August 25, 2014 | dan In one of our cases, Jackson v. Payday Financial, LLC, No. 12-2617, 2014 WL 4116804 (7th Cir., August 22, 2014), the federal court of appeals in Chicago rejected an attempt by payday lenders associated with a Native American tribe to avoid state restrictions on such loans. The court held that the district court erred in granting defendants’ motion to dismiss plaintiffs’ lawsuit, alleging that certain loans promulgated by defendants that had yearly interest rates of 139 percent violated various Illinois civil and criminal statutes, where dismissal was based on venue clause contained in loan agreements that called for parties to submit disputes to arbitration conducted by Cheyenne River Sioux Tribe that were to take place on Cheyenne River Sioux Tribe Reservation located in South Dakota. The court found that the arbitral mechanism specified in loan agreement was sham/illusory, since Tribe had no procedures for selection of arbitrators or for conduct of arbitral proceedings. Thus, it would not have been possible for plaintiffs to have ascertained dispute resolution process and rules to which they were agreeing at time of loan agreement. As such, Ct. found that plaintiffs could proceed in federal court where venue clause in loan agreement was substantively and procedurally unconscionable. The following is from a comment about the case on Indigenous Law and Policy Center Blog Michigan State University College of Law: As should be expected by this time, payday lending in Indian country is creating bad law for tribal interests. This case involved a privately owned payday lending operation. Tribally-owned operations will be scrambling to distinguish themselves from this case. Particularly troublesome is the holding and (hopefully) dicta from the opinion that suggests tribal courts have no jurisdiction involving off-reservation lending operations, even though the operation is based in Indian country and even though the lending instrument includes a forum selection clause naming a tribal forum. My initial recommendations to tribal leaders and counsel — shut down on-reservation-based payday lending operations operated privately immediately. My second recommendation is to ensure that tribal regulations of tribally owned payday lending operations are independent and robust. In other words, tribes must be able to withstand the kind of searching inquiry into their regulatory scheme that the federal court did in this case. Can tribal sovereign lenders say that?