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On February 21, the Minnesota Attorney General settled an action against executives of a Montana-based tribal lender for alleged predatory lending practices. In its complaint, filed in October 2023, the AG alleged the company engaged in, among other things, unfair, deceptive and abusive trade practices, unfair collections practices (resulting in a federal RICO charge), unlawful usury practices, and violations of Minnesota’s short-term lending statute, in making small dollar installment loans to consumers bearing interest rates between 474% and 795%. The company allegedly led many Minnesotans to believe that the tribal entity was immune from state laws guarding against interest rate limits on small and short-term loans, and implemented deceptive contractual provisions.

Under the terms of the settlement, the entity and its subsidiaries can no longer lend to Minnesota residents nor can they advertise or market those loans until their practices comply with Minnesota law. The settlement also requires that any loans originated to Minnesota consumers prior to settlement must be modified to prevent the charging or collection of interest. 

Putting It Into Practice: The complaint filed in this case named executives of the tribal lender, not the tribal entity itself. The Minnesota AG argued in its complaint that despite any alleged claims of tribal immunity, “tribal sovereign immunity does not prevent the substantive application of laws where tribal-related entities engage in off-reservation business activity that would otherwise be subject to state regulation,” and that officials acting in control of the tribe were subject to injunctive relief. Tribal lending entities should pay close attention to this settlement as it shows the aggressiveness of state action against short-term installment lending.