What Happened to Great Plains Lending? The Rise and Fall of a Tribal Lending Enterprise

Great Plains Lending, once a prominent name in the online lending space, particularly known for offering short-term, high-interest loans, ultimately ceased operations. The company faced a complex web of legal challenges, regulatory scrutiny, and financial pressures that culminated in its demise. Specifically, challenges to their tribal lending model and its assertion of sovereign immunity in the face of state and federal consumer protection laws, coupled with dwindling profitability, proved insurmountable. Essentially, the legal foundation upon which their business model was built eroded, leaving them vulnerable to lawsuits and regulatory action.

Understanding the Great Plains Lending Business Model

To truly understand what happened to Great Plains Lending, we need to delve into the specifics of their business model. Like many other online lenders, Great Plains Lending primarily offered installment loans and lines of credit to consumers, often with less-than-perfect credit scores. These loans typically came with high interest rates and fees, reflecting the increased risk associated with lending to this demographic.

However, what set Great Plains Lending apart was its affiliation with a Native American tribe. The company claimed to be an arm of a tribal entity, arguing that this affiliation granted them sovereign immunity from state laws regulating interest rates and lending practices. This strategy was not unique; numerous tribal lending entities emerged, seeking to bypass state usury laws and operate nationally without adhering to the specific consumer protections enacted by individual states.

The Appeal of Sovereign Immunity

The concept of sovereign immunity allows federally recognized Native American tribes to operate independently from many state and federal regulations. Tribal lending entities argued that this immunity extended to their lending operations, shielding them from state laws governing interest rates, loan terms, and collection practices. This allowed them to offer loans with Annual Percentage Rates (APRs) far exceeding state limits.

For consumers, the appeal was access to credit, even with a poor credit history. For the lenders, the potential for profit was substantial, given the high interest rates and the perceived protection from state regulation. However, this model quickly attracted the attention of regulators and consumer advocacy groups.

The Regulatory and Legal Challenges

The success of the tribal lending model was short-lived. Numerous states and the federal government challenged the assertion of sovereign immunity by these lending entities. Lawsuits and investigations alleged that these lenders were engaging in predatory lending practices, targeting vulnerable consumers with exorbitant interest rates and hidden fees.

Key Legal Battles

One of the most significant legal battles involved the Consumer Financial Protection Bureau (CFPB). The CFPB filed lawsuits against several tribal lending entities, including those affiliated with Great Plains Lending, alleging violations of federal consumer protection laws. The core argument was that these lenders were not truly arms of the tribe and that the claim of sovereign immunity was a sham designed to evade state and federal regulations.

State attorneys general also pursued legal action, arguing that the lenders were operating illegally within their jurisdictions. These lawsuits challenged the legitimacy of the tribal affiliation and sought to enforce state usury laws and consumer protection regulations. The challenges brought by both federal and state regulators put immense financial pressure on these lenders.

The Erosion of Sovereign Immunity

Over time, courts began to side with the regulators and consumers, finding that the tribal affiliation was often a business arrangement designed to circumvent the law, rather than a genuine exercise of tribal sovereignty. In many cases, the courts determined that the tribes had limited control over the lending operations and that the true beneficiaries were non-tribal individuals and entities. This erosion of sovereign immunity was a critical blow to the tribal lending model.

The Financial Pressures

In addition to the legal and regulatory challenges, Great Plains Lending faced increasing financial pressures. The lawsuits and investigations led to significant legal fees and potential penalties. The negative publicity surrounding the company’s lending practices also damaged its reputation and made it more difficult to attract new customers.

Decreasing Profitability

As the legal landscape became increasingly hostile, many consumers became wary of borrowing from tribal lenders. This led to a decrease in loan volume and a corresponding decline in profitability. The increased scrutiny also made it more difficult to obtain funding and maintain the operational infrastructure necessary to run a large-scale lending operation. The combined effect of these factors created a downward spiral that ultimately led to the demise of Great Plains Lending.

The End of Operations

Faced with mounting legal costs, declining profitability, and an increasingly hostile regulatory environment, Great Plains Lending eventually ceased operations. The company’s website was shut down, and it stopped offering new loans. While the exact details of its closure remain somewhat opaque, the factors outlined above clearly played a significant role in its downfall. Great Plains Lending serves as a cautionary tale about the risks of building a business model on shaky legal ground.

Frequently Asked Questions (FAQs) About Great Plains Lending

1. What types of loans did Great Plains Lending offer?

Great Plains Lending primarily offered short-term installment loans and lines of credit. These loans were typically aimed at consumers with poor credit who might not qualify for traditional bank loans.

2. What were the interest rates and fees associated with Great Plains Lending loans?

Great Plains Lending’s loans often came with very high interest rates, often exceeding state usury laws. APRs could range from several hundred percent, depending on the loan amount, term, and the borrower’s creditworthiness. They also charged various fees, such as origination fees, late payment fees, and non-sufficient funds (NSF) fees.

3. How was Great Plains Lending affiliated with a Native American tribe?

Great Plains Lending claimed to be an arm of a Native American tribe, asserting that this affiliation granted them sovereign immunity from state laws regulating lending practices. They partnered with a tribe, claiming their operations were under tribal authority.

4. What is sovereign immunity and how did it apply to Great Plains Lending?

Sovereign immunity is the legal principle that protects federally recognized Native American tribes from certain lawsuits and state regulations. Great Plains Lending argued that this immunity extended to its lending operations, shielding it from state usury laws.

5. Why were states and the federal government challenging Great Plains Lending’s claim of sovereign immunity?

States and the federal government argued that Great Plains Lending’s tribal affiliation was a sham designed to evade state and federal consumer protection laws. They claimed that the tribe had limited control over the lending operations and that the true beneficiaries were non-tribal entities.

6. What role did the Consumer Financial Protection Bureau (CFPB) play in the downfall of Great Plains Lending?

The CFPB filed lawsuits against Great Plains Lending and other tribal lending entities, alleging violations of federal consumer protection laws. These lawsuits challenged the legitimacy of the tribal affiliation and sought to hold the lenders accountable for their lending practices.

7. What happened to consumers who had loans with Great Plains Lending when the company ceased operations?

The outcome for consumers with outstanding loans varied. In some cases, loan agreements were voided or renegotiated as part of legal settlements. Other lenders or collection agencies might have acquired the outstanding loan portfolios, and borrowers were then required to repay their debts to these entities. Many consumers were advised to seek legal counsel.

8. Was Great Plains Lending considered a predatory lender?

Due to the high interest rates and fees associated with its loans, Great Plains Lending was often accused of being a predatory lender. Critics argued that its lending practices targeted vulnerable consumers and trapped them in a cycle of debt.

9. What lessons can be learned from the Great Plains Lending case?

The Great Plains Lending case highlights the importance of compliance with consumer protection laws and the risks of building a business model on questionable legal grounds. It also underscores the need for regulatory oversight to protect consumers from predatory lending practices.

10. Are tribal lending entities still operating today?

While the landscape has changed significantly, some tribal lending entities continue to operate today. However, they face increased regulatory scrutiny and legal challenges. Some have adapted their business models to comply with state laws or have formed partnerships with state-chartered banks.

11. Where can consumers with poor credit find legitimate loan options?

Consumers with poor credit can explore options such as credit unions, community banks, and online lenders that offer more reasonable interest rates and terms. It is also advisable to improve credit scores through responsible financial management to qualify for better loan options.

12. What are some signs of a predatory loan?

Signs of a predatory loan include extremely high interest rates, hidden fees, short repayment terms, and demands for collateral that exceed the loan amount. Consumers should always read the fine print and compare offers from multiple lenders before taking out a loan.