Administrative Order Related to Alleged Usury Violations Unenforceable Against Indian Tribe

In October 2014, the Connecticut commissioner of banking sent a cease and desist order to two limited liability companies allegedly created by a federally recognized Indian tribe. The commissioner alleged that the companies had made usurious consumer loans and had operated without the necessary licenses. The commissioner ordered the companies to cease and desist from providing any additional loans and to refund any sums obtained from these allegedly usurious loans. The order also required the companies to provide a list of all Connecticut residents who had applied for consumer loans from the companies or had contracted with them to pay interest at rates exceeding the legal maximum.

The companies filed a motion to dismiss the order based on their tribal immunity from all state enforcement actions. The commissioner denied the motion and ordered the companies to pay civil penalties in the amount of $800,000 in addition to the requirements of the prior order. The companies appealed to the Superior Court.

On appeal, the companies renewed their claim for sovereign immunity. In response, the commissioner argued that the activity in question took place off the tribal reservation and was therefore subject to nondiscriminatory state laws. Additionally, the commissioner argued that tribal immunity only barred a state agency from bringing an action in court, but did not bar administrative action. The Superior Court disagreed.

It found that the US Supreme Court had previously ruled that off-reservation commercial conduct was immune from state action. The Superior Court also rejected the commissioner’s argument that only tribal immunity only prevented the bringing of a suit against a tribe. It held that an administrative action was equally barred by tribal immunity.

Though the court rejected the commissioner’s arguments, it remanded the action back to the commissioner in order to determine if the companies were, in fact, arms of the tribe and therefore entitled to tribal immunity. If they were not, the Superior Court seemed unlikely to prevent the commissioner from enforcing the cease and desist and civil penalty orders.

Great Plains Lending, LLC v. Conn. Dep’t of Banking, 2015 Conn. Super. LEXIS 2923 (Conn. Super. Ct. 2015)

About Patrick Siegfried

Patrick Siegfried is the author of the Usury Law Blog. Patrick is a practicing attorney in Bethesda, Maryland. Patrick’s work focuses on issues regarding alternative small business financing. He can be reached at psiegfried@usurylawblog.com

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