While they seem attractive to borrowers strapped for cash, payday loans can often lead to serious debt problems for individuals across the country. Payday lenders are known for their unconscionable repayment terms, including astronomical interest rates and unfair-and unlawful-lending and collecting practices. Unfortunately, many borrowers find this out the hard way.
What many people are unaware of is the means by which lenders operate. Some payday lenders use tribal sovereignty to exempt themselves from state laws.
Western Sky Financial is one of these lenders. Affiliated with the Cheyenne River Sioux Tribe, the lending company is located on their South Dakota reservation. They argue that this affiliation makes the company exempt from state laws that cap interest rates on loans.
In a recent lawsuit, New York state’s attorney general has accused Western Sky Financial of charging more than 355 percent for interest rates on some loans, while the state’s cap is 25 percent.
Other states have sued the company for similar reasons. As a result of multiple consumer protection lawsuits, Western Sky Financial announced that they would stop funding loans on September 3, 2015. Have you been the victim of a payday loan gone wrong? Please share your experience in a comment below.
Sources: Public Justice | Thomson Reuters | Washington Post