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Internet Based Payday Loan Business Taken Down by Supreme Court

Published / by Blue Button / Leave a Comment

court-gavelWell, one state body isn’t taking it on the chin when it comes to Internet payday loan businesses.

The Georgia Supreme Court announced on Monday that it is giving the go ahead to state officials to proceed with a lawsuit that targets an out-of-state payday lender that is violating state laws.

In 2013, Attorney General Sam Olens filed a lawsuit against Western Sky Financial LLC, a Native American tribal Internet payday lender located in South Dakota. The lawsuit alleges that the business violated the state’s 2004 law that aims to crack down on short-term, small-dollar, high-interest payday loans.

At the time, the payday lender was looking to dismiss the case because it had claimed tribal immunity from lawsuits submitted under federal law. Moreover, Western Sky Financial alluded to a loophole in the 2004 legislation that defines payday lending that “does not encompass loans involving interstate commerce.” It seems that the state felt despair, but Monday’s ruling gave them the momentum.

Georgia Supreme Court Justice Robert Benham wrote that lawmakers did not actually take out payday loans by out-of-state businesses from the legislation, and it wouldn’t make any sense if they did. While there are legit internet payday loan businesses services like Western Sky Financial LLC are making it very tough for them.

“If that were so, the act would be virtually meaningless because it would prohibit nothing,” Benham wrote. “Instead, we are persuaded that this language is simply a legislative finding of fact that is obviously factually inaccurate.”

When it comes to the claim of tribal sovereignty, the judge noted that Native Americans often conduct business beyond reservation boundaries. This means that they are required to comply with criminal and civil laws. So a Native American tribe would be mandated to face the court system over allegations.

In the end, the supreme court did not reject the lawsuit. In fact, it ordered the online payday lender to pay more than $15 million, which is the sum the business has received from Georgia borrowers since the lawsuit was initiated. This could cause the business to shut down its operations.

Many outside of the legal system are celebrating.

Liz Coyle, head of Georgia Watch, a consumer advocacy group, which tipped off the attorney general regarding Western Sky Financial, said that predatory lenders are having a negative effect on Georgia.

“We know what a detrimental effect on Georgians and Georgia families these predatory lenders have, so it’s fortunate that Georgia does have a strong ban on payday lenders and a department of law that enforces that ban,” said Coyle. “Unfortunately the state still has small dollar lending through title pawn loans that trap Georgians in the same cycle of debt as payday lending and end up with rates as high as 300 percent APR.”

Because the federal and state governments are looking to prohibit or restrict payday loan stores from opening or operating, a lot of lenders are setting up shop on the Internet to hand out costly loans without fear of reprisal from the government.