Four online lenders belonging to the tiny Habematolel Pomo Indian tribe of Northern California have charged triple-digit interest rates on low-value loans and used aggressive tactics – including debiting consumer bank accounts – to collect. However, federal regulators sued Thursday, saying the fees and interest were so excessive they violated loan laws in 17 states.
Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial, and Majestic Lake Financial have tricked consumers into collecting debts that were not legally due because they violated interest rates or fee caps in Arizona, Arkansas, Colorado, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio and South Dakota, according to a complaint filed Thursday by the Consumer Financial Protection Bureau .
“We allege that these companies made deceptive demands and illegally took money from people’s bank accounts,” CFPB director Richard Cordray said. “We are seeking to put an end to these violations and to obtain relief for consumers.”
All four companies are online lenders based in Northern California and are owned by the Habematolel Pomo from the Upper Lake Indian tribe, a federally recognized tribe with 263 members. For several years, the four companies have offered small loans, ranging from $ 300 to $ 1,200, at annual interest rates ranging from 440% to 95%, according to the CFPB.
Such high rates violate many state laws, according to the regulator, who also argued that costs were not properly disclosed, as the truth of the loan laws demanded.
Sherry Treppa, president of the tribe, disputed the allegations.
“We look forward to vigorously defending these baseless allegations in court,” she said. She declined to comment further, referring additional questions to lawyers for the tribe, who were not available for comment.
However, these tribal lenders have also aroused the ire of consumers, who have complained about the companies to the Better Business Bureau, Yelp and Ripoffreport.com.
“While this company made it really easy to get a loan… paying it off is not that easy,” a disgruntled client from Golden Valley wrote on BBB’s website. “I had made two payments of $ 350.00, then one payment of $ 975.00 for a total of $ 1,675.00 in payments for a loan of $ 1,000.00. I had only borrowed this money. for a month. It’s a total scam at best. “
A complaint regarding Silver Cloud Financial on RipoffReport stated: “I was tricked into this loan and had no idea that my repayment amount was more than 3 times my loan amount!”
According to the CFPB complaint, lenders charged a $ 30 fee for each $ 100 loan balance every two weeks, which pushed the annual percentage rate into the stratosphere. For an $ 800 loan, a typical loan agreement requires the consumer to repay a total of about $ 3,320 over a 10-month period, the CFPB said in its lawsuit.
Under the Dodd-Frank Act, the CFPB is authorized to take action against institutions engaging in unfair, deceptive or abusive acts or practices, or that violate federal consumer finance laws such as the Truth Act. in loans. In this case, the agency is asking for unspecified monetary relief for consumers, civil penalties and an injunction to prevent businesses from collecting what it claims are illegal loans.