The Federal Trade Commission is seeking to shut down an online payday lending operation that involves two Oklahoma Indian tribes after consumers filed more than 7,500 complaints to authorities in recent years.
The commission filed a complaint Monday in U.S. District Court in Nevada against high-fee, short-term lending firms operated by the Miami Tribe of Oklahoma and the Modoc Tribe of Oklahoma. The complaint names several individuals as controlling the operation, including race car driver Scott Tucker.
The FTC claims the payday lending companies “piled on undisclosed and inflated fees, and collected on loans illegally by threatening borrowers with arrest and lawsuits.” The case raises questions about the tribes' ability to avoid government oversight of their businesses by claiming their sovereign rights.
The complaint charges that a web of defendants, including the Miami Tribe's AMG Services Inc., three other Internet-based lending companies, seven related companies and six individuals violated federal law by deceiving payday loan customers. The agency seeks an injunction to stop the companies from operating while authorities pursue the case.
A message left for Miami Nation Chief Thomas Gamble with Miami Nation Enterprises was not returned Monday. Modoc tribal officials did not respond to a message seeking comment on the complaint. Attempts to contact Tucker through his racing company's website were unsuccessful.
Payday loans are small-dollar, short-term unsecured loans that borrowers promise to repay out of their next paycheck or regular income payment. They typically carry extremely high interest rates, but the short-term nature of the loan is designed to limit the borrower's costs.
The commission's filing claims the lending companies would make repeated small withdrawals from customers' accounts, with each payment incurring a fee. In one example cited, a customer was charged $675 in fees to pay off a $300 loan.
The companies also threatened customers with lawsuits or arrest to obtain payments, according to the filing.
According to documents filed with the court, Tucker and his co-defendant and brother, Blaine Tucker, transferred more than $40 million dollars collected from consumers by the payday lending companies to another company Scott Tucker controls, Level 5 Motor Sports, for “sponsorship” fees that benefit Scott Tucker's automobile racing, the commission said.
The operation has claimed in state legal proceedings that its affiliation with Indian tribes makes it immune from legal action. Recently, the Miami Tribe claimed victory in a Colorado case when the court affirmed its immunity after authorities there sued the tribe for teaming with Tucker to establish an online lending agency.
The Federal Trade Commission said the defendants' claims of tribal affiliation do not exempt them from complying with federal law.
Barry Brandon, executive director of the Native American Fair Commerce Coalition, last month endorsed the Colorado decision, saying “the court got it right.”
On Monday, Brandon declined to comment specifically on the FTC complaint, which he had not seen.
“I guess I'm surprised that the FTC is making those arguments” on tribal sovereignty, Brandon said.
“That gives me some pause in terms of wanting to know more factually of whether or not the FTC in its investigation may have uncovered some flaw in the way that the tribe has preceded,” Brandon said.
“Generally, our reaction is that we're supportive of a tribe's sovereign right to engage in economic development and we urge our tribal members to play by the rules and to create a good regulatory structure and to make sure that we are in line with those standards as enunciated by the court in Colorado.”
The Miami and Modoc tribes are not members of the Native American Fair Commerce Coalition, he said.
After The Oklahoman published a story in January about the tribes' payday loan operations, the administrator of the Oklahoma Department of Consumer Credit said such businesses should be subject to state oversight. That agency licenses payday loan companies that operate in Oklahoma.
“Our department is respectful of tribal sovereign immunity, but it is my opinion that there is a difference between an Oklahoma consumer conducting business with a tribal entity on tribal land as opposed to tribal entities conducting business with Oklahoma consumers via the Internet,” Scott Lesher said in a statement.
“Tribal lenders that enter into payday loan products with Oklahoma consumers via the Internet should be subject to Oklahoma regulations because such entities are operating outside the boundaries of tribal land,” he said.
The Better Business Bureau for Eastern Oklahoma lists hundreds of complaints against online companies owned by the two Oklahoma tribes.
The bureau issued a consumer warning last month about the potential danger of some online payday lenders “that claim they are not beholden to state or federal laws regarding licensing requirements, debt collection practices or caps on interest rates.”