A Connecticut judge found that an Oklahoma-based tribe that owns two payday lending companies is immune from an enforcement action by the Banking Department.
The Banking Department imposed a $700,000 fine on Great Plains Lending LLC, a $100,000 fine on Clear Creek Lending, and a $700,000 fine on Otoe-Missouria John Shotton for violating the state’s small loan law by charging Connecticut borrowers annual interest rates ranging from 199.44 percent to 448.76 percent on short-term loans of less than $15,000. Loans for less than $15,000 are capped at 12 percent in Connecticut.
The tribe declined to participate in the Uniform Administrative Procedure Act after the Banking Department issued a cease and desist order last October. The tribe filed an administrative appeal in Connecticut Superior Court against the Banking Department claiming sovereign immunity.
Superior Court Judge Carl Schuman agreed that a UAPA hearing could offend the Otoe-Missouria Tribal Nation’s sovereign immunity.
“Administrative actions under the UAPA are sufficiently similar to suits in court to interfere with the dignity of tribes as sovereigns,” Schuman wrote in his decision. “A UAPA case is not just an informal meeting.”
He went onto say that the “hearing contains most of the traditional hallmarks of civil trial.”
But that doesn’t mean the case is settled.
The court sent the case back to the Banking Department to make a finding of fact. The department could find that the payday companies are not “arms” of the tribe. The court declined to answer that question and suggested that the Banking Department Commissioner could reach that conclusion.
The Banking Department argued the payday lending operations were not arms of the tribe in court, but was unable to make that determination in a final ruling because the hearing on the cease and desist order never occurred. Instead, the case went directly to court.
“This case will likely take many twists and turns before all the issues are resolved – that is because the issues here are complex and do not involve settled law,” Bruce Adams, general counsel to the Banking Department, said. “Now that the court has sent the case back to the Department to make further findings, we must consider very carefully what steps to take next.”
The tribal lending organizations contend that they could be subject to federal laws, but are not subject to state laws.
The tribe filed a brief in court claiming the state’s action and fine “violates the legal principles of sovereign immunity so deeply engrained in the fabric of federal Indian law and policy.”
The attorney for the two tribal lending companies goes onto argue that: “Tribal sovereignty is not subject to diminution by the states and thus, neither is sovereign immunity.”
In an emailed statement Tuesday Shotton said: “We are a sovereign nation and our leaders are duly elected by the Otoe-Missouria people. As was recognized by the court in its decision, Indian nations have sovereignty as set forth by treaty and affirmed by legal precedent. We are pleased that the court has validated the rights of not only the Otoe-Missouria Tribe, but all tribes throughout Indian Country and feel confident that our sovereignty will be upheld.”
This summer members of the Otoe-Missouria Tribe held a “sovereignty rally” to show their support for the legal action being taken in Connecticut.
Earlier this year a federal judge in Oklahoma tossed a lawsuit the tribe filed against the Connecticut Banking Department. The judge concluded that the action the Connecticut Banking Department took against the tribal lending companies was not aimed at the state of Oklahoma, but rather the companies and their actions in the state of Connecticut.