Tribal Sunset in the Western Sky? Not So Fast.

By Hilary Miller, Atty at Law.

On Monday, March 18 2013, the Colorado (state) District Court granted summary judgment to the Attorney General in a payday-lending case against Western Sky Financial and its control person, Martin A. (“Butch”) Webb. State ex rel. Suthers v. Western Sky Financial, LLC, No. 11 CV 638 (Apr. 15, 2013). Although this decision may initially seem a victory for opponents of tribal lending, on closer examination the decision provides little new insight. More importantly, the decision does not address the most prevalent tribal lending model where – unlike in Western Sky – the lending is actually done by tribal entities. Accordingly, cheering consumerists should put away their anti-tribal Terrible Towels and resume their seats.

Webb, an enrolled member of the Cheyenne River Sioux Tribe, owns and operates an Internet lender, Western Sky, which is an ordinary state- (in this case, South Dakota) chartered business entity. Webb is no stranger to the judicial system and has his own cross-country litigation trail of tears.

What distinguishes Western Sky is that it is not owned or operated by a tribe and therefore cannot be said to be an “arm” of the tribe entitled to tribal sovereign immunity. See, e.g., Breakthrough Mgmt. Group, Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1185 (10th Cir. 2010). As an individual Indian, Webb is not entitled to immunity. Puyallup Tribe, Inc. v. Department of Game, 433 U.S. 165, 171 (1977).

No other tribal lender uses Webb’s model.

The Colorado court probably gets the right result as applied to Western Sky’s particular business model, although it arrives there somewhat inelegantly. The court relies on its prior decision for the non-immunity of defendants and reiterates much of its prior reasoning on this point (from an April 17, 2012 order denying defendants’ motion to dismiss). It engages in a prolix discussion of long-arm jurisdictional issues; this discussion continues to confound some basic issues about where the loans are consummated and about the defendants’ purported contacts with Colorado, but ultimately it comes to a reasoned, if arguably further appealable, conclusion on the issue. A large portion of the decision relates to a finding of Webb’s personal liability for the wrongs of Western Sky, which is essentially a joint-tortfeasor finding that does not depend on veil-piercing; I address some of these issues in a recent paper. (Senior Assistant A.G. Paul Chessin, a first-class litigator, deserves kudos for his argument on this point, which the court adopted nearly wholesale.) In a final insult to defendants, the court finds their immunity arguments to have been frivolous and awards attorneys’ fees to plaintiff.

None of these holdings is particularly earth-shattering or novel.

This case must be seen as limited to its particular – and unique – facts. In any “serious” current tribal lending model, the tribe has organized a tribally owned lending entity for its tribal economic-development purposes. The loans are thus deemed to be made by the tribe, not by an ordinary business entity owned by an individual Indian. As these models have evolved, more emphasis has been placed on true tribal governance; and the tribes have taken an active role in supervision and enforcement as, they argue, is their intended role under the Dodd-Frank Act. Moreover, the entities’ lending practices have been brought into substantially full compliance with federal law, leaving little – other than garden-variety usury – for state regulators to complain about.

Thus, Western Sky teaches little of importance for those who oppose the tribal model. It leaves unanswered most of the $64 questions in this field, such as the authority of the CFPB to examine and supervise tribal lending enterprises and the ability of tribes to cloak their non-tribal agents with immunity for lending actions taken in furtherance of tribal economic development. For these answers, we will need to await a federal court determination at some later date.

Hilary Miller


Clarity Services: Response to New York Times Payday Loan Article

Letters to the Editor
The New York Times
620 Eighth Avenue
New York, NY 10018

Re: A response to your editorial on payday lending.

My name is Tim Ranney and I am the president of Clarity Services, a leading credit bureau in the non-prime credit services industry. I wanted to offer a few thoughts on your March 4 editorial on payday lending and the information you used from the Pew Research Center study that you referenced.

First off, let me say that I am not an opponent or proponent of payday lending or any other financial services industry segment. We are a credit bureau. Our job is to collect financial and credit transaction data on consumers, store it securely, and distribute it accurately and in accordance with regulations in the form of credit reports.

Your editorial as well as an article you printed a few days ago, relied on research from Pew Research. Pew based their results and conclusions on survey responses from about 450 consumers nationwide. To think that one can draw valid conclusions on a national population using such a limited population stretches logical boundaries. If you wanted to draw behavioral conclusions of a group of 1,000 high school students, do you think you could draw a good conclusion by talking to 4 of them? I leave it to you to answer that question for yourself.

Clarity processes more than half a million report requests per day for consumers seeking many different types of credit. We have data in our systems on about 35 million non-prime consumers. The data tells us a story significantly different than Pew’s results. Pew’s data says that the “typical” payday loan consumer has an income of about $30,000. Our research tells us the number is slightly over $50,000. Pew’s research says that only 49% of the population using payday loans are employed, and our research indicates the number is about 82%. Pew’s results are based on such limited data, yet all of the results they claim are skewed in a direction that perpetuates the view that the consumer is always a victim. The data we see leads us to different conclusions.

I do believe the industry, researchers, government regulators, and others are making a sincere effort to understand the issues faced by credit-challenged consumers and to find ways to promote alternatives that are workable for consumers as well as the financial services industry. The consumer is not served when researchers and New York Times reporters use questionable research and pre-conceived personal opinions in attempt to influence the dialogue.

Tim Ranney
Clarity Services



Thanks to my buddy, Doug Ulrich at payday loan software company AzoBlue out of Chicago for this heads-up!

Al Goldstein, a Chicago entrepreneur to whom many attribute the invention of payday loan Internet lending,  has launched a new company making larger online loans to consumers whose credit is challenged. Mr. Goldstein raised $10 million in Silicon Valley to start AvantCredit Corp., based in Chicago’s River North neighborhood. According to Crain’s Chicago Business, “AvantCredit, which hopes to generate $50 million of loans this year, so far has lent $3 million. It employs 23 and could have as many as 100 employees in Chicago by year-end, he says.”

An INTERESTING development! In spite of the CFPB, the daily onslaught of misreporting by the media, the various state legislative initiatives, and bad mouthing by our competition (Banks, credit unions, credit card companies, pawn, cash-for-gold) smart entrepreneurs recognize an opportunity!

Read the piece in its entirety here: Al Goldstein in Crain’s Chicago Business:

Jer –  What do you think? Hit me!!



Guys, do you “get” what’s happening here? If not, you’d better reach out to us! LOOK at the MyPaydayLoan image below!!

Payday loan applicants searching for you on their smart phones! Lenders implementing social media strategies for underwriting!! It’s a new world. Does your LMS provider set you up for phone friendly websites and social media log-in capabilities like this image demonstrates?

Payday Loan Facebook Application Strategy



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