Fort Worth remains the last major Texas city not regulating payday loans
In times of desperation or financial uncertainty, a payday loan can be a way to get cash, quick — so long as the applicant accepts the terms and conditions set by the lender.
Fort Worth’s Think Finance LLC, according to lawsuits filed over the past several years across the country, capitalized on people’s vulnerabilities by repeatedly servicing loans with interest rates sometimes more than 15 times legal limits. And to fight away the allegations, the company used Native American tribal laws like a shield, the lawsuits allege.
The business, which was formed in 2001 as Think Finance Inc. and declared bankruptcy in 2017, purports to be a financial services firm providing software technology, analytics and marketing services to clients. But, according to lawsuits, the entity engaged in an illegal “rent-a-tribe” payday loan scheme, adopting Native American tribes as partners to evade state and federal laws.
The firm in 2016 was accused of being part of a scheme with Plain Green LLC, a lender “owned by the Chippewa Cree Tribe of the Rocky Boy’s Indian Reservation, Montana,” according to a complaint filed in Vermont. In 2018, according to a complaint in North Carolina, Think Finance was accused of giving out loans with illegal interest rates through an entity called Great Plains Lending.
That entity was allegedly created by Think Finance and former CEO Kenneth E. Rees, with connections to a tribe in Oklahoma. Rees is currently the CEO of Elevate Credit Inc., which has offices in Fort Worth and Dallas.
Over the course of the lawsuits — filed in Vermont, Pennsylvania, Florida, California and North Carolina — Think Finance and other defendants have argued they were exempt from state and federal laws because of their connection to a federally recognized tribe.
But the Fort Worth firm has settled the issue, according to a nationwide consumer settlement submitted to a Dallas court earlier in June.
Think Finance will pay roughly $39.7 million to 21 plaintiffs, according to the settlement. Additionally, any outstanding loans will be canceled, meaning customers with unpaid fees no longer have to worry about paying them back.
“The Settlement fully and finally resolves the claims and disputes among Plaintiffs, the Debtors and other Settling Parties,” counsel for the plaintiffs Leonard A. Bennett said in the document.
Multiple messages left at Think Finance weren’t answered. Rees also didn’t respond to a request for comment.
Additionally, counsel for Think Finance — Hunton Andrews Kurth, which has an office in Dallas — didn’t respond to a request for comment.
The settlement has been submitted to the U.S. Bankruptcy Court for the Northern District of Texas in Dallas. The court and all involved parties have to approve the document before it can become official.
Predatory loan practices
In July 2011, Vermont resident Jessica Gingras borrowed $1,050 from an entity called Plain Green LLC at an interest rate of 198.17 percent per annum, or per year, according to a complaint filed in Vermont. She paid off the loan.
But, the lawsuit states, she kept coming back in need of loans. And the exorbitant rates remained.
Over the course of 2011, 2012 and 2013, Gingras took out loans ranging from $1,250 to $3,000, with rates as high as 371 percent, according to the lawsuit. The legal limit in Vermont then was 24 percent. She was only able to pay off some of the loans.
Like all applicants seeking a loan from Plain Green, Gingras had signed agreements to receive the loans, according to the lawsuit. Those documents, the lawsuit alleges, outlined that any disagreements between lender and borrower “will be resolved by arbitration in accordance with Chippewa Cree tribal law.”
The agreements note “neither this Agreement nor the Lender is subject to the laws of any state of the United States,” according to the lawsuit.
“Chippewa Cree tribal courts are empowered to set aside the arbitrator’s award if it does not comply with tribal law,” the plaintiffs said in the lawsuit.
Victims of the Great Plains Lending scheme faced similar obstacles, court documents show. The organization claimed it was formed under laws of the Otoe-Missouria Tribe of Indians and was located at the tribe’s headquarters in Red Rock, Oklahoma, according to the North Carolina complaint.
In “rent-a-tribe” schemes, cooperating Native American tribes exchange their sovereign immunity for a percentage of revenues, according to the complaint.
Federally recognized Native American Indian tribes — which predate the U.S. Constitution — are sovereign entities separate from the U.S. government. Congress, however, can step in to rule on tribal matters if it chooses to do so.
These sovereign tribes are protected “against further encroachment by other sovereigns, such as the states,” according to the Indian Affairs division of the U.S. Department of the Interior.
The defendants have argued that, since they’re acting as an “arm of the tribe,” state and federal laws don’t apply to them. But plaintiffs have contended the defendants engaged in conduct outside of Indian lands, meaning state and federal laws are applicable.
More than 30 states including Texas allow payday loans with no interest rate cap, according to paydayloaninfo.org. Washington D.C. and 18 states, including Vermont, have imposed caps on rates.
The first lawsuit taking on Think Finance’s rent-a-tribe scheme was filed in Pennsylvania in 2014, according to the settlement. Plaintiffs in other states then followed.
In October 2017, Think Finance filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Northern District of Texas in Dallas and various consumer litigation was transferred to the court, according to the settlement.
The plaintiffs and Think Finance reportedly spent several months agreeing to the “essential terms” of the consumer borrower settlement, and many more months debating individual disputes.
The settlement establishes a trust that will carry funds to be awarded to the 21 plaintiffs.
Think Finance has agreed to transfer all the money from its Escrow Account — $39,695,589 — into the trust, according to the settlement. Other parties named in the settlement will contribute $15.95 million to the trust.
The plaintiffs will receive checks in the mail representing their share of the trust, according to the settlement. Two tiers of plaintiffs are outlined in the settlement — one that will receive 70 percent of the trust proceeds, and another that will receive 30 percent of the proceeds.
A planned website and automated toll-free telephone line will allow plaintiffs the opportunity to check the status of the settlement and any awards, according to the settlement.