Attorney General brought federal lawsuit in 2023 to stop online lenders targeting vulnerable consumers and charging 400-800% interest; lenders had collected at least $540K from defaulted Minnesota borrowers
Consent order bans further predatory lending by defendant online companies and halts collection of illegal interest on outstanding high-interest debt
February 22, 2024 (SAINT PAUL) – Today Minnesota Attorney General Keith Ellison announced his office has secured a settlement that stops three online lenders from conducting predatory lending and collecting illegal interest. In October 2023, Attorney General Ellison sued three online lenders through their managers — Bright Lending, Green Trust Cash, and Target Cash Now, operating jointly under control of a single entity called the Island Mountain Development Group — for issuing thousands of loans to consumers in Minnesota that charged between 400 and 800 percent annual interest, in violation of Minnesota and federal consumer-lending laws. Through these illegal loans, the lenders had collected at least $540,000 from Minnesota borrowers who had defaulted on the loans and potentially much more from borrowers who were not in default. The settlement also requires the lenders to comply with Minnesota interest-rate caps and stop collection of illegal interest on loans. The Attorney General’s Office believes that outstanding balances affected by the settlement exceed $1 million.
“One of my most important jobs as Attorney General is to enforce laws that protect consumers from being ripped off,” said Attorney General Ellison. “If I find lenders charging outrageous interest rates and take advantage of Minnesotans, I will step in and bring a stop to it—whether it’s a business on your street corner or online. I’m pleased that my Office was able to uncover this illegal lending operation, bring it to an end, and help the people of Minnesota afford their lives.”
Background
The case, filed in October 2023, documented experiences of over 40 Minnesota consumers led to take out small-dollar loans that charged interest rates multiple times above the 36 percent annual rate allowed under Minnesota law for lenders that issue payday or other small, short-term loans. Accounts describe how consumers were led to take out loans to get immediate cash before learning they would face exorbitant interest, causing consumers to fall into a debt trap that many could not escape. When consumers asked how these outrageous interest rates were legal, they were told that Minnesota laws do not apply because the lenders operate online and are owned by sovereign Native American tribes.
The lawsuit asserted that these representations were false and that Minnesota law does indeed apply to online loans and businesses owned by a sovereign entity, whether it be a state or tribe. The lawsuit, however, recognized that because the lenders are owned by a tribal entity entitled to sovereign status, the lenders cannot be named directly in the lawsuit and cannot be ordered to pay penalties or other monetary relief.
“My approach to this case is to stop further violations while also preserving and respecting the tribes’ sovereign status,” stated Attorney General Ellison. “I hope the lawsuit my Office filed will serve as a roadmap that other attorneys general can follow to protect people from this type of predatory lending in the future.”
The Settlement
The settlement was filed and is enforceable in federal court in Minnesota. It provides that the businesses must comply with Minnesota law when lending to Minnesota residents that are signed up for loans while located in this state. It also requires that any loan issued before the settlement be canceled except to allow repayment of the original principal balance, which usually was between $350 and $1,500. Interest charges will be written down and all past payments will be attributed towards paying down principal.
The lawsuit, which enforces Minnesota’s statutory interest-rate caps (called “usury” laws), comes on the heels of a state law passed earlier last year and supported by Attorney General Ellison that closed loopholes allowing excessive fees on payday and other short-term lending and capped interest rates for payday loans at 36 percent. Attorney General Ellison has prioritized protecting consumers from exploitative and unfair lending practices, including support for legislation this session to close a different loophole for online lenders that partner with out-of-state banks to circumvent Minnesota laws.
While the overall scope of Bright Lending, Green Trust Cash, and Target Cash Now’s lending is not fully known yet, the Attorney General’s investigation obtained information from their debt collector showing that 634 of their loans to Minnesotans were in default and referred to collections from 2018 to 2022, with balances on those defaulted loans totaling $990,575. Given typical default rates on such loans, the Attorney General’s Office estimates that the lenders issued thousands of loans in Minnesota during that time that violate the law. Based on these figures, the Attorney General believes that outstanding balances affected by the settlement exceed $1 million. The settlement also includes mechanisms to ensure compliance and a full accounting of past illegal lending.
