CreditCube Hit with Class Action Over Alleged ‘Rent-a-Tribe’ Lending Scheme

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A proposed class action alleges online lender CreditCube has attempted to circumvent Illinois interest rate caps by posing as a Native American-owned business entitled to sovereign immunity.

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The 25-page lawsuit claims that CreditCube’s purported affiliation with the Big Valley Band of Pomo Indians is merely a façade for what’s known as a “rent-a-tribe” scheme, whereby non-tribal individuals issue high-interest payday loans in the name of a Native American tribal business entity that would otherwise be shielded from state usury laws.

The complaint charges that, in reality, CreditCube, CEO Ben G. Ray, III and payment processor North American Banking Company have “no colorable claim to sovereign immunity” but nevertheless issue loans to Illinois residents with interest rates of over 700 percent.

As a non-bank, unlicensed entity, Illinois law prohibits CreditCube from offering loans at more than nine percent interest, the filing explains. The suit relays that loans with interest rates that exceed this cap are considered “void and unenforceable,” and loans with interest rates that surpass 20 percent are a felony.

Although CreditCube claims to be “a wholly owned and operated business of the Big Valley Band of Pomo Indians of the Big Valley Rancheria,” a tribe with less than 700 members, at least 11 other internet lenders have operated out of the same 1,200-square-foot building at which the defendant claims to be headquartered.

“The existence of multiple lenders purportedly belonging to very small Native American tribes is indicative of a ‘rent-a-tribe’ arrangement, as otherwise there would be no need for multiple lenders,” the case reads, adding that a lending group may change its name several times to  evade regulatory scrutiny.

The complaint also alleges North American Banking Company, which receives and processes payments and electronic transactions for CreditCube, provides services for multiple tribal lending operations.

According to the filing, CreditCube most likely pays the Big Valley Band of Pomo Indians a single-digit percentage of its revenue to use its name, while non-tribal members perform all substantive aspects of its business operations.

The lawsuit looks to represent any Illinois resident to whom a loan was made in the name of CreditCube at more than nine percent interest which has not been paid in full.

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