Judge questions limits of tribal immunity in Minnesota predatory lending suit

MINNEAPOLIS (CN) — Expressing skepticism over a tribal lender’s voluntary choice to slash its high interest rates, a federal judge weighed Tuesday whether Minnesota can push forward with seeking to void thousands of “predatory” loans issued to residents through a lawsuit.

Arguing in favor of dismissing the state’s suit, Plain Green LLC — controlled and operated by the Chippewa Cree Tribe in Montana — said its April decision to cap interest rates for Minnesota borrowers at 8% makes the state action moot, though U.S. District Judge Jeffrey Bryan struggled to agree.

“I think what we have here is a resolution case in the light most favorable to you,” the Joe Biden appointee said. “It doesn’t void the loan itself; it would still require the indebted party to pay back the outstanding principal.”

Minnesota argues the simple act of passing a resolution reducing the interest rate does not resolve all issues at hand and does not ensure Plain Green will not issue new illegal loans and engage in further collection of existing debt.

The state brought the suit in March against the company’s chief operating officer, Ian Stamper-Windy Boy, and director of operations, James Rader, claiming the two led the company to make thousands of online installment loans to Minnesotans with interest rates between 570% and 697% — far over state limits.

In line with Bryan’s concerns, the state seeks to void all existing loans out of concern Plain Green could return to its prior policies.

“Is there anything that stops Plain Green from changing this resolution?” Bryan asked the company’s attorney. “Is there any barrier from changing tomorrow and going back to saying interest rates are going to be 700%?”

Richard Joseph Zack, Plain Green’s attorney, noted nothing beyond a policy shift and public announcement of adherence to state law exists that would prevent tribal officials from changing their resolution in the future — though he emphasized the company’s unwillingness to do so.

“It’s adopted a policy; this is its position going forward, there is no intention to change that, it has passed that policy to conform with Minnesota state law with respect to interest rates,” he said, later met with criticism from state attorneys.

“They are commitments to cease conduct that would plainly be in their interest to resume if they could, and would be quite easy to do so,” Bennett Hartz of the Minnesota Attorney General’s office said — adamant that a court-ordered injunction is still necessary to ensure Plain Green does not resume charging high interest rates.

Under Minnesota law, the general usury limit caps annual interest for written contracts at 8%, and any loans exceeding this rate without proper licensing are legally void.

Exceptions exist for licensed financial institutions and regulated lenders, who can charge nearly 22% interest for loans up to $100,000. Additionally, specialized state statutes strictly regulate short-term “payday” credit — capping rates at 36% or 50% depending on the borrower’s ability to repay.

The state notes in court documents that Plain Green markets to low-income Minnesotans through its website and social media, promising quick loans that help people meet their “emergency and cash-flow needs quickly and easily.”

Minnesota says consumers are unaware of the abnormally high interest rates before taking the loan and are later shocked at their inability to pay off debt at more than five or six times what they originally borrowed.

As the Chippewa Cree have the sovereign immunity of a federally recognized tribe, Minnesota brought the action against the officials as individuals and seeks only “prospective relief,” including declarations that Plain Green’s outstanding loans are void, barring all future lending for the company in the state and barring negative credit related to Minnesotans’ debts.

Tribal sovereign immunity generally bars lawsuits against tribes and tribal entities absent congressional authorization or a waiver.

The company’s resolution, however, does not address the extent of relief Minnesota seeks, using sovereign immunity as the shield against further action.

“They would be entitled to get a prospective injunction addressing the issues we’ve addressed in the resolution,” Zack said. “Anything other than that the attorney general is not entitled to regarding Plain Green’s sovereignty.”

The company said it approved and adopted the April resolution lowering loan interest rates to 8% “out of respect for Minnesota’s request and in the interest of building a strong, cooperative relationship.”

“Its incentives are to have good relationships with other sovereigns, and for this business to continue to operate in a viable way. It is not to charge the highest interest rate possible, and that’s shown by what it’s done here,” Zack said.

Bryan, appearing skeptical of Plain Green’s reasons for adopting the resolution, pressed the lender on why it couldn’t void all existing loans.

“If you’re saying the resolution adheres to Minnesota law, and Minnesota law says those loans are void… the resolution doesn’t do enough to comply with Minnesota law,” he said. “To really make it moot would be to voluntarily cease any collection on those loans.”

Noting again Plain Green’s status as a sovereign tribal entity and the passed resolution lowering rates, Zack said there is simply no ongoing state violation Minnesota can argue that would force a sovereign entity to take any further action.

The state, however, did not budge — holding these loans were made by an unlicensed vendor at exorbitant and predatory rates and that any representation to consumers that these loans are due is a violation of Minnesota law.

Minnesota filed two lawsuits in 2023 and 2024 against similar tribe-owned businesses employing the same “scheme” as Plain Green — securing orders barring further usurious lending and canceling debt in both cases.

State action follows a national trend of legal action against payday lenders operating under tribal law, with Second and Fourth Circuit panels finding these lenders unable to avoid liability for high interest rates. The Second Circuit dealt with the same company in 2019.

Bryan said he would delay any ruling on the motion to dismiss until the end of the week and instructed the parties to meet and confer in hopes of coming to an agreement outside a court order.