A proposed class action alleges the companies behind online lending website WithULoans.com run an illegal “rent-a-tribe” scheme whereby Illinois residents are issued loans with unlawfully high interest rates.
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The 22-page lawsuit says that although defendants W6LS, Inc.—which does business as WithU and WithU Loans—and Caliber Financial Services, Inc. claim to be owned by the federally recognized Otoe-Missouria Tribe of Indians based in Oklahoma, the lenders are, in fact, falsely “hiding behind” the tribe’s sovereign immunity in order to dodge state usury laws.
Contrary to Illinois law, which prohibits unlicensed entities from issuing loans at more than nine percent interest, the companies “regularly” make loans to residents at annual percentage rates greater than 400 percent, the suit contends. These unlawful loans are considered void and unenforceable under the Illinois Interest Act, the case shares.
Though the defendants purport to be operated by the Native American tribe, the complaint argues that “[v]irtually none of WithU’s business is conducted on the Tribe’s reservation.” Moreover, most of the defendants’ business operations—which are performed outside of the tribe’s jurisdiction—are “conducted by and for the benefit of non-tribal members and investors,” the filing adds.
“While the Tribe’s name and the names of some officers appear in documents establishing the formation of the corporate charters under which WithU and Caliber operate, on information and belief, such documents were designed, written by, approved by, and crafted for the benefit of non-tribal beneficiaries,” the lawsuit charges.
In fact, the Oklahoma-based tribe receives only “a couple of pennies of each dollar as ‘rent,’” while the rest of the business profits go to non-tribal entities, the suit alleges.
According to the complaint, other payday lenders, including American Web Loan, Clear Creek Lending and Great Plains Lending, have also claimed to be owned by the Otoe-Missouria Tribe.
The plaintiffs in the case, two Illinois residents, each took out $600 loans from WithULoans.com with respective interest rates of 498.63 and 497.25 percent—far in excess of the legal nine-percent cap, the filing says.
The lawsuit looks to represent:
“(a) [All] individuals with Illinois addresses (b) to whom a loan was made through www.Withu.com at more than 9% interest (c) which loan has not been paid in full;”
“(a) [All] individuals with Illinois addresses (b) to whom a loan was made through www.Withu.com at more than 9% interest (c) which loan is still outstanding or has been paid on or after a date two years prior to the filing of suit;” and
“(a) [All] individuals with Illinois addresses (b) to whom a loan was made in the name of WithU at more than 36% interest (all of its loans qualify) (c) which loan was made on or after a date 4 years prior to the filing of suit.”
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