BlueChip Financial “Rent-a-Tribe” Scheme Connecticut Class Action

This class action takes on the payday lending entity BlueChip Financial, which does business as Spotloan. However, it also brings suit against officials of the Turtle Mountain Band of Chippewa Indians, which purportedly owns BlueChip, for acting as a front for Spotloan.

The class for this action is all Connecticut residents who entered into a loan agreement with BlueChip.

In recent years, a number of class actions have come out of “rent-a-tribe” schemes, in which payday lenders associate with a Native American tribe, to try to circumvent state usury laws by claiming tribal sovereignty and immunity from prosecution under state laws. 

In 2009, former Google Chief Information Officer Douglas Merrill founded the company which would become Spotloan. He began making high-interest loans online. The complaint says, “In an effort to avoid state usury laws, in 2012, Merrill and [the company] affiliated with the Turtle Mountain Band of Chippewa Indians … located in Belcourt, North Dakota.” A tribal entity, BlueChip, was created to serve as a front, the complaint says. 

While the loans are made in the name of “Spotloan c/o BlueChip Financial,” the complaint says, Merrill and his company “provide the infrastructure to market, fund, underwrite, and collect on the loans…” The tribe receives only about 1% of the profits, while the rest go to non-tribal businesses.

The two plaintiffs in this case took loans from Spotloan, but they are from Connecticut. That state requires that those who make small loans to Connecticut residents have a small loan license in Connecticut. The state further forbids interest on small loans to be higher than an annual percentage rate of 36%. BlueChip, however, charges interest rates of up to 490%.

In February 2014, after the Connecticut Department of Banking issued a cease-and-desist letter to BlueChip, BlueChip said it would stop making loans to Connecticut residents. However, the complaint says it has not done so. 

In June 2018, the Connecticut Department of Banking issued another cease-and-desist letter for making usurious loans, without any license in the state to make loans. It ordered repayments of the illegal interest to Connecticut residents. However, the complaint says that no repayments have been made. 

The plaintiffs in this case are asking to recover damages against BlueChip for violations of state and federal law. They also want injunctive and declaratory relief against the Turtle Mountain Band’s Tribal Council to stop them from violating state and federal laws.

The complaint says that, although “the Tribal Officials are not involved in the day-to-day management and operations of BlueChip, the Turtle Mountain Tribal Council’s acquiescence in and facilitation of the illegal lending enterprise is a key component.”  

In addition to the violations of Connecticut laws, the complaint alleges violations of RICO laws, among other things.

Article Type: Lawsuit
Topic: Consumer
No case events.
Tags: Excessive Interest Rate, Predatory Lending, Tribal Sovereignty Issue