Despite Colorado law, some online loans carry 500%+ interest rate: "They get away with lending murder"
When Tate Anderson's daughter needed a loan for a couple thousand dollars to help buy a car in February, the Englewood woman went online and stumbled on a loan that her father couldn't believe. It carried an interest rate of 581%.
"I can't be everyone's dad, but this can't happen to people," said Anderson. "It's so awful."
Anderson, who has been a mortgage broker for 30 years and is familiar with the lending world, thought it was illegal to charge that much interest in Colorado. His daughter signed up for a $2,000 loan with an online lender called WithU Loans. The payment schedule called for her to pay more than $800 per month for nine months amounting to $6,370.19 in interest and a 581% interest rate for her $2,000 loan, according to loan documents reviewed by CBS News Colorado.
"I was shocked, needless to say", Anderson told CBS News Colorado.
"They get away with lending murder," he said.
Anderson told his daughter "to call them and tell them to pound sand."
How could a loan like that be offered in Colorado, where state laws have capped interest rates at less than 40% for years?
Anderson and his daughter didn't know that WithU Loans was an online lender owned and operated by the Otoe-Missouria tribe of Indians, and Indian tribes in the U.S. are generally exempt from state laws that prohibit exorbitant interest rates. What they are doing is perfectly legal.
"This is something that is baked into our Constitutional system," explained Colorado Attorney General Phil Weiser.
"If you are a tribe and acting as a tribal entity you aren't subject to the regulations of the state," said Weiser.
Tribal loans, as they are called, are exempt from state laws as native American tribes have tribal sovereignty, legal standing that makes them immune from state statutes.
"When tribes operate businesses," said Weiser, "they are operating outside of Colorado law because of their sovereignty."
While Anderson's daughter only dealt with WithU Loans, tribal lenders have proliferated online, offering installment loans that one tribal lender calls "an expensive form of credit."
A spokesperson for WithU loans provided a written statement about offering high interest loans in Colorado saying, "People turn to online lending when they can't find the financial options they need locally, or because they prefer to do business online. The internet connects them to services -- including those offered by Native American Tribes from Tribal Lands under Tribal law." He said, "Our terms are clear..."
Dr. Katherine Spilde, a California-based professor who specializes in American Indian economic development, said tribal loans provide geographically isolated tribal nations with revenue needed for housing, education, health care and law enforcement. She said, "I do think it's a win-win, especially when you think what the tribes are using it for." Asked about the soaring interest rates, she said, "Online lending in general doesn't create financial fragility, it reveals it. These consumers need help, they need a partner they can count on," said Spilde.
The online review platform Trustpilot said 71% of WithU Loans reviewers gave the service a five star review while 18% gave it one star.
"The interest is so evil," wrote one reviewer this month. "You are flat out robbing people who need help. You should be absolutely ashamed of your greed."
The Better Business Bureau in Oklahoma City has given WithU Loans an F grade, with the BBB saying it has received 343 complaints against the lender.
In 2022, one Colorado resident filed a complaint with the federal Consumer Financial Protection bureau about an unnamed tribal lender. He said he took out a tribal loan that carried a 447% interest rate.
"If this is not predatory lending then I don't know what is. Put a stop to this," said the resident.
Weiser said consumers need to do their research.
"With so many online lenders, it's tricky out there. It's easy to go into a product without understanding it," said Weiser. "Consumers have choices. They should think hard about what's best for them."
Tate Anderson said he was able to quickly intervene in his daughter's case and cancel the loan.
"Because I'm not going to let anyone rip my daughter off," said Anderson.
He said after cancelling her loan, he lent his daughter the money for her new car.
While Weiser indicated there is not much the state can do about tribal lenders themselves, in 2023, his office reached a settlement with a collection agency -- TrueAccord -- which was licensed in Colorado and had been collecting debt from Colorado consumers stemming from tribal loans they had defaulted on. The settlement agreement says from 2017 through 2022, TrueAccord collected or attempted to collect from 28,728 Colorado consumers who had defaulted on their tribal loans. Some of the loans had interest rates nearing 900%, according to the settlement agreement.
TrueAccord denied any allegations of wrongdoing but stopped collecting on tribal loans in Colorado and agreed to pay the state $500,000.
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