Tribes Don't Get a Pass on Federal Law
Can a payday lender’s contract require all borrowers’ disputes be subject to an arbitration process in which decisions are exempt from federal law? In a decision announced this week with potential consequences for millions of contracts signed every day, the U.S. Court of Appeals for the 4th Circuit has said no. The decision shines a light on a particularly disreputable instance of the generally worrisome phenomenon of payday loans. Its importance, however, touches on broader issues, including the sovereignty of Indian tribes.
The facts of the case, Hayes v. Delbert, are pretty shocking -- and probably affected the outcome to some degree. James Hayes of Virginia borrowed $2,525 in 2012 from payday lender Western Sky Financial LLC, which transferred the loan to Delbert Services Corp. to service it. The four-year loan had an annual interest rate of 139.12 percent.