FTC Files Amicus Brief in Tribal Payday Lending Case

FTC Payday Lending Arbitration Internet Lending

On September 26, the FTC announced that it had filed an amicus brief in the U.S. Court of Appeals for the Seventh Circuit in a class action suit against a Native American payday lender. In that case, the putative class is challenging a payday lender’s practice of requiring borrowers to submit to arbitration at a Native American reservation in South Dakota. The FTC notes that it is pursuing its own action against the same lender, challenging its jurisdiction over borrowers who do not belong to the tribe and who do not reside on the reservation or in South Dakota. In its Seventh Circuit filing, the FTC argues that Native American tribes and tribal courts have legal authority over their own members and not over non-members, unless non-members conduct activities inside the reservation or enter into a commercial relationship with the tribe or a member of the tribe. The FTC claims that borrowers who take out payday loans from these companies via the Internet do not conduct business on the reservation and should not be subject to arbitration there.