COURT ORDERS LAKOTA CASH AND TWO OTHER INTERNET PAYDAY LENDERS TO SHOW CAUSE WHY THEY SHOULD NOT BE HELD IN CONTEMPT FOR FAILING TO COMPLY WITH THE ATTORNEY GENERAL’S INVESTIGATIVE SUBPOENAS
In a case that has implications nationwide, the Circuit Court of Kanawha County issued an order on October 24, 2011, holding that Payday Financial, which did business as Lakota Cash, was not entitled to tribal sovereign immunity. As a result, the ruling by the Honorable Louis H. Bloom required the business to comply with an investigative subpoena issued by Attorney General Darrell McGraw’s office.
Lakota Cash, an Internet payday lender based in Timber Lake, South Dakota, is owned by Martin Webb, an enrolled tribal member of the Cheyenne River Sioux Tribe. Webb asserted in the West Virginia court hearing, and in similar proceedings in Colorado, Maryland, and Missouri, that Lakota Cash is immune from suit by states by virtue of his status as a tribal member even though Lakota Cash itself is not a tribe.
Lakota Cash challenged Judge Bloom’s ruling by filing a petition for writ of prohibition with the Supreme Court of Appeals of West Virginia, but the Supreme Court entered an order on February 9, 2012 declining to hear the petition. As a result, Judge Bloom’s original order requiring Lakota Cash to comply with the Attorney General’s investigative subpoena within 30 days remained in effect.
Attorney General McGraw announced today that Lakota Cash has still failed to comply with the subpoena, which prompted McGraw’s office to file a petition for contempt against Lakota Cash and two other Internet payday lenders that also failed to comply.
McGraw’s office has been in the forefront in bringing actions to prohibit Internet payday lenders from making predatory loans with interest rates of 600 to 800% to consumers in their states. In response to increased enforcement efforts by the states, many Internet payday lenders began partnering with Indian tribes as a ploy to circumvent state usury and lender licensing laws. Since Indian tribes are viewed as independent sovereign nations, they cannot be sued in state court or otherwise forced to comply with state laws. However, many states have alleged that the lenders are not really Indian tribes but instead have entered into arrangements to use Indian tribes as “fronts” to evade state lending regulations.
The order entered by Judge Bloom requires Lakota Cash to appear before him in the Circuit Court of Kanawha County on October 11, 2012 to show cause why it should not be held in contempt for violation of the court’s order. LoanPointe, LLC, and its owner, Joe E. Strom of Utah, and National Title Loans d/b/a National Cash 12 of Delaware, were also ordered to answer to McGraw’s contempt charges.
Any persons who have complaints about consumer matters should contact Attorney General Darrell McGraw’s consumer protection hotline at 1-800-368-8808. To report a scam or file a complaint, West Virginians can also reach the Attorney General’s Office online at www.wvago.gov.
Read the full story at Office of the West Virginia Attorney General – Press Releases.
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