AG Racine Leads 15-State Coalition Opposing Payday Loan Industry Attempts to Skirt State Usury Laws

States Argue Payday Lenders Affiliated with an Indian Tribe Are Not Automatically Immune from State Consumer Protection Laws

WASHINGTON, D.C. – Attorney General Karl A. Racine is leading a group of 15 state attorneys general in opposing payday lenders’ use of Indian tribes to skirt state laws protecting consumers from exorbitant interest rates and other predatory practices. In an amicus brief filed in the United States Court of Appeals for the 4th Circuit, AG Racine and his counterparts argue that the burden of proof should be on lenders and others claiming tribal immunity from state laws preventing predatory lending practices. Under such schemes, in which unscrupulous lenders make payments to a tribe to “borrow” its immunity, AG Racine and his counterparts argue that the lender should bear the burden of proving that it is a legitimate arm of the Indian tribe through which it claims immunity.

“The District and other states have passed laws specifically to prevent predatory lenders from taking advantage of low-income people,” said AG Racine. “Payday lenders shouldn’t be allowed to hide behind Native American tribes to evade the law and trap consumers in endless cycles of debt.” 

The District of Columbia and partner states filed the friend-of-the-court brief in Williams v. Big Picture Loans, LLC. The lawsuit was filed by a group of consumers who sued the Michigan-based payday lender. Big Picture Loans argued that it was entitled to immunity from state laws preventing exorbitant interest rates because it was acting as an arm of a federally recognized Indian tribe and was thus entitled to what is known in the law as “sovereign immunity.” This immunity would prevent enforcement of state consumer protection laws and could potentially even prevent state investigations into the lender’s activities.

The District, like many states, has laws in place to protect consumers against predatory lenders. For instance, the District’s Consumer Protection Procedures Act bans lenders from charging an interest rate higher than 24 percent per year – one of the lowest so-called “usury caps” in the country. However, many payday lenders charge effective annual interest rates upwards of 700 percent.

Because of this law, the District and many other states with low usury caps no longer have any payday lenders with physical stores in their jurisdictions. As a result, many payday lenders have turned to the Internet to make loans to consumers across the country, contracting with federally recognized Indian tribes to skirt state usury caps.

The District recently brought a successful enforcement action to challenge this misuse of tribal immunity in D.C. v. CashCall. In that case, the D.C. Superior Court denied CashCall’s attempt to dismiss the District’s lawsuit based on its argument that its association with a South Dakota Indian tribe gave it immunity as an arm of the tribe. AG Racine obtained nearly $3 million in relief for CashCall consumers in that case. In Williams v. Big Picture Loans, LLC, a victory against Big Picture Loans would help stop payday lenders from preying on District residents and other consumers across the country. 

Earlier this year, a federal district court in Virginia ruled in favor of the consumers in Big Picture, asserting that the burden was on the lender to prove that it was an arm of the tribe entitled to immunity from state law.

AG Racine is leading the friend-of-the-court brief and is joined by state attorneys general from Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Vermont, and Virginia. 

The brief as filed is available at: