Tag: California payday loan lending statutes and regulation


California Payday Loans Increase to $500?

SFGate.com has an update on AB377, a proposal to increase the maximum California payday loan limit from $300 to $500.

We like this. $300 does not go far today. Plus, the payday loan customer typically leaves with $255 rather than $300 because the fees are taken out first.

Of course, SFGate.com gets the conclusion wrong! They’re against the Bill. No surprise! They’re lucky enough to have never needed a small micro-loan to survive.

What SFGate.com said: “Existing regulations limit payday lenders to loaning customers $300 at a time. AB377 would raise that to $500. The more money the lenders can hand out, the more of that 459 percent (interest) they can collect. This clearly isn’t about the customers – there hasn’t been any groundswell of demand from payday loan customers. Why on earth would (author Assemblyman Tony) Mendoza want to saddle this state’s most cash-strapped citizens with more debt? Even more insidious is a provision in the bill that would extend regulations to Internet payday-loan providers. Internet payday lending operates in a legal gray area in California – many are unlicensed and flout the rules. This paves the way for their legitimization.” – Editorial, June 17, 2009

What SFGATE said happened: This special-interest bill, which had already cleared the Assembly on a 53-8 vote (with 19 members not voting), passed its first big test in the Senate. It advanced through the Senate Banking, Finance and Insurance Committee with seven members voting yes, one voting no and four not voting. Sen. Lois Wolk, D-Davis, the only Northern Californian on the committee, voted against the bill.

What’s next: AB377 was referred to the Senate Judiciary Committee, which is chaired by Sen. Ellen Corbett, D-San Leandro, and includes one other Bay Area member, Sen. Mark Leno, D-San Francisco.

What you can do: Encourage your senator to vote FOR (PaydayLoanIndustry.com Recommendation) AB377. You can find your senator’s name and contact information at www.senate.ca.gov.


Payday Loans, Indian Reservations & Sovereign Nations

The Metropolitan News Enterprise ran an extremely interesting article regarding The Payday Loan Sovereign Nation Model as employed by several Indian Tribes.

In essence, the Division 7 Court of Appeals ruled that several payday loan companies in partnership with the two indian tribes sued by the California Department of Corporations have sovereign immunity and are NOT subject to California payday loan lending statutes and regulation.

This is a fantastic development as we have facilitated the organization and implementation of the  Request More Info Sovereign Nation Payday Loan Model.

Here is a Reprint
Div. Seven Monday granted a writ of mandate sought by five companies
asserting tribal immunity in an action brought by the California Department
of Corporations. The panel overturned an injunction and sent the case back
to the trial court for a determination of whether the relationship between
the tribes and the companies satisfies the requirements for immunity.

The department sued in June of last year, charging that Ameriloan, US Fast
Cash, United Cash Loans, Preferred Cash and One Click Cash had ignored its
“cease and desist” orders and were violating the Deferred Deposit
Transaction Law by lending without state licenses and charging excessive
fees, among other ways.

Internet-Based Business

The companies are engaged in a largely  Internet-based business of lending
money short-term to borrowers who pay back the loans by authorizing
repayment from their checking accounts on specific dates, typically on the
next payday. The business is controversial because the loans carry huge
charges, without regard to the number of days for which the money is
borrowed, and has been regulated to the point at which it is virtually
outlawed in some states.

In response to service of the complaint on the companies, The Miami Tribe of
Oklahoma and the Santee Sioux Nation appeared specially in the action and
moved to quash for lack of jurisdiction. The tribes asserted that the five
defendants were operated by tribal corporations pursuant to tribal
resolutions, that the proceeds of the businesses were used for tribal
government and social welfare purposes, and that the lenders were arms of
the tribes and shared the tribes’ immunity from being sued in the absence of
express congressional authorization or waiver.

Retired Los Angeles Superior Court Judge Joseph R. Kalin, sitting on
assignment, denied the motions and granted a preliminary injunction barring
the companies from engaging in the allegedly unlawful practices set forth in
the complaint. He ruled that the tribes are not immune from liability for
off-reservation commercial activities and that the state’s power to enforce
its laws under the Tenth Amendment takes precedence over their claims of

He also ruled that the tribes had waived any immunity, the Miami because the
tribal corporation operating the businesses was created by a resolution
authorizing it to “sue and be sued,” and both tribes because arbitration
clauses were included in their standard loan agreements.

Presiding Justice Dennis Perluss, however, writing for the Court of Appeal,
said the trial judge erred in several respects.

Tribal sovereign immunity, Perluss said, will apply to off-reservation
commercial conduct if the predicates for such immunity are met. He
distinguished cases holding that states may regulate tribal commercial
activities occurring on nontribal lands.

Those cases, the presiding justice explained, concerned preemption, not
sovereign immunity. The U.S. Supreme Court, Perluss noted, has recognized
that “[t]here is a difference between the right to demand compliance with
state laws and the means available to enforce them.”

Tenth Amendment

Nor, Perluss said, will the Tenth Amendment override the tribes’ immunity
from actions to enforce lending laws. Such actions, he said, are
distinguishable from those of the type discussed by the Supreme Court in
Agua Caliente Band of Cahuilla Indians v. Superior Court (2006) 40 Cal.4th

In Agua Caliente, the state high court said the state had a right to
enforce campaign contribution reporting laws in administrative proceedings
against Indian tribes. The court said the case involved “unique
circumstances” and that the peoples’ right to a  republican form of
government, as well as the reservation of rights by the states under the
Tenth Amendment, allow the state to insist that tribes obey the same
regulations as other donors.

That ruling is limited to the unique field of campaign reform and does not,
Perluss wrote, permit “a broad abrogation of the doctrine of tribal
sovereign immunity.”

Perluss acknowledged that the expansion of tribal commercial enterprises may
call into question the justification for the broad application of sovereign
immunity. But such policy judgments are left to Congress and not to the
state courts, he declared.

He went on to note that the “sue and be sued” clause in the Miami resolution
was specifically limited “to the extent of the specific terms of the
applicable contract or obligation,” and that the arbitration clauses in the
loan agreements were similarly limited to specific transactions and were not
broad waivers of sovereign immunity that would permit a consumer protection
action by the state.

The presiding justice did, however, take note of the department’s argument,
based on evidence it claimed to have discovered after the injunction was
issued, that the loan companies were actually independent of the tribes but
were involved in a “rent-a-tribe” scheme created solely to avoid complying
with the lending laws.

Such evidence, Perluss said, should properly be considered by the trial
judge in order to determine whether the companies are truly arms of the
tribe. Past Court of Appeal decisions, he noted, have established criteria
for resolving that issue, “including whether the tribe and the entities are
closely linked in governing structure and characteristics and whether
federal policies intended to promote Indian tribal autonomy are furthered by
extension of immunity to the business entity.”

The case is Ameriloan v. Superior Court (People), 08 S.O.S. 6711.