Payday lending companies owned by two Oklahoma Indian tribes have agreed to stop using aggressive collection techniques, including threatening borrowers with lawsuits and arrest, in a partial settlement with the Federal Trade Commission.
The payday lending companies, owned by the Oklahoma-based Miami and Modoc tribes, also have agreed to stop requiring borrowers to agree to automatic drafts from their bank accounts to be approved for a loan.
The terms of the settlement were approved by a U.S. District Court judge in Nevada this month.
The FTC is still pursuing claims against the tribes and payday lenders alleging that the companies have deceived their customers by levying hidden fees and inflated charges.
An attorney for the tribes did not respond to a request for comment about the settlement on Monday.
The federal government moved to sue several online payday lending companies owned by the Miami and Modoc, along with tribes themselves, in 2012 alleging deceptive trade practices after receiving thousands of complaints from consumers.
Both based in Miami, OK, the tribes own several online payday lending companies. The Modoc tribe has about 250 members, and is the smallest federally recognized tribe in the state, while the Miami tribe has about 3,800 members.
Although the payday lenders claim to be owned by the Indian tribes and therefore outside of the reach of many state and federal laws, the FTC alleges the companies are primarily controlled by race car driver Scott Tucker, who gives the tribes a cut of the profits.
The Oklahoma Department of Consumer Credit regulates payday lenders in the state, but does not have jurisdiction over the online lending companies owned by the Miami and Modoc tribes because the tribes have sovereign status and are not subject to state laws that protect state consumers, said Roy John Martin, general counsel for the Department of Consumer Credit.
Although the agency receives complaints from consumers about the tribal lenders, there is little the state can do because of the tribes' sovereign status, Martin said.
“The majority of complaints have to do with collection practices, fees, repeatedly debiting bank accounts,” Martin said.
Several borrowers who used the online payday lender AmeriLoan.com, a company owned by the Miami tribe, told The Oklahoman that the company repeatedly drafted their bank accounts for monthly payments, sometimes when the customers did not know a payment was due, or after they believed their loans had been repaid in full.
Chicago resident Brandon Wright said he used Ameriloan.com to borrow $200 earlier this year to pay bills. The loan trapped Wright in a cycle of repeatedly having to borrow and repay the same $200 over a period of several months at high interest rates when he couldn't afford to pay off the loan and meet his other obligations.
AmeriLoan debited Wright's bank account every month for the $200 plus interest, he said. Although the company initially gave Wright a month to repay the loan, it would give him only 10 days to repay the money the last time he borrowed.
“This time they wanted it in 10 days — I had to close my bank account because I couldn't afford to pay that loan on that day and my rent,” Wright said. “I told them I could pay it off basically the following month like I have been doing and the manager I spoke to was quite rude.”
Methuen, Mass., resident Doretha Kitchins borrowed $400 through the AmeriLoan website earlier this year to pay bills after struggling during a period of unemployment and working for a temp agency. She claims the company continued to draft her bank account for regular installments of $120 after she believed the loan had been repaid.
When Kitchins tried to call the company to find out the balance of her loan, she had problems getting anyone to speak with her on the phone, she said.
“It's a recording stating to call back at a different time, and when I called back I would still get the same recording over and over again,” Kitchins said. “It's not a good way to do business.”