Second Circuit Denies Injunctive Relief to Tribe-Owned Online Lenders Seeking Protection From New York State Regulator

Online Lending

On October 1, the Second Circuit affirmed the denial of a preliminary injunction sought by Native American online lenders that would have prevented the New York State Department of Financial Services (“DFS”) from restricting their lending to New York residents. Otoe-Missouria Tribe v. New York State Dept. of Fin. Servs., No. 13-3769-cv (2d Cir. 2014). The lawsuit stems from the DFS’ efforts, led by Superintendent Benjamin Lawsky, to crack down on internet-based, short-term lending businesses. As part of this effort, the DFS is seeking to bar plaintiffs—two Native American tribes allegedly providing internet loans with triple-digit interest rates—from extending loans to New York residents that violate New York’s usury laws. Plaintiffs brought suit seeking to enjoin the DFS from interfering with the tribes’ online lending business, arguing that the state’s efforts to curb their online business violated the Indian Commerce Clause because it infringed on the tribes’ fundamental right to self-government. The court rejected this argument, finding that the state’s action was directed at activity that took place entirely off tribal land and involved New York residents who sought loans without leaving the state.