Alleged 'rent-a-tribe' lender temporarily barred from new business in Minnesota

A Minneapolis judge has temporarily blocked Internet lender CashCall from making new loans in Minnesota, after the company was sued by state officials who argue it's an illegal, sham business.

CashCall is an unlicensed lender in Minnesota, offering personal loans with annual interest rates as high as 342 percent. In its response, the California-based company claims it's governed solely by tribal law, not state law, which the state rejects.

District Judge Kathleen Sheehy issued the temporary injunction Friday, and the order became public Monday. She said "the factual record strongly suggests that the State is particularly likely to prevail" on most of the matters in dispute.

Her order bars CashCall or its affiliates from "making, extending, arranging for, underwriting, funding, or purchasing any unsecured, personal loans to Minnesota borrowers."

The order does not bar the controversial lender from servicing existing loans in Minnesota. So it still can do business in Minnesota in a limited way.

In July, Minnesota Attorney General Lori Swanson and Commerce Commissioner Mike Rothman sued what they called a "rent-a-tribe" Internet lender for violating a series of state laws, including usury laws that put a cap on interest rates.

CashCall advertises on radio and TV and, Swanson believes, preys on vulnerable consumers who are then saddled with astronomical and ruinous payments.

A consumer loan of $2,600 could carry an annual percentage rate of 184 percent, plus a $75 "loan fee," according to CashCall's website. Repaying that loan would require 47 payments of $388 -- or more than $18,000.

Minnesota officials say the loans are originated by an outfit called Western Sky Financial, which state officials describe as "a facade to fraudulently give the loans the appearance to consumers that they are subject to tribal law, not state law." The loans then are immediately sold to CashCall or an affiliate.