Two Indian tribes making payday loans over the Internet, even in states that ban or restrict payday lending, won a court victory Tuesday when a Denver judge blocked the Colorado Attorney General from investigating them further.
The ruling is among a series of recent court decisions posing legal obstacles for states trying to enforce payday-lending laws. Courts have ruled that state regulations don’t apply to businesses owned by tribes. In recent years, a number of tribes have flouted state laws by making loans over the Internet with interest rates as high as 800 percent.
For eight years the Colorado Attorney General has been in court trying to stop businesses affiliated with the Miami tribe of Oklahoma and the Santee Sioux tribe of Nebraska from making loans online. Attorney General John Suthers argued that their claims of tribal ownership are a sham cooked up by Kansas City businessman Scott Tucker, who is better known as an endurance race-car driver.
Tucker started the business in 1998 and approached the tribes only after it came under investigation in Kansas and New York, the court found.
However, the tribes say that their ownership is legitimate. And despite the businesses’ beginnings, District Court Judge Morris Hoffman said not only did the state fail to prove tribal ownership was a sham but added that to him it is clear that the business arrangements today seem not to be shams.
“We’re very disappointed with the court’s order,” said Mike Saccone, a spokesman for the Colorado Attorney General. Attorneys for Tucker and the tribes did not comment on the ruling.
The ruling doesn’t necessarily end the investigation. While the state cannot subpoena the tribes or tribal entities, Judge Hoffman said authorities can still subpoena Tucker and his non-Indian business associates to determine if they still own and control the payday-lending business.