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Tribal Payday Loans: What You Need to Know
You may not be familiar with the term “tribal loans” and what it means. There are a few key differences between traditional payday loans and tribal payday loans.
Tribal loans are simply online payday loans from lenders who are based on tribal land. Just like a standard online payday loan, tribal payday loans are a poor financial decision for most borrowers.
According to the Consumer Financial Protection Bureau (CFPB), payday loans are typically short-term loans for quantities of money less than $1,000. These loans nearly always have very high interest rates, meaning that borrowers face a complicated repayment process. Likewise, payday loans are known for their unsavory lending practices, which often break state and federal laws.
But the CFPB doesn’t define tribal payday loans, and the term has no specific legal meaning. Still, other sources state that tribal payday loans are payday loans that are offered through companies that claim to be located on tribal land rather than the land of any specific state.
Because the U.S. Constitution recognizes Indian reservations as sovereign nations, the companies offering the loans are subject only to tribal regulations and federal regulations on payday loans. As these regulations are typically weaker than those of specific states — especially states with robust consumer protections — tribal payday loans are typically more dangerous for borrowers.
Traditional payday loans are often poor choices for the borrower, but tribal payday loans are fraught with risk. Tribal payday loans typically have higher interest rates than normal payday loans because interest-rate caps or restrictions set by state legislatures do not apply.
Borrowers of tribal payday loans may have a harder time discharging the loan in bankruptcy, refinancing the loan, and asserting their rights when lenders request payment.
READ MORE: Same-day loans that aren’t payday loans
Tribal Loans vs. Payday Loans: What’s the Difference?
Tribal loans carry more risk for borrowers. They have a significantly higher interest rate than an ordinary payday loan since they aren’t legally obligated to follow state laws.
If you’re considering a tribal payday loan, be prepared to face some challenges, particularly if you can’t immediately repay the loan. These include loan refinancing, loan discharges in bankruptcy, and asserting your rights when the lending organization requests payment.
The Dangers of Tribal Loans
Unfortunately, tribal payday loans share all of the pitfalls and dangers of standard payday loans.
As with most payday loans, tribal payday loans are frequently offered by disreputable lenders who use false advertising, fraudulent billing practices, and other shady techniques to take advantage of borrowers, according to the Federal Trade Commission (FTC).
Many payday loan operators lie to borrowers regarding the terms of repayment, the interest rate, and other critical details about the financing. Others are truthful about the characteristics of the loan but represent the information in a deceptive way, which can imply to borrowers that the loan is easier to repay than it is in actuality.
Because payday loans are typically targeted at people who are having financial difficulties, few potential borrowers have the resources needed to go over the terms of service in a payday loan to identify illegal or unethical clauses.
Aside from the dangers stemming from breaches of trade regulations, even when executed in accordance with the law, payday loans put the borrower at risk for:
- Incurring late payment fees
- Losing loan collateral due to inability to repay
- Damage to credit scores
- APRs in excess of 100% of the loan’s value
- Having a bank account locked due to activity by the lender
- Becoming trapped in a cycle of poverty
This means that getting a tribal payday loan to cover expenses is probably not a good financial decision for most people.
Whereas non-tribal payday loans must abide by the lending rules proposed by state legislatures, tribal payday loans do not need to due to tribal immunity (see video below).
In other words, if a state has limited the interest rate on a payday loan to be no more than 25% on a yearly basis, a tribal payday loan could saddle borrowers with rates up to 500% or more.
Then, when you attempt to repay the loan, you could face more fees and interest, and ultimately end up facing some legal questions if you default.
Tribal loans can often also lead to confusion due to the questions about their legality in each state. Likewise, consumer finance advocates, financial advisors, and other financial consultants may not understand the distinction between tribal payday loans and traditional payday loans.
READ MORE: 22 hardship loan options for bad credit
10 of the Most Popular Tribal Lenders (No Credit Check + Guaranteed Approval)
The company is owned by the Tunica-Biloxi Tribe of Louisiana, federally recognized as an American Indian tribe back in 1981. It conducts its business online out of an office located on the tribe’s reservation.
Mobiloans has the slogan “fast cash for people on the go.” The company markets its loans to individuals who need emergency cash. As a potential borrower, you need to know that Mobiloans is a tribal lender that doesn’t operate under state laws.
Loans by Mobiloans are highly identical to credit card cash advances, despite having higher interest rates that closely resemble the typical payday loan. In addition to finance charges and cash advance fees, Mobiloans charges borrowers an annual percentage rate (APR) that ranges between 206.14% and 442.31%.
Otherwise termed as Aaniiih Nakoda Finance, Bright Lending is a loan company located in Hays, Mont. Because it’s a tribal lender, the company’s ownership falls under an American Indian tribe that’s also state-recognized. Therefore, in this instance, the Indian tribe is the Fort Belknap Indian Community of the Reservation of Montana.
Bright Lending’s interest rate is a whopping 725% for new customers. Therefore, if you want to sign up for automatic payments, the company will lower the interest rate down to 700%! The resulting amount is still 309% higher than your average payday loan.
Bright Lending, active for the past five years, hands out short-term payday loans with high interest rates. Their loans are almost twice as much as your average traditional payday loan. Furthermore, the Federal Reserve Bank of St. Louis lists the typical interest rate of a payday loan as 391%.
River Valley Loans
River Valley offers small installment loans ranging from $100 5o $3,000. River Valley doesn’t disclose interest rates. Instead, it posts the following information on its FAQ page:
Buried in the terms and conditions, you’ll find the following disclosure: Wahido Lending dba River Valley Loans is a wholly owned subsidiary of Dakota Economic Development Corporation (“DEDC”), a sovereign economic arm, enterprise, and instrumentality of, and created under the laws of and for the benefit of, the Crow Creek Sioux Tribe, a federally recognized sovereign American Indian tribe in South Dakota, which abides by the principles of federal consumer finance laws, as incorporated under the laws of the Crow Creek Sioux Tribe.
River Valley Loans does not lend to residents of Arkansas, Connecticut, District of Columbia, Illinois, New York, Pennsylvania, South Dakota, Vermont, Virginia and West Virginia.
Spotloan is an online-based tribal loan alternative to the average payday loan that operates slightly similarly to Better Day Loans. Spotloan is known to offer high-interest, short-term installment loans to worthy applicants. Unlike most payday lenders, Spotloan allows their borrowers to repay their loans in a series of payments over time to put this into perspective.
Spotloan’s maximum annual percentage rate (APR) is 490%. For example, if you borrow $600 from Spotloan and choose a bi-weekly pay $775 in finance charges, meaning you’ll pay back $1,375 total for your $600 loan — if you make all of your payments on time.
Spotloan tries hard to advertise itself as a better option to payday lending. While it seems easier to repay a loan in installments, Spotloan still charges identical rates to the average payday loan. What this means is that it’s tough for them to set themselves apart from the loan industry.
Plain Green Loans
Currently, the company operates entirely online and offers small personal loans to customers that must be repaid in installments. The loans offered by Plain Green Loans are similar to those of a payday loan when it comes to the loan amount and extraordinarily high interest rate.
American Web Loans
American Web Loans is an online lender that’s under full ownership of the Otoe-Missouria Tribe of Indians. Because it legally identifies as a sovereign American Indian state, it’s not limited by state laws.
The Indian tribe in question has inhabited the Missouri River Valley from the 1600s to date. The business, however, has only been in operation for the last ten years.
American Web Loans’ APR advertises an APR range between 400-600% If you borrow $800 at the 400% rate and pay it off over 28 payments of $126.42, you’ll end up paying about $3,539.
Withu Loans says they’re “WithU” all the way with installment loans ranging from $300 to $2,500.
Listed under “our story,” you’ll find the following passage:
W6LS, Inc. dba ‘WithU’ and ‘WithU Loans’ is an online lending solutions company owned and operated by the Otoe-Missouria Tribe of Indians (“Tribe”). The Tribe has lived in the Missouri River Valley since the 1600’s and was the first tribe to meet with Lewis and Clark in 1804.
Interest rates are not disclosed, but the Better Business Bureau has posted a consumer alert warning of unauthorized loans and “relatively” high interest rates.
Withu is based in Oklahoma City. They don’t lend in all states, but it’s unclear where they don’t lend. The website only contains a message stating: “To find out what states we lend in, please call 866-404-0674.”
Uprova is owned by the Habematolel Pomo of Upper Lake Tribe of Pomo Indians. The tribe’s reservation in northern California is a federally recognized sovereign nation. That status exempts Uprova from the state laws and regulations.
Uprova is an online lender. According to their website, they make installment loans from $300 to $5,000. Their website states that their goal is “to help borrowers level the financial playing field and improve their financial health”.
Uprova only makes online loans. Their listed office address is 635 East Highway 20, Upper Lake, CA.
eLoanWarehouse looks like a traditional lender until you read the fine print in the loan terms and conditions. That’s where you’ll notice the following:
Opichi Funds, LLC d/b/a eLoanWarehouse is a sovereign enterprise, an economic development arm and instrumentality of, and wholly-owned and controlled by, the Lac Courte Oreilles Band of Lake Superior Chippewa Indians (the “Tribe”), a federally-recognized sovereign American Indian Tribe. This means that the Opichi Funds installment loan products are provided by a sovereign government and the proceeds of our business fund governmental services for Tribal citizens.
eLoanWarehouse issues installment loans ranging from $300 to $2,500. They offer “loyalty tiers,” meaning that the more loans you take out, the more you can borrow. First-time borrowers appear to be limited to $800. While the website does not disclose the interest rates charged, eLoanWarehouse says it does not extend loans to Active Duty Military, their spouses or their dependents, which means the loan terms must exceed what’s permissible by the Military Lending Act.
eLoanWarehouse’s listed address is PO Box 1753, Hayward, WI 54843.
Blue Trust Loans, another well-known tribal lender, is transitioning to eLoanWarehouse.
Big Picture Loans
Big Picture Loans is a tribal payday loan company that grants installment loans to needy borrowers. The company has been fully functional for an impressive eight years.
On their homepage, Big Picture Loans states that they willingly accept up to 94% of external applications and begin the disbursement process of all approved loans as soon as the next business day.
Big Picture Loans is under ownership by the Lake Superior Chippewa Indians Tribe. It generally operates outside of Watersmeet, Michigan, which happens to be the tribe’s reservation.
Big Picture Loans offers loans between $200 to $3,500 with APRs from 350% to 699% and loan terms ranging from 4-18 months. If you borrow $900 at an APR of 389% over 18 months, you’ll end up paying more than $5,000.
Better Day Loans
Updated January 2023: Better Day Loans is no longer issuing new loans
Better Day Loans advertised itself as an alternative to payday loans. But the APR on a personal loan from Better Day Loans was more than twice what you’d pay on a traditional payday loan. A $500 loan at 780% APR with 24 payments of $162 a month will end up costing you about $3,900.
Majestic Lake Financial
Updated January 2023: Majestic Loans Financial is no longer issuing new loans
Majestic Lake Financial appears to have rebranded and are now doing business under the names Ascend and Uprova. The BBB also placed an “Additional Information” section on their review page. They state that Majestic Lake Financial has close business ties with Silver Cloud Financial, Mountain Summit Financial, and Golden Valley Lending. If you’re thinking about borrowing, make sure to do some research to determine if lenders are operating under multiple names or are partnered with other lenders.
Majestic Lake offered loans from $300 to $1000. The company won’t disclose its APRs.
Better Loan Options
The following lenders are not tribal lenders. They’re better options if you need an installment loan quickly and have less-than-perfect credit.
- Upstart: Upstart issues loans from $1,000 to $50,000 at interest rates ranging from 5.22% APR to 35.99%. The minimum credit score for an Upstart loan is 300.
- Badcreditloans.com: Badcreditloans.com offers loans from $500 to $10,000. Repayment terms range from three months to six years. Rates range from rates between 5.99% APR to 35.99% APR but the rate will depend on the lender. No minimum credit score is listed and you can prequalify (and see your interest rate) with only a soft credit check.
- Upgrade: Upgrade issues loans from $1,000 and $50,000 at interest rates ranging from 7.96% APR to 35.97%. The minimum credit score for an Upgrade loan is 560.
- Avant: Avant issues loans from $2,000 to $35,000 over a repayment term of 2 to 5 years. Interest rates range from 9.95% APR to 35.99%. The minimum credit score for a loan from Avant is 580.
The Potential Benefits of Tribal Payday Loans
The benefits of tribal payday loans aren’t all that different from those of normal payday loans. Basically, both will advance borrowers a small amount of money for a short time, even when they don’t have good credit or a reliable source of income.
Using the funds from a tribal payday loan, borrowers can cover crucial expenses in between paychecks. When borrowers get paid, they’re expected to repay the loan.
Unlike other short-term loan options or credit cards, payday loans are issued to people who may not be able to repay the loan. This means that borrowers who are unemployed, already in debt or otherwise financially disadvantaged can still qualify for tribal payday loans.
In addition, tribal payday loans may offer borrowers a larger loan amount than a typical payday loan, often with no credit check, and instant guaranteed approval. As a result, this may seem like an appealing option because they can solve multiple problems with one loan.
A Tribal Payday Loan Example
Let’s compare the advantages of a tribal payday loan with a traditional payday loan and credit cards.
Michael’s car needs an urgent repair that will cost $2,000. Though he owns his home, he doesn’t have time to explore a home equity loan or home equity line of credit. He has a credit card, but the credit limit is $500, not nearly enough to cover the repair cost. Because he only earns $1,000 a month, he’ll face challenges getting approved for a traditional credit card with a credit limit high enough to cover the full repair bill.
And if he does manage to open a new account with a limit of $2,000 or more, it can take a week or more for credit checks and approval, and then up to another week until he can use those funds.
On the other hand, if Michael tries to get a standard payday loan, he may have some success. While he will likely need to register his income and creditworthiness, his income probably won’t prevent his approval. His credit score also won’t be a factor. Unfortunately, depending on where Michael lives, state laws may prohibit payday loans or his lender may be required to collect collateral for the loan. So with a traditional payday loan, while Michael could get the $2,000 he needs, he might need to visit the payday loan office in person, which may be difficult or expensive if his vehicle isn’t working.
To access a tribal payday loan, all Michael needs is an internet connection. He won’t need to visit a retail location or put up any collateral. He also probably won’t need to verify his income or his creditworthiness before his loan application is approved. As a result, Michael will be able to pay for his car repairs the same day his loan is approved, restoring his mobility almost immediately. Because of his specific needs and situation, a tribal payday loan would be the only type of credit line that Michael would be able to access in time to get the car repairs he needs.
Are Tribal Loans Illegal?
Tribal loans are legally ambiguous. Many states have cracked down on payday loans, either with statutes that regulate the loan amounts, plus interest and fees. Other states have outlawed payday lenders altogether. The National Conference of State Legislatures reports that 37 states now have payday lending laws.
But some tribal lenders argue that because they’re wholly owned and operated by a tribal nation, they have sovereign immunity and state laws don’t apply to them. Be sure to check with your state to see if it offers guidance for tribal lending.
READ MORE: 25 ways to get quick cash
The Bottom Line
Should you take out a tribal loan? Ultimately, that’s your call. When in doubt, it’s best to avoid taking any time of payday loan at all if you can. If you absolutely cannot avoid a payday loan, read the terms carefully and understand your protections.
Traditional payday loans will always be much better than borrowing from a tribal payday lender, because borrowers have so few protections and state laws will not help you.
Aim to take out the smallest possible payday loan and have a repayment strategy in place.
If you don’t repay your loan, the debt collector or payday lender may try to take you to court and force you to pay. If the ruling falls in their favor, or you don’t dispute the claim or lawsuit, the court will declare a judgment or order against you. The collector or lender will then be able to garnish your wages.
This means your employer will back a portion of your state-required assets or salary to take care of your debts, also known as wage garnishment. This also happens when your bank or credit union gets a garnishment order, known as a bank garnishment.
Each state has its own processes that apply to both bank garnishment and wage garnishment. For instance, under federal law, certain payments or benefits can be immune to garnishment.
Keep in mind that some tribal loan lenders will threaten garnishment to coerce borrowers into payment, despite any official legal authority to do so. If that happens to you, research your legal options. The Federal Trade Commission (FTC) and Consumer Finance Protection Bureau have rules that lenders must follow.
In simple terms, yes — a payday loan company will take you to court the moment you default on your debt repayment. They can only sue you if you’re late on your payments and if you violate your initial loan agreement.
Keep in mind that payday lenders cannot take you to a criminal court — only civil court. You cannot go to jail if you don’t repay your payday loan.
Most times, lenders prefer personal negotiations and will help you create a payment plan rather than settle it in court.
While no loan is 100% guaranteed, tribal loans are usually easy to obtain. However, there are a few minimum requirements:
you must provide a driver license or government ID, confirm your employment status, have an active bank account and provide your monthly income.
In general, tribal lenders do not report to credit bureaus.
Most tribal lenders do not check your credit.
In theory, many tribal lenders’ websites say that you can only qualify for one tribal loan at a time. Borrowers can sometimes negotiate to get the loan extended if they can’t make payments or get an existing loan rolled into a new loan. However, it is possible to find a separate tribal lender who will issue a completely separate loan. This is not recommended.