In an opinion yesterday denying a motion for a preliminary injunction, Judge Sullivan ruled that New York State had authority to regulate allegedly usurious “payday loans” by Indian Tribes. (See our prior post on the case here):
Plaintiffs have built a wobbly foundation for their contention that the State is regulating activity that occurs on the Tribes’ lands. They explain that, when a consumer comes to their websites for a loan, the consumer “travel[s] to Tribal land via the Internet.” (Mem. at 19.) In support of this conceit, Plaintiffs point out that (1) the Tribes own and control the lending websites, (2) the websites warn that loans are subject to tribal law and jurisdiction, (3) the “Tribal loan underwriting system” reviews loans, (4) loans are funded by Tribally-owned bank accounts, and (5) the Tribe’s internal regulators regulate the loan process. However, Plaintiffs overlook that none of these activities relates to the activity that the State is seeking to block. The State’s action is directed at activity that takes place entirely off tribal land, involving New York residents who never leave New York State. These consumers are not on a reservation when they apply for a loan, agree to the loan, spend loan proceeds, or repay those proceeds with interest. These consumers have not, in any legally meaningful sense, traveled to Tribal land. Therefore, to the extent the State seeks to prevent the Tribes from making loans to New York residents who are in New York, it is regulating off-reservation activity.