District court approves $18.5 million ‘rent-a-tribe’ payday loan settlement

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On February 25, the U.S. District Court for the Eastern District of Virginia allowed Preliminary Approval of $18.5 Million Class Action Lawsuit regulation to resolve allegations including violations of the Racketeer Influenced and Corrupt Organizations Act, usury and state loans laws, and unjust enrichment against a financial technology company and a tribal (accused). According to complaint, the company evaded the usury limits imposed by state law by attempting to use the sovereignty of an Indian tribe (“rent-a-tribe”) to issue payday loans bearing annual percentage interest rates up to 460%. Although the defendants have denied any wrongdoing, they have agreed to, among other things, (i) cancel the loans incurred during the class period “on the ground that the debt is disputed”; (ii) no longer sell outstanding loans and cease all collection activity; (iii) contact all consumer reporting agencies to request the permanent removal of any missed payment marks on loans incurred during the Class Period; (iv) no longer sell Group Members’ personally identifiable information to third parties; and (v) establish a fund of $18.5 million to cover costs, awards for services rendered, attorney fees and cash awards to class members.

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