Class Action Says TheLoansmith.com Operates an Illegal ‘Rent-A-Tribe’ Loan Scheme

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A proposed class action accuses those behind online lender TheLoansmith.com of operating an illegal “rent-a-tribe” scheme in an attempt to make loans with unlawful interest rates to Indiana residents.

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The 16-page lawsuit says that although the entities that run the lending website claim to be owned by a small Native American tribe—the Guidiville Rancheria of Pomo Indians—the business is actually owned by non-tribal lenders that “fraudulently [hide] behind” the tribe’s sovereign immunity in order to “circumvent state interest rate caps.”

The suit names as defendants Choice Capital Fund and Upfront Processing, which do business as The Loansmith, as well as Choice Capital Fund’s manager, Michael Derry.

Through TheLoansmith.com, the defendants have issued to Indiana consumers loans at interest rates in excess of 700 percent, the case alleges. These illegal loans were made in the name of the tiny California-based tribe by whom the online lenders falsely purport to be owned in order to avoid prosecution under criminal usury laws, the complaint contends.

Per the filing, the allegedly usurious loans issued through the website are void and unenforceable because they were made at interest rates well above the legal cap, which, under Indiana law, is 36 percent.

The plaintiff, an Indiana resident, says she was issued a $400 loan from TheLoansmith.com in July 2023 with an annual percentage rate of 720 percent—considerably above the legal interest rate, the suit relays.

According to the case, the defendants represent just a few of the online lenders purportedly owned by the Guidiville Rancheria of Pomo Indians, including Tribal Consumer Lending and BestChoice123.com. The true operator of these two businesses, non-tribal member Charles Hallinan, was convicted in 2017 of offenses related to the lending scheme, the complaint adds.

The lawsuit looks to represent any Indiana residents to whom a loan was made via TheLoansmith.com at more than 36 percent interest within the last four years.

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