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S.D. lender that claimed tribal immunity ordered to stop making loans in Md.

State regulators have ordered a South Dakota-based payday lender to stop making consumer loans in Maryland after finding the company used predatory tactics and charged excessive interest rates.

Western Sky Financial, located on a reservation in Timber Lake, S.D., has said it was not required to follow Maryland law because of tribal immunity, according to the Maryland Department of Labor, Licensing and Regulation.

The labor department's Division of Financial Regulation said Thursday it has issued a final cease and desist order against Western Sky, its owner Martin Webb and other related parties. The order also prohibits the company from collecting or attempting to collect on any loans made to Maryland consumers.

Webb did not respond to a request for comment Thursday morning.

The financial regulation division had issued a summary cease and desist order in 2011 after discovering that borrowers were given loans with interest rates ranging from 120 percent to more than 1,800 percent, far exceeding interest rate limits under state law.

Western Sky's business model did not entitle it to tribal immunity, though the company has the right to appeal the final order to Maryland Circuit Court, said Mark Kaufman, commissioner of financial regulation. The lender is located on the Cheyenne River Reservation, home to the Cheyenne River Sioux Tribe.

Western Sky, which advertises on television but is not licensed in Maryland, originated loans to Maryland consumers online, state officials said. The company advertises "Loans of $850 to $10,000 in your bank account overnight" on its website.

"Western Sky and Mr. Webb sought to exploit the concept of tribal immunity to evade state law and to prey on vulnerable borrowers around the country," Kaufman said in a statement. He noted that the company avoids lending anywhere in South Dakota, including on the reservation.

On its company website, Western Sky says it is wholly owned by an individual member of the Cheyenne River Sioux Tribe, not by the tribe or any of its political subdivisions. It describes itself as a Native American-owned business operating within the exterior boundaries of the reservation, a sovereign nation within the U.S.

Maryland Labor Secretary Leonard Howie said the department continues "working to combat predatory lending practices and the risks posed by unlicensed creditors, lenders and collectors."

Lorraine.mirabella@baltsun.com

Copyright © 2015, The Baltimore Sun
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