The Chippewa Cree reservation is seen in Montana in an undated photo.
Online payday lender Plain Green allegedly blocked borrowers from accessing their accounts or viewing their loan documentation, leaving borrowers unsure of their legal rights and how much they still owed, according to a complaint filed in U.S. District Court in Vermont on Tuesday.
The complaint, part of a class-action lawsuit led by two Vermont residents, adds federal racketeering charges to the list of alleged violations of federal trade and consumer protection laws levied against the company when the suit was first filed in in May. The Pennsylvania attorney general is also suing Think Finance, a Texas-based finance company connected to Plain Green, in federal court for alleged violations of the Racketeer Influenced and Corrupt Organizations Act.
"None of the Plaintiffs in this action can access any of the records relating to their loans from Plain Green, including any purported arbitration agreement," the complaint states.
The complaint says that the Chippewa Cree laws that the loans are subject to are not available online, and that "organizations -- like law school libraries -- will not provide a copy... by remote access" because Plain Green executives "have not granted them the right do to do."
Plain Green's loan agreement states that the loans are governed by the laws of the Chippewa Cree tribe of Montana, which owns the company. However, as The Huffington Post recently reported, the tribe’s ownership of Plain Green is nominal at best: The company is part of a growing trend of "rent-a-tribe" operations, where off-reservation finance companies use tribal sovereignty as a shield to try to evade state lending regulations and consumer protection laws.
Company documents, which HuffPost first published in June, have now been filed in the Vermont class action case. They show that the tribe receives just a tiny fraction of the company’s revenues and plays little part in running the business. The Chippewa Cree tribe only receives between 4.5 percent and 5.5 percent of the revenues generated by the company. (A term sheet outlining the deal notes that the company was to be 51 percent owned by the tribe. A recent tribal resolution submitted in court states that Plain Green is "wholly owned" by the Chippewa Cree.)
The bulk of the operation’s incoming cash -- an estimated $500 million to $700 million a year -- flows off the reservation to Think Finance and to other third parties, including an anonymous Cayman Islands limited liability company.
The latest complaint adds Ken Rees, the former chairman and CEO of Think Finance and current CEO of Elevate, a lending company spun off of Think Finance last year, as a defendant, along with the venture capital firms Sequoia Capital and Technology Crossover Ventures, both investors in Think Finance.
The complaint points to Sequoia and TCV's intensive due diligence processes, which include an analysis of legal risk. It alleges that they were "fully aware" of how Think Finance and Plain Green operated, and that they "knew that the practices violated the law" before they decided to invest.
"The very purpose of an online lender affiliating with a tribe is specifically and expressly so that they can lend in violation of state laws," Ellen Harnick, a payday lending expert at the Center For Responsible Lending, told HuffPost in June.
In a statement to HuffPost, Plain Green CEO Joel Rosette said the amended suit "is a transparently desperate attempt to inject new life into a baseless lawsuit full of allegations that are not only false but are also disparaging to all members of the Chippewa Cree Tribe."
The amended lawsuit claims that the complex structure of its subsidiaries is an effort on the part of Think Finance and Rees "to isolate and decrease any liability they may face."
Think Finance and TCV declined to comment for this article. Sequoia did not return requests for comment.
CORRECTION: This article previously stated that the Pennsylvania attorney general is suing Plain Green in federal court. They are in fact suing Think Finance, a related company. Language has also been amended to reflect that Plain Green's loans are governed by tribal law because of language in the loan agreements themselves, and not solely due to the tribe's ownership role with the company.