Four lenders operated by one tribe forced to cancel loans and pay fines

A class of consumers asked a federal judge in Virginia to approve a $500 million settlement with a Native American tribe (Habematolel Pomo of Upper Lake) in a lawsuit over short-term loans charging interest rates of up to 950%. The rates charged violated state rate caps in the states where consumers reside.

According to Monday’s motion, the settlement includes $450 million in debt forgiveness and the creation of a $39 million pooled fund to be distributed to class members who have already repaid illegal amounts on their loans.

As part of the settlement, tribal officials will first clear the balance of all outstanding loans, and tribal officials have agreed to cease all collection activity and not to sell, transfer or assign outstanding loans for collection.

The lawsuit involved four lenders – Golden Valley Lending, Silver Cloud Lending, Majestic Lake Financial and Mountain Summit Financial – all operated by Habematolel Pomo and all accused of charging usurious interest rates.

Indeed, these companies were the subject of a combination carried by the Consumer Financial Protection Bureau (CFPB) in 2017.

At that time, the CFPB noted:

Since at least 2012, Golden Valley Lending and Silver Cloud Financial have offered online loans between $300 and $1,200 with annual interest rates ranging from 440% to 950%. Mountain Summit Financial and Majestic Lake Financial started offering similar loans more recently.

At the time of this lawsuit, Richard Cordray, then director of the CFPB, said:

“We are suing four online lenders for collecting debts that consumers did not legally owe,” said CFPB Director Richard Cordray. “We allege these companies made deceptive claims and illegally took money from people’s bank accounts. We seek to end these violations and obtain relief for consumers.”