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American Indian status does not protect against FTC regulation

Aug 01, 2013 Philip Burgess

The government routinely attempts to curb or otherwise eliminate short term lending and industry professionals regularly seek ways to reduce the number of obstacles borrowers must overcome to receive a loan. These efforts often clash with one another. This was recently an issue in Minnesota, where the Star Tribune reported that regulators filed a lawsuit against California-based Internet lender CashCall.

The source noted that CashCall considers itself an online alternative to short term loans. This itself was not the issue. Rather, authorities claimed that the loans the company provided were not covered by the doctrine of tribal sovereign immunity, despite being made by the American Indian-owned company, Western Sky Financial Inc, which then sells the loans to CashCall.

However, the concept of tribal immunity may not apply to short term lenders at all. The Federal Trade Commission (FTC) recently ruled against AMG Services Inc. due to its loan practices. While AMG defendants tried to claim that the FTC lacked the authority to file a suit against American Indian tribes, Magistrate Judge V. Cam Ferenbach ruled that they did. The FTC pointed out that statutes of general applicability, as in the case of the Electronic Fund Transfer Act, apply to tribal businesses.

The source noted that the defendants argued that exemptions in the rule mean that it lacks general applicability. The judge countered that general applicability need not be universally applicable.