Recently I was writing about a company that had strong Native American affiliations yet was not itself a tribal lending entity. The company is called AMG Services and they found themselves in the news because a federal judge has sided with a Federal Trade Commission claim that they are not immune from the scrutiny of the FTC just because of their ties to Native American lenders. Here's what happened...
The U.S. Federal District Cout Judge Gloria Navarro has agreed with the contention that the FTC just because AMG Services has strong ties to (multiple) Native American lenders it does not protect them from being regulated as just another company engaged in financial transactions and generally just part of interstate commerce.
AMG Services had argued that because much of their work was done for tribal lenders, and since tribal businesses are exempt from interference (regulation) from federal and state regulatory bodies, that the FTC had no jurisdiction or legal say as to what types of business AMG Services practiced. At issue is the high interest rates being utilized by AMG and the many affiliated tribal lenders that AMG has contracts with; the company performs a number of functions for tribal lenders which include customer service, account maintenance and, above all, collections activities on delinquent accounts.
Despite this close relationship Judge Navarro ruled that AMG Services was not to be held in any different light or scrutiny than any other licensed lending or collections agency.
Specifically in the case it's interesting because I'm always telling people here at the site to not take the threats made against them by tribal lenders too seriously. They not only threaten to ruin your credit but they often use the pathetic lie that the sheriff or deputy or some kind of law enforcement individual is about to serve them a warrant or place them under arrest for not repaying a loan.
So not only has the company mislead customers on how much the cash will cost them, the firm is also acting in deceitful and creepy ways to try to snatch away as much money as they can with no morality being applied at any point in the process.
Of course this works with a certain percentage of the customers because they panic at the prospect of the cops arriving at the door. But it didn't turn out too well for the defendant in this case, that's AMG Services, because part of the case focused on one consumer who was told it would cost him $650 to repay a $500 loan but the company somehow got confused and didn't remember the $650 part of the deal when the loan was issued, and instead wanted $1,925 to have the loan paid off. Just a slight difference in the amounts, no big deal right?
The FTC didn't think it was a slight difference and the consumer complained when AMG Services had their collection agents threaten the consumer with arrest if he didn't pay the $1,925 amount. And the FTC didn't stop there because they called out the company for "piling on undisclosed and inflated fees, and by threatening borrowers in debt collection calls with arrest and lawsuits" which is a direct quote and I don't think I could say it any better if I had to.
It's funny, I've been writing and complaining about high rates and bad practices by tribal lenders but in all my articles I don't think I ever hit on the head so eloquently as the FTC did in that one sentence. It's all true, the piling on fees, the fact that they are undisclosed, the inflated aspect, threatening borrowers who fall behind in their payments, and alluding to getting arrested and being sued even those these are unsecured loans that aren't even licensed in the state which they are being issued in.
I read exactly what Judge Navarro said in her ruling and the language she chose is quite interesting. At one point in talking about the scope of the jurisdiction granted to the FTC, she wrote that the agency has the "authority to regulate arms of Indian tribes, their employees, and their contractors" in relation to the powers granted to the Federal Trade Commission to regulate and monitor companies that are contractually tied to Native American lenders. By the way, just an aside, I was surprised the judge used the term "Indian" in this instance. Isn't it Native American these days? Oh well, I guess she's the judge.
The FTC has been pushing to try to reel in Native American loans because of the extraordinary finance charges, caused by the high rates, not to mention the various penalties and other odd (unknown) fees that get tossed on these loans. It's good that the judge sided with the FTC, and I think we'll be seeing more of this as this case and others move to the Federal Appellate Courts and ultimately to the U.S. Supreme Court.
It's not that people don't want Native American companies to operate as lenders, the truth is we as a society need many more sources of unsecured credit. But the difficulty is that nobody can afford an 800% APR on a loan, it's just beyond acceptable and that's why you will continue to see the tide turn against the tribal loan companies until they make substantial changes to their lending programs.
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