Sierra Financial Ignores Michigan’s Usury Laws and Gets Hammered by AG
Online tribal lender Sierra Financial is in hot water with the Michigan Attorney General, Dana Nessel.
The Attorney General filed the lawsuit after numerous complaints from consumers. According to the complaints, consumers received funds, only to be surprised by hidden fees and very high interest rates which they did not agree to.
This is Michigan’s first ever lawsuit against a lender that has violated the federal Consumer Financial Protection Act.
The AG vows to do everything in its power to stop the loan shark practices of Sierra Financial.
According to one complaint (of several), the consumer was email numerous times about a loan approval up to $5,000.
Needing help to pay bills, the consumer filed for the loan, but 30 days later to her surprise, Sierra Financial began withdrawing funds from her bank account.
By the second payment, she noticed the payment was much larger than she agreed to.
Not only was she charged much more than she agreed to, but Sierra would not allow her to pay the loan off, to avoid the high interest rates.
In total, Latisha ended up paying $1,200 – $1,300 for a $500 loan.
Michigan’s Interest Rate Laws
After reviewing the complaints, the Michigan Department of Attorney General contacted Sierra to find out how many Michigan consumers obtained a loan.
However, Sierra would not disclose that information, citing tribal lenders are not required to adhere to state and federal laws outside of tribal nations.
AG Nessel fired back with a clear argument.
The lawsuit was filed in U.S. District Court for the Eastern District of Michigan with the intention of prohibiting Sierra Financial from further trapping Michigan consumers with high-interest rate loans.
Michigan Interest Rates Act limits the interest rates on loans to 7% annually, with a maximum of 25%.
Interest rates above 25% are subject to Michigan’s criminal usury statute.
What’s the Story With Tribal Lenders?
Consumers in tight spots that need a bad credit loan often turn to tribal loans as a last resort.
Tribal lenders are often under the assumption that state and federal laws do not apply to them. This is true to an extent, but consumer lending to U.S. citizens apparently is a different story.
Lenders often partner with tribal nations in an attempt to skirt state and federal laws. And they may get away with it for a short period of time. But as we see in the case of Sierra Financial in Michigan, lenders will eventually get caught.
And the repercussions can have severe consequences for lenders that do not abide by state and federal laws…even for tribal nations.