Located on – and operating from – a Reservation, these organizations solicit short-term borrowers through Internet websites and TV ads.
The tribal lending process is straightforward:
- You complete a short loan application online.
- According to lender disclosures, shortly after submitting your application, you get a loan decision.
- Once your application is approved, your loan proceeds typically are deposited in your account as soon as the next business day.
- Tribal lenders claim rapid turnaround on loan applications and loan funding.
Some lenders limit the amount on a first loan to $1,000 (or less) and then allow returning borrowers (who successfully serviced the first loan) to borrow larger amounts (e.g., up to $2,500) at lower rates.
- Some tribal lenders advertise loans as high as $10,000.
Borrower eligibility requirements (composite profile):
- You must be at least 18 years old.
- You must be a US citizen.
- You must reside in a state where the lender does business.
- You must be employed or have a verifiable source of income (the lender may require a certain minimum monthly income).
- You must have a checking account in good standing at a separate depository institution (no overdrafts, bad checks, or other problems within the last 30 days).
- You must have a valid e-mail address.
- A poor credit record may not be a deterrent to borrowing; tribal lenders do not perform credit checks on applicants.
- Not all tribal lenders fully disclose annual interest rates.
- Some say only that they “tailor loan costs to the individual borrower” and do not quote specific terms.
- These lenders claim that their loans are “less expensive than traditional payday loans” by some percentage.
- One tribal lender fully discloses an APR schedule by loan amount. In this case, the APR runs from 200% for a $1,500 loan to 450% for a $200 loan.
- Consumers who visit a tribal lending website and want information on the cost of borrowing may be told that full details are provided in the lender’s loan agreement (which is not posted for public inspection).
- Lenders stress the ease of repayment (“affordable payments”), but most do not disclose all the repayment options, preferring instead to state that these can be found in the “loan agreement” (which usually is not posted).
- One lender states that “repayment terms can range from 4 to 15 months, depending upon loan amount.”
- Loans can be repaid in full at any time (no prepayment penalty). As one lender notes, “You only pay interest for the time you keep the loan.”
- Charges may be assessed for late payments; as with all other loan terms, these charges are disclosed only in the “loan agreement.”
What does it cost?
With respect to tribal lending organizations, the following information applies to one of the larger lenders:
- The APR ranges from just under 450% for a $200 loan to almost 200% for a loan of $1,500 (the largest loan made).
- First-time borrowers are limited to a $1,000 loan; repeat customers with favorable loan servicing records can expect to borrow larger amounts at lower APRs.
- The base term on any loan is 14 days; loans can be extended up to 3 times on the same terms as the original loan.
- If a loan payment is missed for any reason, additional charges may apply.
Example of a $250.00 14-Day Term Loan with Native American Tribal Lenders
- $250.00 Total Amount Financed
- $43.15 Finance Charge at 450.00% Annual Rate
- $293.15 Total Payments on Loan (450.0% Annualized Index of Borrowing Cost)
Note: Representative terms and conditions for Internet based Unlicensed Tribal Lending Entities Fees and Interest Schedule on a $250.00 Loan