Q&A with Andre B. Caldwell
Decision sets precedent, seeks to enforce fairer lending practices
Q: The Federal Trade Commission sought relief in the district court against several payday lenders owned by tribal entities for violating laws governing deceptive consumer practices, improper debt collection and truth in lending. Explain the facts of this case.
A: The FTC claimed that, since at least 2002, the lenders’ websites and loan documents represented that the lenders would withdraw consumers’ scheduled payments from their bank accounts when their loan was due, ultimately leading to fewer finance charges. However, in reality, the lenders were withdrawing payments on multiple occasions and assessing multiple finance charges, ultimately resulting in a higher total cost over the life of the loan than initially disclosed.
Q: Why is this particular enforcement action of note to tribal payday lenders?
A: This case is important because this is the first federal court opinion in an FTC action wherein a court ruled that the assertion of sovereign immunity by tribal entities was insufficient to defeat an FTC enforcement action. The district court ruled that the FTC Act was a law of general applicability not subject to the sovereign immunity defense. Moreover, while the FTC Act provides certain exceptions, tribal entities were not amongst those enumerated.
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