by the tribe, for thetribe’s benefit, relying on formal-looking tribal corporate documents and declarationssigned by tribal officials. These tribal documents and declarations presented the tribe asan autonomous entity that runs, regulates, and benefits from the business. Yet, theseexhibits typically provided few details about the relationship between the payday lenderand tribe, such as financial arrangements or oversight, and instead focused on the tribe’sneed for money and the tribal council’s alleged intent that the lender share in the tribe’ssovereign immunity. Also, many of the tribal council members who signed declarationsfor payday lenders in litigation were members of the Native American Financial ServicesAssociation (NAFSA), a lobbying group supporting tribal payday lending. In oneinstance, two companies that had claimed to be wholly owned by a tribe admitted thatone of their corporate officers—also a tribal leader—had submitted false tribaldeclarations in state court that overstated the tribe’s involvement in the lending business.In contrast to the lending sites, and as mentioned above, the websites run by thetribes that purportedly own each business almost never had any information about thelending business each tribe supposedly owned—even though several tribal sites featuredother kinds of tribal businesses. We were unable to find any evidence of ongoing tribalcouncil or committee involvement in running the lending business, lists of tribalemployees of the business in tribal directories, or references to the revenue or lossesincurred by the tribe for any of the lenders we researched.Meanwhile, statements made by tribal leaders and other tribal members outside thecontext of court proceedings were typically much less positive about the tribe’sinvolvement in the lending business. While some tribal council members did confirmtheir tribe’s involvement in lending, others—even within the same tribe—denied thattheir tribe had anything but minimal involvement. Some even expressed surprise at thenotion that the tribe “owned” a payday lending business.4. The active lending websites citing California tribes all used similarlanguage and images when referencing their relationship to a California tribe. All ofthe lending websites we reviewed contained similar characteristics. Facial similaritiesincluded a Native American-themed name, bright colors, and stock images of smilingpeople. Many emphasized how payday loans could be used in a financial emergency.Many sites featured the logo of one of the two lobbying groups that seek to advance“tribal” payday lending: either the Online Lenders Alliance (OLA) or NAFSA, which hasspent tens of thousands of dollars lobbying the federal government over the last fouryears.3

5. Many of the “tribal” lending websites did not disclose loan terms (at leastnot prior to the submission of a loan application), and if terms were disclosed, theytended to be terms shielding the lender from liability. While not all lenders’ sitesdisclosed the contract terms that would govern a loan (prior to submitting an application),the loan terms we found on the sites appeared to be designed to exculpate the lender fromliability: clauses requiring all disputes to be resolved by arbitration or in tribal court;tribal choice-of-law terms; class-action bans; and shortened statutes of limitations(limiting the time within which a dispute can be brought). Several sites explicitly claimedthat no state and/or federal laws or consumer protections would apply to the loan.6. Few tribes appeared to actively regulate the lenders they purportedlyowned, and even where regulations did exist, lenders did not appear to follow them.To the extent we found any evidence of tribal regulation of lending, the regulations werenot beneficial to consumers—all either permitted an exorbitant interest cap, or had no capat all. And the lending businesses ostensibly owned by the tribes did not follow thelending limits or other regulations prescribed in the tribal documents establishingconsumer finance regulatory bodies.C. Implications and Need for More OversightThe information we obtained from all these sources, taken together, stronglysuggests that in most (if not all) cases, while lenders are presenting an image to theoutside world—and especially to courts—of tribal control, financial prosperity, and selfdetermination, in reality tribal involvement exists only on paper, with tribes receivingonly a token percentage of the profits from the lending enterprise while non-Nativeindividuals and corporations enjoy the lion’s share of the financial benefits from thebusiness. While there is no conclusive evidence illuminating the exact nature of therelationship between each tribe and payday lender, our research tends to support thetheory that, for the most part, the tribes that supposedly “own” payday lending businessesare not fully operating or controlling those businesses. Indeed, we saw no evidence thatany tribe was fully operating the payday lender it supposedly owns. Perhaps the mostimportant conclusion we can draw from this research is that more information is neededabout this largely hidden industry. The payday lenders that have sought tribal affiliationas a means of evading liability—as opposed to lending businesses legitimately formed,operated, and regulated by tribes—have thrived on their ability to hide the details of theserelationships from regulators, courts, consumers, and lawmakers. This has made itincredibly difficult for consumers who are cheated to hold them accountable and forstates to enforce their laws against this segment of the industry.However, several recent developments suggest the tide is turning in favor ofgreater accountability and transparency within the industry. While lenders had largelysucceeded in blocking consumer protection litigation by hiding behind tribal immunityover the last several years, both the Federal Trade Commission and the ConsumerFinancial Protection Bureau have recently overcome immunity arguments in federal4

district courts; and the California Supreme Court recently held that two paydaybusinesses claiming to be tribally owned and controlled had failed to show they weretruly “arms of the tribe,” paving the way for enforcement of the state’s payday lendinglaw against purported tribal lenders that operate online. Meanwhile, after a different typeof tribal model was repeatedly rejected by numerous courts, another family of lendingcompanies sued their own lawyers, making public the flimsiness of the tribal connectionby arguing that the attorney had erroneously promised them that the tribal affiliation shestructured would allow them to continue violating state consumer protection laws withimpunity.We also found that, for the most part, California’s statutory and regulatoryenforcement regime applicable to payday lending has not been enforced against thelenders we profiled in this report. However, recent decisions both by the Californiagovernmental agency charged with enforcement and by state courts strongly suggest thatthe enforcement gap is closing. All these developments, together with the extensiveinformation compiled in this report, can provide a road map for determining what musthappen to ensure that California consumers are adequately protected—through litigation,regulation, legislation, or education—from unfair, illegal and abusive payday loans madeby companies claiming tribal affiliation.II.BACKGROUNDA. The “Tribal Payday” ModelAs sovereign nations, Native American tribes have special legal status. Theinherent sovereignty of Indian tribes, which predates the sovereignty of federal and stategovernments of the United States, is enshrined in our Constitution and has beenrepeatedly recognized and affirmed by both statutory and judge-made law.2 The U.S.Supreme Court first recognized the unique nature of Indian tribal sovereignty as early as1831, classifying tribes as “domestic dependent nations.”3Tribes generally have immunity from state-law claims in any court unless theywaive their immunity or consent to jurisdiction.4 While Congress can limit tribalimmunity through legislation, the power to “intrude into tribal affairs does not extend tothe states.” 5 As a result, only the federal government and federal law—and not state2See Nathalie Martin & Joshua Schwartz, The Alliance Between Payday Lenders and Tribes: Are BothTribal Sovereignty and Consumer Protection At Risk?, 69 WASH. & LEE L. REV. 751, 767-68 (2012).3Cherokee Nation v. Georgia, 30 U.S. 1, 8 (1831).4Heather Petrovich, Circumventing State Consumer Protection Laws: Tribal Immunity And InternetPayday Lending, 91 N.C. L. REV. 326, 334-38 (2012) (describing sovereign immunity and its applicationto tribal commercial practices).5Id.5

agencies and state law—can regulate how tribes and their commercial enterprisesfunction.6 Tribal immunity is understood to serve several important policies, including“protection of the tribe’s monies, . . . preservation of tribal cultural autonomy,preservation of tribal self-determination, and promotion of commercial dealings betweenIndians and non-Indians.”7Tribal immunity extends not only to a tribe itself, but also to any tribalgovernment or business enterprise that qualifies as an “arm of the tribe.”8 It isunsurprising, then, that non-tribal businesses, and particularly online payday loancompanies, have increasingly sought to affiliate themselves with Indian tribes in an effortto take advantage of the tribes’ immunity from state lending laws and gain an advantageover state-licensed competitors. In some cases, “a non-tribal payday lender makes anarrangement with a tribe under which the tribe receives a percentage of the profits, orsimply a monthly fee, so that otherwise forbidden practices of the lender are presumablyshielded by tribal immunity.”9 As the Wall Street Journal reported, “[a]ll it takes to makea deal is a willing tribe and an eager payday lender,” after which the lender “incorporateson tribal land, agreeing to pay the chief a salary of a few thousand dollars a month[.]”10Given such arrangements—in which the payday business is far-removed fromtribal self-governance— courts, policymakers, and even some tribal leaders have begunto question whether applying tribal immunity to shield payday lenders from legalaccountability truly serves the doctrine’s intended policies. And some scholars cautionthat the proliferation of these arrangements between tribes and payday lenders may not bein the tribes’ long-term interests.Id. Although “tribal” payday lenders have contested whether federal entities like the ConsumerFinancial Protection Bureau have the ability to regulate them, courts are generally not receptive to thisargument. See, e.g., CFPB v. Great Plains Lending, 2017 WL 242560 (9th Cir. Jan. 20, 2017) (rejectinglenders’ argument that “because the Act [the Dodd-Frank Wall Street Reform and Consumer ProtectionAct] treats states and tribes as co-regulators, Congress did not vest authority in the [CFPB] to regulatetribal entities in the absence of cooperation with tribal regulators” and holding that federal agencies dohave authority over “tribal” payday entities); F.T.C. v. AMG Servs., Inc., No. 2:12-CV-00536-GMN, 2014WL 910302, at *6 (D. Nev. Mar. 7, 2014) (holding that “the FTC Act is a federal statute of generalapplicability that under controlling Ninth Circuit precedent grants the FTC authority to regulate arms ofIndian tribes, their employees, and their contractors” and rejecting payday lenders’ argument that the FTCAct did not apply to them because of their claimed tribal affiliation).67Breakthrough Mgmt. Group, Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1188 (10th Cir.2010).People v. Miami Nation Enters., 386 P.3d 357, 367-75 (Cal. 2016) (“People v. MNE”); Breakthrough,629 F.3d at 1182.89Martin & Schwartz, supra note 2, at 777.10Jessica Silver-Greenberg, Payday Lenders Join with Indian Tribes, WALL ST. J., Feb. 10, 4576134304155106320.6

Professor Alex Skibine of the University of Utah, an expert on federal Indian law,argues that tribal sovereign immunity could well be lost if payday lenders continue to“stretch the envelope” of the protections such immunity affords. As Professor Skibineexplains:Another type of case that will eventually stretch the envelope oftribal sovereign immunity are those [that] involve payday lenderspartially owned by Indian tribes. . . . In such cases, tribal sovereignimmunity is being used to avoid complying with state usury lawseven though what is involved here are loans issued over the internetand mostly involving non-Indian customers not living on Indianreservations. In addition, a majority of the lending outfits seem to becorporations that are only partially owned by the tribe[.] I believethat the issues and problems raised by these tribal payday lendingactivities will only increase in the future. . . . Tribes have sovereignrights and have survived as sovereign nations primarily because ofthe willpower and tenacity of their people but tribal immunity fromstate laws remain[s] a very precarious right. If tribal immunity isperceived as being abused in

In the course of bringing strategic litigation against payday lenders on behalf of consumers who have been cheated in violation of consumer protection law, Public Justice's Anti-Payday Lending Initiative was first forced to contend with a "tribal immunity" defense raised by a payday lender in 2012 in response to a lawsuit. Now, with

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