The Hazards of Tribal Payday Loans

Payday Loan Place Window Graphics

A few years ago, I appeared on a local news station to discuss the problems payday loans:

The interest rates on payday loans can often reach 365% or more.  You can read more about the pitfalls of payday loans in this article that I wrote after doing the television interview. What I recently discovered is that tribal lenders such as American Web Loan (“AWL”) will often go out of their way to harass borrowers having financial difficulty with few consequences to them.

Consumer debtors are protected by harassment by third party debt collectors under the federal Fair Debt Collection Practices Act (“FDCPA”).  But the FDCPA does not apply to original creditors, so states like California have adopted consumer protection laws like the Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”). What many borrowers do not realize is that tribal lenders will claim that sovereign immunity allows them to avoid complying with state laws such as the Rosenthal Act.  I recently encountered a situation where American Web Loan refused to stop contacting my client at work despite written and verbal requests from both me and my client.  Unless my client files for bankruptcy, the lender believes they can continue to call without any legal repercussions.

Some states like New York have successfully sued tribal lenders to stop predatory lending practices and at least one court has ruled that the Federal Trade Commission has jurisdiction to stop abuses by tribal lenders.  However, the status of the law is far from clear. Payday loans are nearly always a bad idea, but using a tribal-based lender could opening you up to creditor abuse that could be far worse than you might have imagined.

If you are in Southern California and are having problems with payday loans or other types of date, please me at (619) 448-2129 for a free consultation.

Image credit: Taber Andrew Bain

Carl Starrett

Carl Starrett is a consumer bankruptcy attorney in San Diego, California helping debtors file for protection under Chapter 13 and Chapter 7 of the Bankruptcy Code.

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