Wisconsin tribal lender agrees to cancel suspect loans in Minnesota after state suit

A northern Wisconsin tribal lending operation will cease making allegedly predatory loans in Minnesota — and cancel existing credits — under a consent agreement with the state Attorney General’s office.

The agreement with the head of LDF Business Development Corp., an arm of the Lac du Flambeau Band of Lake Superior Chippewa, is the second state settlement this year with a tribal lender over online loans bearing annualized interest rates of over 200%.

The Lac du Flambeau tribe’s business arm, which has operated at least a dozen separate loan companies, has been one of the most active tribal lenders nationally and in Minnesota. Minnesota Attorney General Keith Ellison’s office estimates that LDF companies have made more than $1 million in loans in the state in recent years.

LDF’s lenders, which go under several names including Radiant Cash, Cash Aisle and Makwa Finance, have charged interest rates “exponentially higher” than Minnesota law allows, the Attorney General’s Office claims in a lawsuit filed Tuesday in U.S. District Court for Minnesota.

Those annualized rates “routinely” run from 200% to 800%, said the suit, which claims violations of Minnesota usury laws as well as state statutes for deceptive trade practices, false advertising and consumer fraud prevention.

The loans, which are generally under $2,000 and often under $1,000, are marketed to people in need of immediate cash. LDF lenders told Minnesota consumers that the out-of-state status of their tribal owner — and tribal law — allowed them to avoid compliance with Minnesota law, Ellison’s suit said.

The suit is filed against John Johnson as board president of LDF Business Development Corp., which ultimately owns the tribe’s lending operations. Johnson is also president of the Lac du Flambeau band, though he isn’t named as a defendant for that role.

Ellison’s office also Tuesday filed a consent order with Johnson in federal court, which would cancel prior loans in Minnesota. LDF lenders ceased collection or reduced balances to zero for loans to Minnesotans from July 24, 2016, to Oct. 1, 2023, said the consent order, which must get court approval.

Johnson denies that the tribe broke any Minnesota laws, Ellison’s office said in a court filing. And the consent judgment doesn’t constitute an admission of any wrongdoing by Johnson and the tribal lenders.

“I am grateful for the defendants’ cooperation in this investigation and agreement to cease further lending and collection activity in Minnesota,” Ellison said in a news statement. Johnson didn’t respond to requests for comment.

While Johnson agreed to halt further alleged illegal lending, LDF lenders stopped doing business in Minnesota in late 2023 after Ellison’s office sued the principal officers of a lending business owned by the Fort Belknap Indian Community in Montana, the suit said.

The attorney general alleged that Fort Belknap-affiliated lenders had violated several laws with thousands of online loans to state consumers carrying interest rates of 474% to 795 %. The Fort Belknap tribal loan company agreed to cease making illegal and predatory loans in February.

Many tribes in the Midwest and West — though not in Minnesota — have run online lending businesses for years. The Lac du Flambeau tribe’s lenders have been operating since 2012.

Consumer lending experts say tribal lenders target people who are financially desperate. But tribes with online lending operations are usually struggling, too, looking for ways to bolster economic development.

Tribal lending also comes with a twist since tribes are sovereign governments, immune from lawsuits. Ellison said his office’s LDF suit doesn’t name LDF’s tribal lenders as defendants for that reason. Tribal lenders and their executives have often used sovereignty as a defense in scores of lawsuits filed by consumers nationally.

Those lawsuits, which include a multitude against lending operations operated by LDF, typically allege that nontribal companies affiliated with tribal lenders take advantage of tribal sovereignty as a legal shield.

Though Lac du Flambeau lenders are owned by a tribal business, Ellison’s suit said “non-tribal tribal actors appear to play a coordinated and substantial role in managing illegal lending operations and collecting revenue from loan repayments.”

In August, LDF Business Development Corp. and non-tribal lending companies agreed to pay a $37.4 million settlement to consumers in a class action suit alleging predatory lending, according to Wisconsin Public Radio. The deal in a federal court in Virginia included canceling $1.4 billion in debt from outstanding loans.

LDF Business Development Corp. agreed to pay $2 million of that settlement.