Short on cash, Vermont resident Jessica Gingras was lured to the website of Plain Green LLC, an online lender whose site has cheery cartoons promising access to cash “as easy as 1, 2, 3.” The site suggests that an online loan may improve a customer’s credit score, is a better option than overdrafting a bank account and is less expensive than a payday loan.
“If approved, your loan funds will be deposited as early as the next business day, ” the website promises.
So, Ms. Gingras applied for the loan, even though payday lending is illegal in Vermont. She was instantly approved. Over a period of two years, she took out three loans totaling $3, 550. She gave Plain Green online access to her bank account and over a period of three years paid more than $6, 235 to the company — almost twice her original loan amount.
Last month, Ms. Gingras filed a lawsuit against Plain Green claiming it blocked her access to her own bank account, automatically withdrew funds without her consent, did not examine her ability to repay the loan, and charged excessive interest rates, which are against Vermont law. Plain Green has asked a judge to dismiss the claim.
Although Vermont banned payday storefront shops, online vendors are not constrained by state laws or borders, giving financial regulators across the country enforcement headaches.
“Online payday lenders may not be subject to any regulation under your state law, they can ignore any state-issued consumer protections on the industry, like capped interest rates, rollovers and repayment plans, ” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. “Online payday lenders think they’re beyond the reach of state enforcers and often act like it.”
Indian tribal status
Plain Green is wholly owned by Montana’s Chippewa Cree Tribe. The lawsuit filed by Ms. Gingras claims Plain Green is using its tribal sovereignty to evade state law that bans its lending practices.
Two years ago, the New York state’s attorney general filed a similar lawsuit against three online lenders with ties to an Indian tribe, which also claimed their sovereignty shielded them from being sued under state law for illegal lending practices.
“This rent-a-tribe concept is to take tribal immunity to shield certain lending practices from state and federal laws, ” said Matthew Byrne, a lawyer at Gravel & Shea who represents Ms. Gingras, “Our case is a direct challenge to this concept — that you can’t rent sovereign immunity to avoid state law.”
Plain Green’s loans are made in the name of a lender affiliated with the tribe. But another entity, Think Cash, provides the marketing, funding, underwriting and collection of Plain Green’s loans, according to the lawsuit.
Think Cash was named as a litigant in a 2008 Federal Deposit Insurance Corp. payday lender prosecution action that ended with the issuing of $15 million in fines. After the federal action, the company rebranded itself Think Finance.
“Think Finance approached the Chippewa Cree Tribe with a deal, ” Ms. Gingras‘ lawsuit claims. “Think Finance would provide everything the Tribe needed to run a successful payday loan enterprise if the Tribe would let them use the concept of a tribal immunity to stymie state and federal regulators. In return, the tribe would receive 4.5 percent of the revenues.”
Plain Green officials, in a statement provided to The Washington Times Wednesday, strongly disputed any suggestion that its corporate setup was improper or that its lending practices were unethical.
“Plain Green is a wholly owned entity of the Chippewa Cree Tribe, and any allegations claiming otherwise are both inaccurate and offensive, ” said spokeswoman Shelby DeMars.
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