605 Lending Operates Illegal ‘Rent-a-Tribe’ Loan Scheme, Class Action Alleges

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Payday lender FSST Management Services, LLC faces a proposed class action over its alleged participation in a so-called “rent-a-tribe” lending scheme whereby the company allegedly purports to be operated by a Native American tribe to avoid state usury laws.

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The 22-page lawsuit in Illinois alleges that although the defendants—who include FSST, operating as 605 Lending; its CEO and COO; and First Direct Mediation, Inc., a debt collector—claim to be operated by the Flandreau Santee Sioux Tribe, the tribe’s involvement in the “predatory” lending operation is “merely superficial.” According to the case, the defendants are, in truth, non-tribal lenders hiding behind an “elaborate charade” through which they pay the Flandreau Santee Sioux Tribe a fraction of their revenues in exchange for the use of its name and associated tribal immunity.

“On information and belief, the Tribe’s only real contribution is providing a cloak of sovereign immunity for illegal lending activities,” the complaint charges, alleging that 605 Lending has charged Illinois consumers more than 700 percent interest on payday loans in violation of the state’s usury laws.

The lawsuit says that although 605 Lending purports to be operated by the Flandreau Santee Sioux Tribe, “all substantive aspects” of the lending business’s operations are performed by, financed by and benefit non-tribal members.  

“Where non-tribal individuals and entities control and manage the substantive lending functions, provide the lending capital necessary to support the operation, and bear the economic risk associated with the operation, they are not in fact ‘operated’ by Native American tribes and, therefore, are not shielded by sovereign immunity,” the complaint argues.

According to the suit, the loans made by 605 Lending are void and unenforceable because they violate Illinois law, which prohibits entities without a bank or credit union charter or a consumer lending license issued by the state’s Department of Financial and Professional Regulation from making loans at an interest rate of greater than nine percent. Per the case, 605 Lending has neither a bank nor credit union charter nor an Illinois lending license yet has made loans in the state at interest rates of 700 percent or more.

Moreover, First Direct Mediation has attempted to collect on 605’s allegedly illegal loans in violation of the federal Fair Debt Collection Practices Act, the lawsuit alleges.

The lawsuit looks to represent Illinois consumers to whom a loan was made at more than nine percent interest and:

• The loan was made in the name of 605 Lending and has not been paid in full;
• The loan was made by an entity without a proper lending license in Illinois or a bank or credit union charter, has not been paid in full, and that First Direct is seeking to collect or has collected on within the past five years;
• The loan was made in the name of FSST Management Services (doing business as 605 Lending) and is still outstanding or has been paid within the past two years;
• The loan was made by an entity without a proper lending license in Illinois or a bank or credit union charter and First Direct has collected money on it within the past two years;
• The loan was made in the name of FSST Management Services (doing business as 605 Lending) on or after March 23, 2021;
• The loan was made by an entity without a proper lending license in Illinois or a bank or credit union charter and First Direct has collected money on it on or after March 23, 2021;
• The loan was made in the name of FSST Management Services (doing business as 605 Lending) within the past four years; or
• The loan was made by an entity without a proper lending license in Illinois or a bank or credit union charter and First Direct collected money on it after a communication was made within the past year and until 30 days after the suit was filed.

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