Controversy Over Payday Loans

: Chris Lee Law Firm

  Filed under: Loans

Controversy Over Payday Loans

It is fairly common to see people taking out personal loans for extra cash when money is tight. They seem like a fair deal that can provide quick and easy cash when you need it the most. When faced with debt many people get caught up in these  loans that are, all too often, full of hidden fees and unreasonable repayment terms. Even worse, you may find yourself at risk for having your assets seized, credit damaged, being charged outrageous fees or interest rates.  A recent bill is being pushed in Congress to take action against the lenders that fail to disclose important information about the loans to consumers. In an effort to protect consumers, the bill would require payday loan lenders to disclose all of the terms and conditions of the loan upfront before the consumer enters into the loan agreement.  A similar bill was signed into action last June that would tighten the ropes for the entire lending industry. The issue now is whether these bills are actually providing the industry regulation they promised.

Tribal Land Has Its Own Rules

Native American reservations are afforded “sovereign rights” by the government. These rights allow for the tribal nations to govern themselves within the borders of the United States and provides additional laws establishing the relationship between the two entities. Many businesses and organizations that are not approved to legally operate within an area are allowed if they reside on land owned by the tribal nation.  The most common examples are gaming facilities and spirits distributors.

Payday loan companies are attempting to hide behind tribal nation rights in efforts to avoid industry regulations. By operating under the sovereign nation status on tribal lands, these companies are claiming exemption  from the regulatory practices set forth in the congressional bills.  Despite the question over whether this relationship is mutually beneficial to the tribal nation and loan company, many are concerned about the message this sends to other businesses.

Internet Businesses Take Notice

The internet does not hide much and nearly any service can be found via the internet. Payday loan companies have found their way into a web-based market. These companies find their way around state regulations by operating without licensing themselves in any one state, or through a sovereign-nation status of one or more states. These companies are not out of the water yet, as these federal regulations are intended to step in where the state regulations may fail. Even further, the government does maintain the right to enforce regulations through treaty agreements.


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