The Supreme Court on Friday granted review of a case that arises from a payday loan to a consumer from a corporate entity owned by a Native American tribe. The issue in the case is whether the Bankruptcy Code abrogates tribal sovereign immunity. Given the prevalence of internet-based payday lending affiliated with tribal lenders, the decision may be important for consumers.
The Lac du Flambeau Band of Lake Superior Chippewa Indians owns a number of corporate entities. One of those entities, Lendgreen, makes payday loans over the Internet, charging triple-digit interest rates. In this case, Lendgreen made a $1,100 to an individual and charged an effective annual interest rate of 107.9%. (Lendgreen purportedly charges as much as 838%.) The man later filed for bankruptcy, which operates as an automatic stay of all collection attempts. According to the filings in the case, however, Lendgreen, ignored the automatic stay, and continued to threaten and harass him for repayment. He therefore moved the bankruptcy court to enforce the automatic stay. The Band and its corporations, including Lendgreen, moved to dismiss the enforcement proceeding, arguing tribal immunity.
The Bankruptcy Code abrogates the immunity of a “governmental unit,” which it defines to include both foreign and domestic governments. The specific question before the Supreme Court is whether the term encompasses Native American tribes.
The case arises from a decision of the First Circuit, which is here. The Supreme Court will likely hear argument in the case in April and issue a decision by the end of June.
