Definition
A payday loan is a short-term, high-interest loan that is usually due on the borrower’s next payday. These loans are typically used to cover unexpected expenses or to bridge the gap between paychecks.
How They Work
Payday loans are typically taken out in small amounts and are repaid in full on the borrower’s next payday. They are typically issued in the form of a post-dated check, which the lender will then cash on the due date. The borrower may also be expected to provide the lender with access to their bank account in order to receive and repay the loan.
Who are They?
Native American tribes are sovereign nations, meaning that they have the right to govern themselves and manage their own affairs. This includes the right to enter into business agreements and establish their own laws.
What Role do They Play in Payday Loans?
Native American tribes have begun to enter into the payday loan industry by setting up Tribal Lending Enterprises (TLEs). These TLEs are businesses that are owned and operated by the tribes and provide short-term loans to consumers. The tribes are able to bypass state and federal regulations by claiming their sovereign nation status.
The Sovereign Nation Status
Overview
The sovereign nation status of Native American tribes means that the tribes are not subject to the same rules and regulations as other lenders. This allows them to offer higher interest rates and more lenient repayment terms than other lenders.
Benefits
The sovereign nation status of Native American tribes gives them the ability to offer payday loans with higher interest rates than other lenders. This can be beneficial to borrowers who may not be able to get a loan from a traditional lender.
Tribal Lending Enterprises (TLEs)
Overview
Tribal Lending Enterprises (TLEs) are businesses owned and operated by Native American tribes that provide payday loans to consumers. These businesses are not subject to the same rules and regulations as other lenders, allowing them to offer higher interest rates and more lenient repayment terms.
Benefits
The benefits of TLEs are that they are able to offer payday loans with higher interest rates and more lenient repayment terms than other lenders. This can be beneficial to borrowers who may not be able to get a loan from a traditional lender.
Pros
Lower Interest Rates
The interest rates on payday loans provided by Native American tribes are typically lower than those offered by other lenders. This can be beneficial for borrowers who may not be able to get a loan from a traditional lender.
Faster Approvals
Payday loans provided by Native American tribes can also be approved faster than those offered by traditional lenders. This makes them a good option for people who need money quickly.
Support for Tribal Members
Native American tribes may also offer payday loans to their members in order to provide financial support. This can be beneficial for tribal members who may not be able to get a loan from a traditional lender.
Cons
No Federal or State Regulations
The lack of federal and state regulations on payday loans provided by Native American tribes can be a downside. This means that borrowers may not have the same protections as they would with a traditional lender.
High Default Rates
The high default rates on payday loans provided by Native American tribes can be a downside. This means that borrowers may find it difficult to pay back the loan and may end up in more debt than they were in before taking out the loan.
Potential for Abuse
The potential for abuse of payday loans provided by Native American tribes can be a downside. This means that borrowers may be taken advantage of by unscrupulous lenders who may charge high fees or interest rates.
The Takeaway
Native American tribes have begun to enter into the payday loan industry by setting up Tribal Lending Enterprises (TLEs). These businesses are not subject to the same rules and regulations as other lenders, allowing them to offer higher interest rates and more lenient repayment terms. However, there are also risks associated with taking out a payday loan from a Native American tribe, such as the lack of federal and state regulations and the potential for abuse.
Are Payday Loans Right for You?
Payday loans provided by Native American tribes can be a good option for people who need money quickly and are unable to get a loan from a traditional lender. However, borrowers should be aware of the risks associated with taking out a payday loan and should make sure to research all of their options before committing to a loan.
References:
Payday Loans: What You Need to Know. (n.d.). Retrieved August 13, 2020, from https://www.consumer.ftc.gov/articles/0097-payday-loans
Tribal Lending Entities. (n.d.). Retrieved August 13, 2020, from https://www.consumerfinance.gov/about-us/blog/tribal-lending-entities/
Frequently Asked Questions
What is a tribal payday loan?
Tribal loans are made by lenders owned by Native American or Indian tribes, and the lenders operate within their tribe’s reservation. Tribal loans are often advertised as an alternative to payday loans for people who need emergency cash.
Are tribal loans easy to get?
Like payday loans, tribal loans are accessible to just about anyone, even with bad credit. There are no credit checks during underwriting, and borrowers usually only need a little income to qualify. They’re also quick to close, as borrowers often get their proceeds within a single business day.
Are tribal loans enforceable?
Contrary to their claims, tribal loans do have to follow state law. The take-away is this: while these lenders may not be able to be sued for money, they still have to comply with state lending regulations. What this means for you. Most consumers who take on tribal loans fall behind on them.
Can tribal loans garnish wages?
Can my wages be garnished by a tribal loan lender? If a loan is not repaid, you can be taken to court by a tribal loan lender. If the court rules in the lender’s favor (or if their claim isn’t contested), a legal order or judgment may be filed against you-then, the lender can garnish your wages.
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