CHARLESTON, W.Va. -- An Internet payday lender must comply with a state investigative subpoena into inflated loan interest rates despite the company's ties to a American Indian tribe, a Kanawha County judge ruled Wednesday.Several West Virginians lodged complaints with state Attorney General Darrell McGraw that the internet-based lender Lakota Cash was approving loans with higher than 700 percent interest.State laws prevent payday lenders from establishing interest rates at more than 18 percent, Assistant Attorney General Norman Googel said."How do they get around our laws?" Googel said. "One way, is that they give out loans on the Internet."Another loophole, which state officials say Lakota Cash owner Martin Webb was trying to employ, involves declaring that a company's affiliation with an American Indian tribe gives the business immunity from U.S. laws.Webb is a member of the South Dakota-based Cheyenne River Sioux tribe, Googel said. The U.S. government considers American Indian tribes sovereign entities."Indian tribes are viewed as nations," Googel said. "You can't really sue another country."
In his ruling, Kanawha Circuit Judge Duke Bloom found that Webb's company was organized under the laws of South Dakota, not a tribal entity, and that the owner controlled the business individually.He also said that Lakota Cash did not provide evidence that it operated for the benefit of Webb's tribe, as opposed to his individual benefit and profit. The loans, though processed over the Internet, were performed in West Virginia and not on a reservation, Bloom found.McGraw began investigating the Internet payday lending industry in 2005, after receiving numerous complains from West Virginians claiming to have been victimized by loans with interest rates as high as 780 percent, according to a news release.The office has settled lawsuits with 113 payday lenders, collection agencies, and affiliated service providers and yielded more than $2.75 million in refunds and canceled debts for about 8,500 consumers, the release states."Attorneys general nationwide are becoming increasingly concerned with Internet payday lenders' routine claims of being affiliated with Indian tribes in an effort to protect consumers from predatory lending," McGraw said in the release.Reach Zac Taylor at Zachary.Taylor@wvgazette.com or 304-348-5189.