On August 19, the Attorney General’s Office for the State of Minnesota (Minnesota AG) announced that it had settled a lawsuit against a California-based online lender relating to an alleged “rent-a-tribe” scheme. The settlement bars the lender from doing business in Minnesota unless and until it complies with the state’s usury, lending, and licensure laws. The settlement also requires the lender to provide over $11.7 million in financial relief to Minnesota borrowers.
The Minnesota AG initiated the suit against the lender in 2013 alleging violations of state usury, lending, and licensure laws relating to a company that allegedly falsely pretended to be affiliated with a Native American tribe. The Minnesota AG determined that this “rent-a-tribe” scheme was used to originate unlawful loans that were immediately transferred to the lender, which subsequently charged and collected interest rate payments that far exceeded the state limits.
The Minnesota AG’s office has informed consumers affected by this scheme that any outstanding loan with the lender has been adjusted to a zero balance and forgiven. Any adverse credit reporting in relation to these loans must be corrected by the lender by September 1. The lender has also paid $4.5 million to the State that will be used as restitution to affected borrowers.
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