Connecticut Restrains Tribal Payday Lenders

HARTFORD, Conn. (CN) - Sovereign immunity does not shield payday-lending firms owned by the Otoe-Missouri Tribal Nation, Connecticut regulators found.

Jorge Perez, commissioner of the state banking department, concluded on May 6 that Great Plains and Clear Creek are not arms of the tribe.

Likewise Chief John Shotton "does not have tribal sovereign immunity from either the financial penalties or prospective injunctive relief," according to Perez's determination.

The ruling buoys Perez's finding last year that the companies violated Connecticut's small-loan law by charging borrowers annual interest rates ranging from 199.44 percent to 448.76 percent on short-term loans of less than $15,000.

Loans for less than $15,000 are capped at 12 percent in Connecticut.

Perez's latest opinion clarifies the Oklahoma tribe's immunity on remand from the New Britain Superior Court.

Under the operating agreement, Great Plains Lending's board of directors is appointed and can be removed by the Tribal Council and all profits and losses are allocated to the tribe, Perez wrote.

Perez also pointed out that Shotton was featured prominently in the June 2015 film "An Unlikely Solution," where he discusses the benefits of online lending companies.

"We provide a forum in which people can electronically come into our reservation via the Internet," Shotton says in the movie. "It is the electronic equivalent of walking into our reservation and taking out a loan at a tribal bank or a financial institution."

Perez's ruling additionally cites a news article from Bloomberg Technology, "Behind 700% Loans, Profits Flow Through Red Rock to Wall Street," which details how non-tribal interests seeking an opportunity to evade state law approached the tribe.

"The tribe, Shotton and American Web Loan have been identified in at least one reputable business news report suggesting that the Tribe established the Respondent entities after they were approached by non-tribal interests seeking the opportunity to evade state law," Perez wrote.

The article details how private investors came to the small town of Red Rock, Oklahoma, and gave a presentation to the tribe. It says the 3,100-member tribe needed the money and after the presentation granted a license to American Web Loan in February 2010. That company and another owned by Otoe-Missouria, generates more than $100 million a year in revenue and the tribe keeps about 1 percent, according to the article.

Represented by Robinson & Cole in their appeal, the lending companies had claimed that the Banking Department's conclusions on sovereign immunity relied upon new evidence, namely the movie and news article, rather than simply reviewing the administrative record.

"The commissioner has acted unlawfully in unilaterally opening the record, considering new evidence and proposing an additional hearing," the attorneys wrote in their May 23 motion.

They said the movie was released in June 2015, six months after the cease and desist order now on appeal.

"Plainly, the commissioner could not have relied on this movie as the basis for his decision when the movie had not even been released yet," the motion said.

Moreover the Bloomberg article was available during the initial proceedings but never referenced, according to the motion.

Banking Department spokesman Matthew Smith cited a policy of not commenting on pending litigation but said "the agency stands by its mission to protect Connecticut consumers of financial services."

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit