The Consumer Financial Protection Bureau on Thursday accused four companies with operations in Kansas of running an illegal payday lending operation, marking another investigation into an industry with an ongoing and sizable presence in Kansas City.
A federal lawsuit filed in the Northern District of Illinois asks for a permanent injunction on the business activities of Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial and Majestic Lake Financial, all companies incorporated on a tribal reservation in Northern California but which do business at a call center in Overland Park.
The CFPB lawsuit accuses the companies of collecting on loans that violated state usury and lender licensing laws; an $800 loan carried a contract that would require the consumer to repay $3,320 over 10 months. It also said the companies didn’t disclose loan terms such as annual percentage rates until after a borrower was approved for a loan.
All four companies are incorporated at the same address on tribal lands of the Habematolel Pomo Tribe in Upper Lake, Calif., which is a federally recognized American Indian tribe.
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Payday lending companies at times incorporate their businesses on tribal lands because tribes are generally immune from state regulations and lawsuits, and there’s no federal law on usury on the books.
A lawyer representing the defendant companies disputed the government’s claims and said the businesses operated legally. The tribe’s attorney said the CFPB was wrong on the facts and the law.
“The Habematolel Pomo of Upper Lake Indian Tribe attempted to work in good faith with the CFPB to demonstrate why its business model and practices were in compliance with the letter and spirit of the law,” Lori Alvino McGill, a partner with Washington, D.C., law firm Wilkinson Walsh & Eskovitz, wrote in an email to The Star.
“Unfortunately, instead of working with the tribe in good faith, they filed a surprise lawsuit. This is a shocking example of governmental overreach.”
The CFPB lawsuit claims that while the companies were registered on the California tribe’s reservation, only a few employees actually worked there while the majority worked in Kansas. The complaint says the tribe bought a call center in Overland Park in 2013.
A spokesman for the CFPB declined to release the name or address of the call center.
Two of the payday loan companies, Silver Cloud and Golden Valley, received $26.7 million from a variety of sources, according to the lawsuit. RM Partners, a Fairway business controlled in part by Kansas City payday loan businessman Richard Moseley Sr., was among the donors to the defendants named in the CFPB lawsuit.
Moseley faces criminal charges in New York related to his payday lending enterprises. Another Kansas man, Josh Landy, was involved with other business entities that helped fund the payday lending companies named in the CFPB lawsuit, according to the complaint.