A Tribal Lender Charging 800% APR Has Agreed to Stop Operating in Minnesota by Megan O’Matz and Joel Jacobs

by Megan O’Matz and Joel Jacobs

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

A new settlement that will end a payday-like loan operation in Minnesota puts additional pressure on a Native American tribe that has been on the defensive for its high borrowing rates across the country.

The Lac du Flambeau Band of Lake Superior Chippewa Indians has been telling customers that its practices are allowable, but that stance has become harder to maintain. Shortly before Thanksgiving, the Wisconsin tribe agreed to settle a civil suit filed by Minnesota Attorney General Keith Ellison alleging that LDF broke state law, which requires reasonable lending rates, by charging Minnesotans between 200% and 800% annual interest. The state also claimed LDF had violated statutes on consumer fraud, deceptive trade and false advertising.

In the consent decree, LDF’s top official denied the allegations but formally agreed to stop lending to people in Minnesota unless the tribe adheres to the state’s strict usury laws and other regulations, including licensing requirements.

Tribal Council President John Johnson Sr., the lone defendant in the case, also promised that the tribe’s lending arm would forgive all outstanding loans to Minnesotans, estimated to be worth more than $1 million. A judge must still approve the consent agreement.

“I will not allow Minnesotans to be exploited by predatory lenders,” Ellison said in a press release announcing the settlement.

Johnson did not return calls or emails seeking comment. He is board president of the LDF Business Development Corp., which runs a variety of tribal companies, including its lending operation.

Previously, Johnson has said LDF’s lending practices are transparent and its collection methods are fair and ethical. “In offering unsecured loans, we consciously embrace the risk involved, reflecting our commitment to aid those facing urgent financial needs,” Johnson said in an April email to ProPublica.

The move by Minnesota to cut off lending companies controlled by LDF comes shortly after ProPublica reported extensively in August and September on LDF’s loan operations, finding that over the past decade, the tribe has grown to become one of the leading players in the tribal lending industry. Its loans contribute to the debt people shoulder throughout the country. A ProPublica analysis found companies owned by the LDF tribe showed up as a creditor in roughly 1 out of every 100 bankruptcy cases sampled nationwide.

The Minnesota attorney general’s office reported in its federal court filing that the state had received many consumer complaints about LDF Holdings, the tribe’s lending arm, that described extreme hardship caused by “continuing demands for payment of excessive interest.”

It gave the example of a Burnsville resident who took out a $1,398 loan from the LDF company Lendumo in December 2023 at an annual percentage rate of 795%. The loan snowballed to $8,593.

After Minnesota authorities reached out to LDF on behalf of the borrower, LDF argued that the loan was legal and not subject to state law, but Lendumo resolved the complaint “as a courtesy” — though not before demanding an additional $389, court records state.

“These are the highest, most nefarious APRs that we see,” said Anne Leland Clark, executive director of Exodus Lending, a nonprofit in Minnesota that refinances payday loans for borrowers using tax dollars and private donations. About a quarter of the loans they have refinanced since 2015 are tribal loans, she said.

This summer, in a class-action lawsuit out of Virginia, tribal council leaders agreed to a landmark settlement that cancels $1.4 billion in outstanding loans nationwide and provides $37.4 million in restitution and attorney fees. LDF officials will pay $2 million of that, while the remainder is to be paid by nontribal partners involved in five of the tribe’s lending firms. A final approval hearing is scheduled for Dec. 13.

Despite the national settlement and the action in Minnesota, Johnson has not signaled that the tribe will exit the lucrative lending business or alter its practices. ProPublica previously determined that LDF entered the loan business in 2012 and set up at least two dozen lending companies and websites, some of which remain active today.

LDF works with outside firms to operate businesses offering short-term installment loans. Unlike traditional payday loans, these are not due by the next pay period; typically, they are repaid over months in installments via automatic bank deductions.

One defunct website associated with LDF, Lendgreen, was the subject of a 2023 U.S. Supreme Court ruling that held that tribes must abide by the U.S. Bankruptcy Code, including provisions protecting debtors from continued collection efforts and harassment during the restructuring process.

Only a few dozen of the country’s 574 federally recognized tribes engage in online lending. Those that do often see it as an economic boon for their community, bringing in much-needed revenue for tribal government operations, which have limited options for expansion in their often-remote areas of the country.

LDF grew its footprint, ProPublica found, by partnering with multiple outside managers and financiers. Revenue data is not public, but historically, in the tribal lending model of payday lending, these outsiders have taken the lion’s share of the profits, according to lawsuits.

Lac du Flambeau Tribal President John Johnson Sr., the lone defendant in Minnesota’s suit over the tribe’s lending practices

(Angela Major/WPR)

In a prior email to ProPublica, Johnson described LDF’s lending operation as an engine for community improvement. “The importance of our business extends far beyond simple economics; it is interwoven with the very fabric of our community, supporting a myriad of vital services,” Johnson wrote.

LDF and other tribal lenders contend that they are able to offer loans at exorbitant rates because of Native American tribes’ sovereign rights and immunities.

LDF’s loan documents have included provisions waiving Minnesota law, according to the state’s lawsuit, and improperly limited consumers’ rights to challenge repayment demands, falsely claiming Minnesota law doesn’t apply because of sovereign immunity.

The attorney general’s office also cited a letter from LDF Holdings to a borrower that stated: “the loan is not subject to state law and the [LDF lender] is not required to be licensed with any state. Your loan is legal.”

The tribe has stressed that it follows tribal law and federal law, which has no interest rate cap except for active-duty military members and their families.

States are not powerless, however, to address the issue.

Courts have ruled that while states cannot pursue tribes for monetary damages, they can sue the executives in charge and obtain injunctions stopping future harm.

“The truth is that out-of-state businesses and businesses incorporated under the laws of other sovereigns must comply with Minnesota law when transacting business in Minnesota,” Ellison wrote.

The LDF settlement is the second enforcement action by Ellison directed at tribal lenders operating in Minnesota.

In February, his office obtained a settlement agreement with top lending executives of the Fort Belknap Indian Community in Montana. It, too, bars the tribe — which denied any wrongdoing — from making future loans in Minnesota. Calling itself an industry leader, the Fort Belknap operation revealed in an annual report that it had processed more than 300,000 loans nationwide in 2021. The tribe’s economic development arm, which legal filings show gets most of its revenue from lending, reported more than $180 million in revenue that year.

In an interview with ProPublica in March, Ellison said other states with strong usury laws could follow Minnesota’s lead. “I hope other states do look at what we did and take note.” He declined to be interviewed for this story.

Minnesota strengthened its usury laws with legislation that took effect in January 2024 governing small-dollar loans. It eliminated a sliding scale of set fees and imposed a stricter APR cap: 36% in many instances, but 50% for licensed lenders that conduct an analysis on whether a borrower can repay.

Johnson told the attorney general’s office that the tribe had stopped originating new loans to Minnesotans as of Dec. 31, 2023, a day before the law took effect, according to the consent decree. by Megan O’Matz and Joel Jacobs

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

A new settlement that will end a payday-like loan operation in Minnesota puts additional pressure on a Native American tribe that has been on the defensive for its high borrowing rates across the country.

The Lac du Flambeau Band of Lake Superior Chippewa Indians has been telling customers that its practices are allowable, but that stance has become harder to maintain. Shortly before Thanksgiving, the Wisconsin tribe agreed to settle a civil suit filed by Minnesota Attorney General Keith Ellison alleging that LDF broke state law, which requires reasonable lending rates, by charging Minnesotans between 200% and 800% annual interest. The state also claimed LDF had violated statutes on consumer fraud, deceptive trade and false advertising.

In the consent decree, LDF’s top official denied the allegations but formally agreed to stop lending to people in Minnesota unless the tribe adheres to the state’s strict usury laws and other regulations, including licensing requirements.

Tribal Council President John Johnson Sr., the lone defendant in the case, also promised that the tribe’s lending arm would forgive all outstanding loans to Minnesotans, estimated to be worth more than $1 million. A judge must still approve the consent agreement.

“I will not allow Minnesotans to be exploited by predatory lenders,” Ellison said in a press release announcing the settlement.

Johnson did not return calls or emails seeking comment. He is board president of the LDF Business Development Corp., which runs a variety of tribal companies, including its lending operation.

Previously, Johnson has said LDF’s lending practices are transparent and its collection methods are fair and ethical. “In offering unsecured loans, we consciously embrace the risk involved, reflecting our commitment to aid those facing urgent financial needs,” Johnson said in an April email to ProPublica.

The move by Minnesota to cut off lending companies controlled by LDF comes shortly after ProPublica reported extensively in August and September on LDF’s loan operations, finding that over the past decade, the tribe has grown to become one of the leading players in the tribal lending industry. Its loans contribute to the debt people shoulder throughout the country. A ProPublica analysis found companies owned by the LDF tribe showed up as a creditor in roughly 1 out of every 100 bankruptcy cases sampled nationwide.

The Minnesota attorney general’s office reported in its federal court filing that the state had received many consumer complaints about LDF Holdings, the tribe’s lending arm, that described extreme hardship caused by “continuing demands for payment of excessive interest.”

It gave the example of a Burnsville resident who took out a $1,398 loan from the LDF company Lendumo in December 2023 at an annual percentage rate of 795%. The loan snowballed to $8,593.

After Minnesota authorities reached out to LDF on behalf of the borrower, LDF argued that the loan was legal and not subject to state law, but Lendumo resolved the complaint “as a courtesy” — though not before demanding an additional $389, court records state.

“These are the highest, most nefarious APRs that we see,” said Anne Leland Clark, executive director of Exodus Lending, a nonprofit in Minnesota that refinances payday loans for borrowers using tax dollars and private donations. About a quarter of the loans they have refinanced since 2015 are tribal loans, she said.

This summer, in a class-action lawsuit out of Virginia, tribal council leaders agreed to a landmark settlement that cancels $1.4 billion in outstanding loans nationwide and provides $37.4 million in restitution and attorney fees. LDF officials will pay $2 million of that, while the remainder is to be paid by nontribal partners involved in five of the tribe’s lending firms. A final approval hearing is scheduled for Dec. 13.

Despite the national settlement and the action in Minnesota, Johnson has not signaled that the tribe will exit the lucrative lending business or alter its practices. ProPublica previously determined that LDF entered the loan business in 2012 and set up at least two dozen lending companies and websites, some of which remain active today.

LDF works with outside firms to operate businesses offering short-term installment loans. Unlike traditional payday loans, these are not due by the next pay period; typically, they are repaid over months in installments via automatic bank deductions.

One defunct website associated with LDF, Lendgreen, was the subject of a 2023 U.S. Supreme Court ruling that held that tribes must abide by the U.S. Bankruptcy Code, including provisions protecting debtors from continued collection efforts and harassment during the restructuring process.

Only a few dozen of the country’s 574 federally recognized tribes engage in online lending. Those that do often see it as an economic boon for their community, bringing in much-needed revenue for tribal government operations, which have limited options for expansion in their often-remote areas of the country.

LDF grew its footprint, ProPublica found, by partnering with multiple outside managers and financiers. Revenue data is not public, but historically, in the tribal lending model of payday lending, these outsiders have taken the lion’s share of the profits, according to lawsuits.

Lac du Flambeau Tribal President John Johnson Sr., the lone defendant in Minnesota’s suit over the tribe’s lending practices

(Angela Major/WPR)

In a prior email to ProPublica, Johnson described LDF’s lending operation as an engine for community improvement. “The importance of our business extends far beyond simple economics; it is interwoven with the very fabric of our community, supporting a myriad of vital services,” Johnson wrote.

LDF and other tribal lenders contend that they are able to offer loans at exorbitant rates because of Native American tribes’ sovereign rights and immunities.

LDF’s loan documents have included provisions waiving Minnesota law, according to the state’s lawsuit, and improperly limited consumers’ rights to challenge repayment demands, falsely claiming Minnesota law doesn’t apply because of sovereign immunity.

The attorney general’s office also cited a letter from LDF Holdings to a borrower that stated: “the loan is not subject to state law and the [LDF lender] is not required to be licensed with any state. Your loan is legal.”

The tribe has stressed that it follows tribal law and federal law, which has no interest rate cap except for active-duty military members and their families.

States are not powerless, however, to address the issue.

Courts have ruled that while states cannot pursue tribes for monetary damages, they can sue the executives in charge and obtain injunctions stopping future harm.

“The truth is that out-of-state businesses and businesses incorporated under the laws of other sovereigns must comply with Minnesota law when transacting business in Minnesota,” Ellison wrote.

The LDF settlement is the second enforcement action by Ellison directed at tribal lenders operating in Minnesota.

In February, his office obtained a settlement agreement with top lending executives of the Fort Belknap Indian Community in Montana. It, too, bars the tribe — which denied any wrongdoing — from making future loans in Minnesota. Calling itself an industry leader, the Fort Belknap operation revealed in an annual report that it had processed more than 300,000 loans nationwide in 2021. The tribe’s economic development arm, which legal filings show gets most of its revenue from lending, reported more than $180 million in revenue that year.

In an interview with ProPublica in March, Ellison said other states with strong usury laws could follow Minnesota’s lead. “I hope other states do look at what we did and take note.” He declined to be interviewed for this story.

Minnesota strengthened its usury laws with legislation that took effect in January 2024 governing small-dollar loans. It eliminated a sliding scale of set fees and imposed a stricter APR cap: 36% in many instances, but 50% for licensed lenders that conduct an analysis on whether a borrower can repay.

Johnson told the attorney general’s office that the tribe had stopped originating new loans to Minnesotans as of Dec. 31, 2023, a day before the law took effect, according to the consent decree. 

A new settlement that will end a payday-like loan operation in Minnesota puts additional pressure on a Native American tribe that has been on the defensive for its high borrowing rates across the country.

The Lac du Flambeau Band of Lake Superior Chippewa Indians has been telling customers that its practices are allowable, but that stance has become harder to maintain. Shortly before Thanksgiving, the Wisconsin tribe agreed to settle a civil suit filed by Minnesota Attorney General Keith Ellison alleging that LDF broke state law, which requires reasonable lending rates, by charging Minnesotans between 200% and 800% annual interest. The state also claimed LDF had violated statutes on consumer fraud, deceptive trade and false advertising.

In the consent decree, LDF’s top official denied the allegations but formally agreed to stop lending to people in Minnesota unless the tribe adheres to the state’s strict usury laws and other regulations, including licensing requirements.

Tribal Council President John Johnson Sr., the lone defendant in the case, also promised that the tribe’s lending arm would forgive all outstanding loans to Minnesotans, estimated to be worth more than $1 million. A judge must still approve the consent agreement.

“I will not allow Minnesotans to be exploited by predatory lenders,” Ellison said in a press release announcing the settlement.

Johnson did not return calls or emails seeking comment. He is board president of the LDF Business Development Corp., which runs a variety of tribal companies, including its lending operation.

Previously, Johnson has said LDF’s lending practices are transparent and its collection methods are fair and ethical. “In offering unsecured loans, we consciously embrace the risk involved, reflecting our commitment to aid those facing urgent financial needs,” Johnson said in an April email to ProPublica.

The move by Minnesota to cut off lending companies controlled by LDF comes shortly after ProPublica reported extensively in August and September on LDF’s loan operations, finding that over the past decade, the tribe has grown to become one of the leading players in the tribal lending industry. Its loans contribute to the debt people shoulder throughout the country. A ProPublica analysis found companies owned by the LDF tribe showed up as a creditor in roughly 1 out of every 100 bankruptcy cases sampled nationwide.

The Minnesota attorney general’s office reported in its federal court filing that the state had received many consumer complaints about LDF Holdings, the tribe’s lending arm, that described extreme hardship caused by “continuing demands for payment of excessive interest.”

It gave the example of a Burnsville resident who took out a $1,398 loan from the LDF company Lendumo in December 2023 at an annual percentage rate of 795%. The loan snowballed to $8,593.

After Minnesota authorities reached out to LDF on behalf of the borrower, LDF argued that the loan was legal and not subject to state law, but Lendumo resolved the complaint “as a courtesy” — though not before demanding an additional $389, court records state.

“These are the highest, most nefarious APRs that we see,” said Anne Leland Clark, executive director of Exodus Lending, a nonprofit in Minnesota that refinances payday loans for borrowers using tax dollars and private donations. About a quarter of the loans they have refinanced since 2015 are tribal loans, she said.

This summer, in a class-action lawsuit out of Virginia, tribal council leaders agreed to a landmark settlement that cancels $1.4 billion in outstanding loans nationwide and provides $37.4 million in restitution and attorney fees. LDF officials will pay $2 million of that, while the remainder is to be paid by nontribal partners involved in five of the tribe’s lending firms. A final approval hearing is scheduled for Dec. 13.

Despite the national settlement and the action in Minnesota, Johnson has not signaled that the tribe will exit the lucrative lending business or alter its practices. ProPublica previously determined that LDF entered the loan business in 2012 and set up at least two dozen lending companies and websites, some of which remain active today.

Good journalism makes a difference:

LDF works with outside firms to operate businesses offering short-term installment loans. Unlike traditional payday loans, these are not due by the next pay period; typically, they are repaid over months in installments via automatic bank deductions.

One defunct website associated with LDF, Lendgreen, was the subject of a 2023 U.S. Supreme Court ruling that held that tribes must abide by the U.S. Bankruptcy Code, including provisions protecting debtors from continued collection efforts and harassment during the restructuring process.

Only a few dozen of the country’s 574 federally recognized tribes engage in online lending. Those that do often see it as an economic boon for their community, bringing in much-needed revenue for tribal government operations, which have limited options for expansion in their often-remote areas of the country.

LDF grew its footprint, ProPublica found, by partnering with multiple outside managers and financiers. Revenue data is not public, but historically, in the tribal lending model of payday lending, these outsiders have taken the lion’s share of the profits, according to lawsuits.

In a prior email to ProPublica, Johnson described LDF’s lending operation as an engine for community improvement. “The importance of our business extends far beyond simple economics; it is interwoven with the very fabric of our community, supporting a myriad of vital services,” Johnson wrote.

LDF and other tribal lenders contend that they are able to offer loans at exorbitant rates because of Native American tribes’ sovereign rights and immunities.

LDF’s loan documents have included provisions waiving Minnesota law, according to the state’s lawsuit, and improperly limited consumers’ rights to challenge repayment demands, falsely claiming Minnesota law doesn’t apply because of sovereign immunity.

The attorney general’s office also cited a letter from LDF Holdings to a borrower that stated: “the loan is not subject to state law and the [LDF lender] is not required to be licensed with any state. Your loan is legal.”

The tribe has stressed that it follows tribal law and federal law, which has no interest rate cap except for active-duty military members and their families.

States are not powerless, however, to address the issue.

Courts have ruled that while states cannot pursue tribes for monetary damages, they can sue the executives in charge and obtain injunctions stopping future harm.

“The truth is that out-of-state businesses and businesses incorporated under the laws of other sovereigns must comply with Minnesota law when transacting business in Minnesota,” Ellison wrote.

The LDF settlement is the second enforcement action by Ellison directed at tribal lenders operating in Minnesota.

In February, his office obtained a settlement agreement with top lending executives of the Fort Belknap Indian Community in Montana. It, too, bars the tribe — which denied any wrongdoing — from making future loans in Minnesota. Calling itself an industry leader, the Fort Belknap operation revealed in an annual report that it had processed more than 300,000 loans nationwide in 2021. The tribe’s economic development arm, which legal filings show gets most of its revenue from lending, reported more than $180 million in revenue that year.

In an interview with ProPublica in March, Ellison said other states with strong usury laws could follow Minnesota’s lead. “I hope other states do look at what we did and take note.” He declined to be interviewed for this story.

Minnesota strengthened its usury laws with legislation that took effect in January 2024 governing small-dollar loans. It eliminated a sliding scale of set fees and imposed a stricter APR cap: 36% in many instances, but 50% for licensed lenders that conduct an analysis on whether a borrower can repay.

Johnson told the attorney general’s office that the tribe had stopped originating new loans to Minnesotans as of Dec. 31, 2023, a day before the law took effect, according to the consent decree.

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