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Ely
Ely, Counselor at Law
Category: Legal
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Experience:  Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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I got a couple of payday loans from lenders whose offices are

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I got a couple of payday loans from lenders whose offices are on Indian Reservations. These lenders charge exorbitant interest rates and say they are immune to federal and
state laws. Are they immune? And can these lenders charge me interest rates above that legally allowed in the state of California? Please let me know if I am legally obligated to pay them back (which I will do) but am I legally required to pay their exorbitant interest rates even though they are way above what California allows??
Submitted: 1 year ago.
Category: Legal
Expert:  Ely replied 1 year ago.
Hello friend. My name is XXXXX XXXXX welcome to JustAnswer. Please note: (1) this is general information only, not legal advice, and, (2) there may be a slight delay between your follow ups and my replies.

I am sorry for your situation.

Are they immune? And can these lenders charge me interest rates above that legally allowed in the state of California?

Yes and no. If you look at your contract closely, you will see that it looks like the following:

"All borrowers must consent to be bound to the jurisdiction of the (insert a jurisdiction here - whichever is your contract] Tribal Court, and further agree that no other state or federal law or regulation shall apply to this Loan Agreement, its enforcement or interpretation."

This means that the jurisdiction for this contract lies within the Tribal Court. Their law applies, which may and does differ from other US jurisdictions. Wherein other jurisdictions have usury laws that find that interest rate illicit, the Tribal Court does not. And by signing the contract, you have agreed to bind yourself to that jurisdiction - a contractual clause which is valid.

Okay, we know that they have this crazy interest rate because they are operating under Tribal laws and your contract binds you to Tribal jurisdiction. So what about the collection agency in CA?

If this was challenged in CA Court, you could potentially have the interest adjusted by the Court if/when the Court found the interest to be substantively unconscionable, and thus, void. Discover Bank v. Superior Court, 113 P. 3d 1100 - Cal: Supreme Court 2005. Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided. Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071, 130 Cal.Rptr.2d 892, 63 P.3d 979 (Little), cert. den. sub nom. Auto Stiegler, Inc. v. Little (2003) 540 U.S. 818, 124 S.Ct. 83, 157 L.Ed.2d 35.

Furthermore, California, Maryland, South Dakota and West Virginia residents have had their Attorney General offices sue these companies operating from Indian territory and/or request a stay in Court, that would have the them be halted in the state due to the unreasonable interest rate.

Please let me know if I am legally obligated to pay them back (which I will do) but am I legally required to pay their exorbitant interest rates even though they are way above what California allows??

No. Rather, not if you take proper steps. You may file a complaint with your state's Attorney General and let the collection agency know of this and hope that the AG acts fast to help you. See here. If it does not, you may always:

(1) File your own suit in the Superior Court of CA via Petition of Declaratory Judgment under CA Code of Civ. Proc. §§1060 - 1062.5 and claim that the interest rate is substantively unconscionable and thus void, and have the Court reduce the interest rate. However, the collection agency may then try to move the jurisdiction to Tribal Court per the contract and it would get very technical (you want to keep it in CA since in CA, you have much more of a chance of getting this voided).

OR

(2) Refuse to pay, but risk them filing suit against you, in which case you'd use the same argument of (substantive) unconscionability as an affirmative defense and take your chances. This would work best if they filed suit against you in CA, which they may since even though this is jurisdictionally tied to Tribal Court, they'd want to file in CA for easier collection so that they do not have to go through the extra step of registering a Tribal Court judgment in CA court, but they would not be counting on you putting up a fight.

Conclusion
Sorry for the legalese, but this is a complicated matter and I wanted to make sure you understood your options here. So it is a tug of war here, and if you stand your ground, they are likely to back off, or, lose in Court.

Good luck.

Gentle Reminder: Please use the REPLY button to keep chatting, or RATE my answer when we are finished. Kindly rate my answer as one of the top three faces and then submit, as this is how I get credit for my time with you. Rating my answer the bottom two faces does not give me credit and reflects poorly on me, even if my answer is correct. I work very hard to formulate an informative and honest answer for you; please reciprocate my good faith. (You may always ask follow ups at no charge after rating.)
Customer: replied 1 year ago.

Thank you for your complete answer. If I do as you suggest, would
I pay as much or more to contest this legally than it would cost me to just pay them?? Satisfaction in winning is great, but how much it would cost me is really more important?

Expert:  Ely replied 1 year ago.
k,

You are very welcome.

If I do as you suggest, would
I pay as much or more to contest this legally than it would cost me to just pay them?? Satisfaction in winning is great, but how much it would cost me is really more important?


Well, you may end up spending about $300 in legal costs and up to a few thousand in attorney fees. So it is not a great option, I am afraid. But some may choose it just over the principle. Some may attempt to get the AG involved and this is recommended before paying anything, because if the AG takes the case, you may end up being represented for free and/or the AG simply scaring them off.

Please note: I aim to give you genuine information and not necessarily to tell you only what you wish to hear. Please, rate me on the quality of my information and do not punish me for my honesty. I understand that hearing things less than optimal is not easy, and I empathize.

Gentle Reminder: Please use the REPLY button to keep chatting, or RATE and submit your rating when we are finished.
Ely, Counselor at Law
Category: Legal
Satisfied Customers: 88138
Experience: Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
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