California Supreme Court Declines to Extend Tribal Sovereign Immunity to Payday Lending Businesses

On December 22, 2016, the California Supreme Court issued People ex rel. Owen v. Miami Nation Enterprises. The decision found that certain tribal business entities that provided loans in California are not "arms of the tribe" entitled to immunity from California state law regulating payday loans.

In 2005, two federally recognized tribes, the Miami Tribe of Oklahoma and the Santee Sioux Nation, created business entities under tribal law for the purpose of offering online payday loans throughout the country. These tribal entities hired a series of management companies to operate their payday lending businesses. Although the tribal entities retained authority to set lending parameters and approve or disapprove any loan, they received only a small portion of lending-related income; under the agreements with one management company, for example, they were entitled to either 1% of gross revenue or a small guaranteed monthly payment.

http://www.jdsupra.com/legalnews/california-supreme-court-declines-to-24527/