MaxLend Operates Illegal ‘Rent-a-Tribe’ Payday Lending Scheme, Class Action Alleges [UPDATE]

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A proposed class action claims the operators of MaxLend.com have executed an unlawful “rent-a-tribe” scheme in an attempt to evade state usury laws while charging consumers nearly 700 percent interest on small loans.

As part of this so-called rent-a-tribe scheme, the defendants—Makes Cents, Inc.; Uetsa Tsakits, Inc.; and owners Cane Bay Partners VI, LLLP and two individuals—have claimed MaxLend is wholly owned by the Mandan, Hidatsa, and Ankara Nation, a federally recognized Native American tribe in North Dakota, the 21-page lawsuit alleges. 

In reality, however, the tribe has “no significant involvement” in the operation of the defendants’ lending business, and acts as “simply a façade for an illegal lending scheme” whereby the parties have exploited the tribe’s sovereign immunity in exchange for a fee, the suit says.

The case claims the defendants have violated several Illinois state laws and the federal Racketeer Influenced and Corrupt Organizations (RICO) Act by charging consumers excessive interest rates on small loans under the guise of a tribal organization.

The lawsuit alleges that although MaxLend, an online payday lending business, purports to be a “tribal lending entity” entitled to tribal immunity, its business is owned and operated by Cane Bay Partners and the two individual defendants, who are not members of the Mandan, Hidatsa, and Ankara Nation. Moreover, the principal economic benefit of the defendants’ business is received by mostly non-Native American consumers, the case says.

According to the suit, so-called “tribal lenders” such as the defendants typically perform all of their business functions “far from tribal land,” and are operated by and benefit non-tribal members to such an overwhelming degree, the lawsuit says, that tribal involvement is “effectively nil,” and tribal immunity does not apply.

“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 alleges.

The suit adds that attempts by non-tribal lenders to skirt usury laws by “fraudulently hiding behind” tribal immunity have been found to be criminal conduct.

The plaintiff in the case is an Illinois resident who claims to have received a $400 loan from MaxLend at an annual percentage rate of 699.77. Per the suit, the defendants have never had a license from the Illinois Department of Financial and Professional Regulation, or a state or federal banking or credit union charter, permitting them to make loans to Illinois residents at interest rates above nine percent. Moreover, a loan issued at more than 20 percent interest by a non-licensed lender is a felony in Illinois, according to the complaint.

The lawsuit alleges that the defendants “regularly make loans” to Illinois residents at well above those limits and at rates approaching 700 percent, in violation of state and federal laws.

The case looks to cover individuals with Illinois addresses to whom a loan was made in the name of MaxLend at more than nine-percent interest after March 23, 2021 and has not paid the loan in full.

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