A settlement in a federal class-action lawsuit against officials of the Lac du Flambeau Ojibwe Nation and some of their business partners calls for forgiving about $1.5 billion in loans to customers across the country, the latest step in trying to curb a tribal lending industry some consider the equivalent of loanshark operations.
The plaintiffs filed their initial lawsuit in 2020, saying they took out loans carrying triple-digit interest rates while in desperation, often in excess of 700%. Such loans are illegal in many states, the lawsuit read.
Tribal officials and their associates also would pay $37.4 million to consumers and the lawyers who brought the suit. The tribe itself would pay just over 5% of that.
The plaintiffs allege that LDF Holdings and its multiple subsidiaries were organized under tribal sovereignty laws to avoid state laws against extremely high-interest lending and protect affiliated non-tribal business partners from liability.
“Although the Band (Lac du Flambeau Ojibwe) may be motivated by its intention of advancing its own community, its effort to advance the Band and its members exploits desperately poor people in other communities who, in their moment of despair, agree to take a small dollar loan with triple-digit interest rates,” the lawsuit read.
The plaintiffs allege that the tribe and its subsidiaries violated the Racketeer Influenced and Corrupt Organizations Act, known as RICO.
LDF Holdings operates under a multitude of names around the country, including Sky Trail Cash; Makwa, LLC; Loan at Last; Bright Star Cash; Lendgreen; and Bear Claw Finance.
The plaintiffs also acknowledged that non-tribal business partners assumed significant control over the lending businesses and that a significant portion of profits from the loans did not go the tribe or LDF Holdings.
“Upon information and belief a large portion of the profits made under these names did not go to the Band or LDF Holdings, but instead went to nontribal outsiders who paid for the affiliation with the Band to protect themselves from liability of their violations of state and federal laws,” the lawsuit read.
A federal judge in Virginia ruled in favor of the plaintiffs this month in a preliminary settlement agreement. It could take months to iron out all the details.
Judge Norman K. Moon ruled that $1.5 billion in loans would be canceled and a $37.4 million common fund would be created to be distributed to consumers who repaid unlawful amounts.
The tribe’s portion of that $37.4 million comes to $2 million, which it has already agreed to pay.
Any objections to the settlement agreement must be filed with the court by Nov. 29, as the settlement agreement decision will become final after that date. A final hearing is scheduled for Dec. 13.
Tribal officials did not respond to a request for comment.
The Lac du Flambeau Tribe, as well as several other tribes across the country, have been defendants in multiple lawsuits against lending practices for at least the last 10 years.
Last year, the U.S. Supreme Court ruled that the Lac du Flambeau Tribe must abide by U.S. bankruptcy law for individuals, which overrides tribal sovereign immunity, in a case against one of its lending companies.
The case involved a member of the tribe, Brian Coughlin, who borrowed $1,100 from Lendgreen, one of the tribe’s loan companies, in 2019.
Coughlin couldn’t repay the high-interest loan and had since filed for Chapter 13 bankruptcy, which is supposed to halt collection efforts from creditors.
But Lendgreen allegedly still continued to try to collect from Coughlin.
Coughlin alleged that “Lendgreen was so aggressive in its efforts to contact him and collect the money that he suffered substantial emotional distress, and at one point, even attempted to take his own life,” according to court documents.
More:Native American tribes offer short-term loans. Consumers say they are being gouged.
More:US Supreme Court rules Lac du Flambeau Tribe in Wisconsin not immune from bankruptcy law
Frank Vaisvilas is a former Report for America corps member who covers Native American issues in Wisconsin based at the Milwaukee Journal Sentinel. Contact him at fvaisvilas@gannett.com or 815-260-2262. Follow him on Twitter at @vaisvilas_frank.
