Send Payday Loan Class Action Back to Tribal Court, Say Lenders

After attempting to settle a payday loan class action lawsuit, a group of lenders including Western Sky Financial have asked a federal judge to send the case back to tribal court because the plaintiffs are no longer interested in settling.

In the original lawsuit, lead plaintiffs alleged that a group of loan companies “conspired to charge usurious interest rates and deceive consumers” by telling consumers that they were “exempt from United States laws because of an affiliation with the Cheyenne River Sioux Tribe.”

According to the payday loan class action lawsuit, Payday Financial, Lakota Cash and Big Sky Cash, Western Sky Financial, Cashcall Inc., and WS Funding issued small, unsecured loans at high interest rates that sometimes required borrowers to agree to repay the loan on their next payday. The class action alleges that this practice, called payday lending, violated a number of state laws and that the lenders engaged in false advertising.

In November of last year, it looked like the parties were attempting to settle the class action when they jointly asked the court to approve a proposed settlement. The settlement included $7 million in cash, an agreement from the loan companies to automatically reduce the interest rate of Class Members current loans to 18 percent, and to remove any items on Class Members’ credit history reports from the loan companies.

In January 2016, a federal judge dismissed the motion from the parties to approve the proposed payday loan class action settlement. The judge found that the settlement could present problems by discriminating against Class Members who had received compensation for excessive interest rates through state litigation and suppress monetary claims. The judge also noted problems with the method of notice, direct mailing to Class Members, and determined it was insufficient.

According to a motion filed by the payday lenders, the class action lawsuit should be remanded to the Cheyenne River Sioux Tribal Court to pursue tribal court remedies. Additionally, the lenders argued that a stay originally issued in March of 2014 should be reinstated so the tribal court can be the first to rule on the case.

According to the motion to remand the case, “Defendants have determined that the circumstances of this case and other cases pending against them in other jurisdictions are not conducive to a class action settlement in this case.”

Earlier this month, the plaintiffs in the payday loan class action lawsuit filed documentation with the court indicating that due to other separate proposed class actions, more discovery is necessary in this case. The lenders stated in their motion to remand the case that the plaintiffs’ argument is moot because the case should be moved to tribal court.

The plaintiffs are represented by Patrick R. Burns of the Burns Law Firm, PLLC, and Shawn J. Wanta of Baillon Thome Jozwiak & Wanta LLP.

The Payday Loan Class Action Lawsuit is Heldt, et al. v. Payday Financial LLC, et al., Case No. 3:13-cv-3023-RAL, in the U.S. District Court for the District of South Dakota, Central Division.