On June 24, the Arkansas Attorney General (AG) announced a settlement with three entities and two individuals, resolving allegations that the defendants conspired to offer illegal payday loans to consumers online while claiming to be affiliated with a Native American tribe.
The complaint, filed in 2013, alleged that the defendants violated Arkansas state law by offering online payday loans with interest rates up to 342%. The companies offered Arkansas consumers loans ranging from $850 to $10,000. One of the defendants, a South Dakota based company, identified itself as a tribal entity with sovereign immunity. The company, however, was neither owned nor operated by a tribe. The complaint alleged that the South Dakota lender entered an agreement with a California-based company, pursuant to which it would originate payday loans before assigning them to the California company to collect.
As part of the settlement, the AG will receive $750,000, and $500,000 of that settlement amount will be returned to eligible consumers. The defendants are prohibited from offering, funding, or collecting any loan with an interest rate exceeding the maximum rate permitted by state law. Further, the settlement voids all current, delinquent, defaulted, charged-off, or outstanding lending transactions with Arkansas consumers.