New York state targets Native American online lending, suit says

Two Native American tribes have filed a New York federal court lawsuit alleging the state is attempting to drive them out of the online-lending business through excessive regulation.

In a complaint filed in the U.S. District Court for the Southern District of New York, the tribes say the state Department of Financial Services Superintendent Benjamin M. Lawsky has “launched an attack on the tribal nations’ inherent sovereignty” by demanding they cease operations and interfering with the third-party business relationships.

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The plaintiffs are the Otoe-Missouria Tribe of Indians, the Lac Vieux Desert Band of Lake Superior Chippewa Indians and several tribal regulatory groups.

The suit says the economy of the Native American groups depends on their online lending businesses since their remote locations prevent them from developing businesses in other areas, such as tourism or casinos.  Additionally, the complaint says, they provide a service to those who cannot take advantage of traditional lending resources.

(Click here to read the complaint on Westlaw.)

The suit says that although the tribes created their own regulatory authorities for monitoring and regulating the tribal nations’ online lending industries, the state of New York has not recognized the groups’ inherent sovereignty.

In addition to demanding that the tribes shut down their online businesses, Lawsky has sent threatening letters to third-party businesses that operate with the groups, the suit says.

In the letters, the state refers to the nations’ businesses as “illegal “payday” lenders that must be regulated.

”Payday” lenders generally impose high interest rates and quick pay-back terms.

The tribes seek a declaratory judgment that they are inherently sovereign nations upon which the state cannot impose its laws.  They also seek damages and costs.

Otoe-Missouria Tribe of Indians et al. v. New York State Department of Financial Services et al., No. 13-CV-5930, complaint filed (S.D.N.Y. Aug. 21, 2013).