“Rent-a-Tribe” lender not immune from lawsuit over unlawful interest rates

The Fourth Circuit this week ruled in favor of Virginia residents in a RICO action challenging illegally high interest rates. The court explained: “The Lac Vieux Desert Band of Chippewa Indians purportedly created businesses under tribal law to make small-dollar, high-interest-rate loans to consumers via the internet. The Borrowers allege that the Tribe did so alongside [a non-tribal individual] Martorello as part of a ‘Rent-a-Tribe’ scheme in which a payday lender partners with a Native American tribe to cloak the lender in the sovereign immunity of the tribe, thereby precluding enforcement of otherwise applicable usury laws that cap interest rates.” Rejecting the claim of immunity, the court held that Martorello cannot avail himself of the tribe’s immunity and instead will have to face racketeering allegations in the consumer class action. The court’s opinion is here.