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Banking Department Still Deciding What To Do About Tribal Payday Loan Companies

The Connecticut Department of Banking has less than 20 days to decide whether it will appeal a court decision that sustains tribal immunity for an Oklahoma-based Indian tribe that manages payday loan companies.

Superior Court Judge Carl Schuman found that the "substantial rights" of the Otoe-Missouri Tribal Nation "have been prejudiced by the commissioner's ruling on tribal immunity."

Schuman remanded the case back to the Banking Department to determine based on the record whether the two tribal payday loan companies are arms of the tribe and whether Chief John Shotton has tribal sovereign immunity from financial penalties that the commissioner seeks to impose now and in the future.

Matthew Smith, a spokesman for the Banking Department, declined comment.

"We are reviewing the judge's order, but it is the department's policy not to comment on matters pending before the agency," Smith said.

The tribe was successful in arguing that new evidence should not be entered into the record through the Banking Department's redetermination of the case.

The underlying allegation is that the companies violated the state's small loan law by charging Connecticut borrowers annual interest rates ranging from 199.44 percent to 448.76 percent on short-term loans of less than $15,000. Loans for less than $15,000 are capped at 12 percent in Connecticut.

The Oklahoma tribe filed a motion in New Britain Superior Court this summer appealing the Banking Department's finding that tribal immunity didn't exist. 

Read the article at CT NEWS JUNKIE

Commentary: More education needed to get people out of payday lending trap

The good news is that more Americans have bank accounts. The bad news is that one-in-five is still using expensive, exploitative services such as payday lenders, check-cashers or pawnshops.

The number of American households without a bank account fell from 7.7 percent in 2013 to 7 percent in 2015, according to an FDIC report released Thursday. That may not seem like much of an improvement, but considering the slow economic recovery for the nation's poorest people, it's a welcome step forward.

About 19.9 percent of American families, though, still use payday lenders, pawn shops or check-cashing stores for their financial needs. That's unchanged from 2015, and represents a huge drag on the ability of these families to break out of the poverty trap.

These alternative financial services like to say they offer an important service to people on the margins of society, but any close inspection reveals that their tactics exploit the financial naivete of the uneducated and exacerbate their financial problems.

The most frightening aspect of this problem is that millennials have embraced them. More than 42 percent of millennials have used an alternative financial service in the last five years, according to a survey by PricwaterhouseCoopers and the Global Financial Literacy Excellence Center at George Washington University.

Two years ago I wrote about how American Express and others saw an opportunity to provide affordable services to the so-called under-banked, who spend $89 billion a year in fees and interest at payday loan and pawn shops. But those services are making limited headway.

The FDIC came out with a study in May that found convenience was a major factor in the under-banked choosing to use an alternative service. Millennials also don't trust banks following the Great Recession of 2008.

"Banks are often perceived as untrusted and unresponsive to consumer needs," FDIC researchers found. "Promising opportunities exist for banks that are considering developing longer-term, sustainable relationships with unbanked and underbanked consumers."

Financial education is also necessary to get more people out of the payday lending trap. They need to know that banks can meet their needs at half the cost. We're making some progress, but more is needed. Read the article at Midland Reporter-Telegram

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