CFPB Sues Four Online Lenders Operated by a California Indian Tribe

The Consumer Financial Protection Bureau (CFPB) has sued four online lenders for collecting debt from consumers they allegedly did not owe. The four lenders include: Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. –

The suit filed in federal court alleges that the four lenders could not legally collect on these debts because the loans were void under state laws governing interest rate caps or the licensing of lenders. The CFPB alleges that the lenders made deceptive demands and illegally took money from consumer bank accounts for debts that consumers did not legally owe. The CFPB filed to stop the practices, recoup relief for impacted consumers, and asses a penalty on the aforementioned lenders. Each of the four lenders operate out of a single address in Upper Lake, California and is owned and incorporated by the Habematolel Pomo of Upper Lake Indian Tribe (Habematolel Pomo Tribe or the Tribe), a federally recognized Indian tribe.

CFPB Director Richard Cordray said they were seeking to stop the apparent violations and get relief for consumers of the services;

“We are suing four online lenders for collecting on debts that consumers did not legally owe,” said Cordray. “We allege that these companies made deceptive demands and illegally took money from people’s bank accounts.”

Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. are online installment loan companies in Upper Lake, California.

The CFPB states that since at least 2012, Golden Valley Lending and Silver Cloud Financial have offered online loans of between $300 and $1,200 with annual interest rates ranging from 440 percent up to 950 percent.

Mountain Summit Financial and Majestic Lake Financial began offering similar loans more recently.

The CFPB says that the loans violated licensing requirements or interest-rate caps – or both – that made the loans void in whole or in part in at least 17 states: Arizona, Arkansas, Colorado, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, and South Dakota.

The specific allegations by the CFPB include:

  • Deceiving consumers about loan payments that were not owed: The lenders pursued consumers for payments even though the loans in question were void in whole or in part under state law and payments could not be collected. The interest rates the lenders charged were high enough to violate usury laws in some states where they did business, and violation of these usury laws renders particular loans void. In addition, the lenders did not obtain licenses to lend or collect in certain states, and the failure to obtain those licenses renders particular loans void. The four lenders created the false impression that they had a legal right to collect payments and that consumers had a legal obligation to pay off the loans.
  • Collecting loan payments which consumers did not owe: The four lenders made electronic withdrawals from consumers’ bank accounts or called or sent letters to consumers demanding payment for debts that consumers were under no legal obligation to pay.
    Failing to disclose the real cost of credit: The lenders’ websites did not disclose the annual percentage rates that apply to the loans. When contacted by prospective borrowers, the lenders’ representatives also did not tell consumers the annual percentage rate that would apply to the loans.
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