605 Lending Operates Illegal “Rent-a-Tribe” Lending Program, Class Action Alleges

Payday lender FSST Management Services, LLC is facing a proposed class action lawsuit over its alleged participation in a so-called “rent-a-tribe” lending program in which the company claims to be operated by a Native American tribe to avoid the laws of usury of the state.

The 22-page Illinois lawsuit alleges that although defendants, which include FSST, doing business as 605 Lending; its CEO and COO; and First Direct Mediation, Inc., a debt collector – which claims to be operated by the Flandreau Santee Sioux Tribe, the tribe’s involvement in the “predatory” loan operation is “merely superficial.” According to the case, the defendants are, in reality, non-tribal moneylenders who are behind an “elaborate charade” whereby they pay the Flandreau Santee Sioux Tribe a fraction of their income in return for the use of its name. and associated tribal immunity.

“On information and belief, the tribe’s only real contribution is to provide a cloak of sovereign immunity for illegal lending activity,” the lawsuit charges, alleging that 605 Lending charged Illinois consumers more 700% interest on payday loans in violation of state usury. laws.

The lawsuit says that although 605 Lending is purported to be operated by the Flandreau Santee Sioux Tribe, “all substantial aspects” of the lending operations are executed, funded and benefit non-tribal members.

“Where non-tribal individuals and entities control and manage the substantial lending functions, provide the loan capital necessary to support the operation, and bear the economic risk associated with the operation, they are in effect not being ‘exploited’ by Native American tribes and, therefore, are not protected by sovereign immunity,” the complaint argues.

According to the lawsuit, the loans made by 605 Lending are void and unenforceable because they violate Illinois law, which prohibits entities without a bank or credit union charter or a consumer loan license issued by the Department of state financial and professional regulations to grant loans at an interest rate greater than nine percent. Depending on the case, 605 Lending has no bank or credit union charter or Illinois lending license, but has made loans in the state at interest rates of 700% or more.

Additionally, First Direct Mediation attempted to collect 605’s allegedly illegal loans in violation of the federal Fair Debt Collection Practices Act, according to the lawsuit.

The lawsuit seeks to represent Illinois consumers who were granted a loan at more than nine percent interest and:

  • The loan was made in the name of 605 Lending and has not been fully repaid;
  • The loan was made by an entity without an appropriate lending license in Illinois or without a bank or credit union charter, has not been fully repaid, and which First Direct is seeking to collect or has collected within the past five years;
  • The loan was made in the name of FSST Management Services (doing business as 605 Lending) and is still outstanding or has been repaid within the last two years;
  • The loan was made by an entity without an appropriate Illinois lending license or bank or credit union charter and First Direct has collected money on it within the past two years;
  • The loan was made in the name of FSST Management Services (doing business as 605 Lending) on ​​or after March 23, 2021;
  • The loan was made by an entity without a proper lending license in Illinois or without a bank or credit union charter and First Direct collected money on it on or after March 23, 2021;
  • The loan was made in the name of FSST Management Services (doing business as 605 Lending) within the past four years; Where
  • The loan was made by an entity without a proper lending license in Illinois or without a bank or credit union charter and First Direct collected money after a disclosure was made during the year elapsed and up to 30 days after the filing of the complaint.

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