Online Payday Loan Peddlers: The Dimming Future of Payday Loan Practices

The Federal is put at task to counter the abusive role of payday lending operators who are running payday lending shops purported to be owned or operated by native American tribes. Stepping into the lending environment where state regulators have failed may not be easy and the federal needs to do more to protect the consumer. Through the consumer Financial Protection Bureau- CFPB, the federal has been lobbying for investigations into the operations of payday lending in tribal lands of America.

Both the CFPB and the Federal Trade Commission believe that some of the increasing payday lending operations are controlled and or owned by non-native American lenders who are abusing their business operations rights to trade under the auspice of native American tribes’ rights of sovereignty. This is a move aimed at shielding themselves from the consumer protection legislation.

The payday loans that carry interest rates as high as 750 percent are available online to native Americans who live on reservations and anyone else in the U.S. Payday loans have been described as predatory lending practices that exploit the already financially crippled consumer. According to State and Federal investors, some of these lending operations swindle customers of their money.

Most of these consumers are already struggling with their bad credit reports and they have been underserved by traditional lending institutions like banks. The payday lenders deceive customers about the costs of the credit facilities and engage in scrupulous and unlawful collection activities.

These lenders have however remained largely out of reach and the federal is pounding on how it could apply the law to trap them. The problem is exacerbated by the fact that tracing these peddlers online is such as daunting tasks. The native American tribal leaders have come up to defend the operations of these lenders saying that the tribes benefit from the positive economic gains realized from the revenues collected through these lending practices.

Some of the economic benefits cited are such as education, medical care, and other basic necessities. The severity immunity of the native American tribes puts legal challenges to the application of consumer laws. The legal concept of severity immunity of native American tribes is complex but when it comes to commercial activities like casino gambling, cigarette sales and payday lending operations, that immunity hinders the legal applications of consumer protection regulation bodies.

Many of the cases put forward against tribal payday loan practices are thrown out of the court on grounds of severity immunity. The issue of payday loan practices in native American lands is quite sensitive. According to the prevailing legal conditions and application of law within the native American tribal lands or reservations, there is a likelihood of protracted litigation over the role and authority of CFPB.

It is unlikely that CFPB will assert any authority in the near future. Until then, it is expected that these lending practices will continue to thrive amidst an ailing consumer group that does not have the privileges to access loans from traditional or other lenders due to their bad credit reports. These are consumers who are in desperate need of cash and they cannot get it from other lenders and the only option they have is to rush for the easily available but highly-charged payday or next paycheck loans. Surprising, the consumer is willing to pay the high interest rates charged on these loans.