by Megan O’Matz and Joel Jacobs

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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........

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