For those of us who champion the rights of consumers and borrowers to have the right to choose financial products that are best for meeting their personal money challenges, the Fourth Circuit of Appeals just came through for them!

Native American Indian Tribes, servicers and vendors are considered to be “arms of the tribe” when properly constructed collaborations are implemented and are entitled to sovereign immunity.

This is a huge win for consumers, lenders, vendors and payment processors!

Per the Press Release by Weider, Brodsky & Kidder PC:

A panel for the U.S. Court of Appeals for the Fourth Circuit recently found that two lending entities affiliated with the Lac Vieux Desert Band of the Lake Superior Chippewa Indians (the Tribe) are entitled to tribal sovereign immunity as “arms of the tribe”.  The panel then ordered the dismissal of an underlying putative class action brought by five Virginia residents who claimed the payday loans they obtained online from the tribe-affiliated lenders violated state usury laws.  The panel’s decision reverses that of the district court, which held that the affiliated lenders failed to sufficiently prove they were “arms of the tribe” and thus were subject to the court’s jurisdiction.

One of the lending entities, Big Picture, was formed by the Tribe in 2014 to consolidate the Tribe’s lending activities, and in 2015, the Tribe formed Ascension as a subsidiary to support its lending activities by providing marketing, technological, and vendor services.  The appellees, Virginia residents, initiated a class action in federal court in 2015 in which they alleged that the payday loans they received from Big Picture came with interest rates fifty times higher than the legal limit in Virginia.  The lending entities moved to dismiss the case for lack of subject matter jurisdiction on the basis of tribal sovereign immunity, but the district court denied their motion, asserting that the appellants’ claim of immunity was unsupported by the evidence they provided.

In reaching its conclusion, the district court applied an “arm-of-the-tribe” analysis, which is used to determine whether tribal immunity may apply when a tribe-created entity engages in commercial activity.  The “arm-of-the-tribe analysis” typically involves consideration of the following factors: “(1) the method of the entities’ creation; (2) their purpose; (3) their… [Read More Below…

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