Consumer Finance Insights
February 13, 2017

Georgia AG Follows Familiar Pattern; Settles Suit Against California Payday Lender for Alleged Rent-A-Tribe Scheme

On February 9, the Attorney General’s Office for the State of Georgia (Georgia AG) announced that it reached a settlement and entered into a consent order with a California-based online lender relating to an alleged “rent-a-tribe” scheme.  The consent order, filed in Georgia state court, bars the lender from doing business in Georgia unless and until it complies with the state’s usury, lending, and licensure laws.  The settlement also requires the lender to provide over $40 million in financial relief to Georgia borrowers.

The Georgia AG initiated the suit against the lender in 2013, alleging violations of Georgia’s Payday Lending Act, O.C.G.A. § 16-17-1. The complaint alleges the lender used a shell company affiliated with a tribal entity to avoid Georgia’s usury, payday lending, and licensure laws (tribal entities are not typically subject to state usury laws). After originating the loans, the tribal entity allegedly immediately sold the loans to the California lender. The lender also allegedly funded all the loans, provided customer support and marketing services, and paid the tribal entity’s administrative fees. The Georgia AG alleged the lender was the “true” or “de facto” lender of the loans, and used  this “rent-a-tribe” scheme to originate unlawful and usurious loans under Georgia law.

Under the terms of the consent order, the lender must pay $23.5 million in consumer restitution, forgive all outstanding loans, and provide an additional $17 million in loan relief to Georgia consumers. The lender also must pay $1 million in civil penalties and $500,000 in enforcement costs to the state of Georgia.  The Georgia AG noted that, to date, the settlement is the largest monetary settlement with the lender in the nation. Enforcement Watch previously covered settlements and litigation against the same lender by the CFPB here and here, as well as similar actions taken by state attorney generals and enforcement agencies here, here, and here.