605 Lending Operates Illegal “Rent-a-Tribe” Loan Program, Claims Class Action Lawsuit

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Payday lender FSST Management Services, LLC is facing a planned class action lawsuit over its alleged participation in a so-called “rent-a-tribe” lending program, in which the company is allegedly operated by a Native American tribe to circumvent state usury laws.

The 22-page Illinois lawsuit alleges that although the defendants – who include FSST – operate as 605 Lending; its CEO and COO; and First Direct Mediation, Inc., a debt collector — which claims to be operated by the Flandreau Santee Sioux tribe, the tribe’s involvement in “predatory” lending is “only skin deep.” According to the case, the defendants are in fact non-Indigenous lenders hiding behind an “elaborate charade” whereby they pay the Flandreau Santee Sioux tribe a fraction of their earnings in exchange for use of its name and the tribal immunity that comes with it.

“To the best of our knowledge and belief, the tribe’s only real contribution is to provide a cloak of sovereign immunity for illegal lending activities,” reads the complaint, which alleges that 605 Lending provides Illinois consumers with more than 700 percent interest on payday loan, which violates state usury laws.

The lawsuit states that although 605 Lending purports to be operated by the Flandreau Santee Sioux tribe, “all material aspects” of the operations of the lending business are conducted, funded, promoted and benefited by non-tribal members.

“When non-Indigenous individuals and entities control and administer the material credit functions, provide the credit capital needed to support the operation, and bear the economic risk associated with the operation, they are not in effect ‘operated’ by Native American tribes and, therefore, are not protected by sovereign immunity ‘ argues the complaint.

According to the lawsuit, the loans made by 605 Lending are void and unenforceable because they violate Illinois law, which prohibits companies from making loans without a bank or credit union deed or a consumer credit license issued by the state’s Department of Financial and Professional Regulation an interest rate of more than nine percent. Depending on the case, 605 Lending does not have a banking, credit union, or lending license in Illinois, but has made loans in the state at interest rates of 700 percent or more.

In addition, First Direct Mediation attempted to collect 605’s alleged illegal loans in violation of the federal Fair Debt Collection Practices Act, the lawsuit says.

The lawsuit seeks to represent Illinois consumers who were granted a loan at more than 9 percent interest and:

  • The loan was granted on behalf of 605 Lending and was not paid in full;
  • The loan was made by a business without a proper Illinois lending license or a bank or credit union deed, was not paid in full, and First Direct has been attempting to collect it in the past five years;
  • The loan was granted on behalf of FSST Management Services (doing business as 605 Lending) and is still outstanding or has been paid within the last two years;
  • The loan was made by a company without a proper Illinois lending license or a bank or credit union charter and First Direct has been raising money for it over the past two years;
  • The loan was originated on behalf of FSST Management Services (doing business as 605 Lending) on ​​or after March 23, 2021;
  • The loan was originated by a company without a proper Illinois lending license or a bank or credit union deed and First Direct collected monies thereon on or after March 23, 2021;
  • The loan was originated on behalf of FSST Management Services (doing business as 605 Lending) within the past four years; or
  • The loan was made by a company without a proper Illinois lending license or a bank or credit union deed, and First Direct collected money for it after receiving notice within the past year and up to 30 days after the lawsuit was filed.

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