As state lawmakers across the country pass bills capping interest rates for short term lenders, more companies are turning to Native American reservations, The Wall Street Journal reports.
Tribal territory is not subject to interest-rate caps or other regulations, and the tribe-operated lending companies are even allowed to do business in the 12 states where competitors have been pushed out. In 2010, tribes dealing with online lenders made about 12,500 loans a month, valuing about $420 million in short term loans, Frank Cotton, an Atlanta-based short term loan consultant, told the paper. Of the 300 companies giving short term loans online, more than 25 are owned by Native American tribes, he said. Short term lenders have come under fire from lawmakers, who have instituted bans or caps on the amount a customer can borrow. Maine, Oregon, Utah, Wisconsin and Wyoming are the only states that do not have such caps on loan sizes, according to the National Conference of State Legislatures. In South Dakota, a panel of state lawmakers recently rejected two bill proposals that would have limited short term loans and car title loans.