NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, November 24, 2014

Joshua Wrenn needed money to make the January payment for his Jeep Cherokee.

The truck driver and aspiring country singer in Madison, North Carolina, got $800 within minutes from a website he found on his phone. When he called to check his balance a few weeks later, he was told he had electronically signed a contract to pay back $3,920 to a company owned by an American Indian tribe.

“I didn’t ever see a contract, not one time,” said Wrenn, 30. “If I was that stupid, to sign for $3,000 for an $800 loan, I might as well bury myself alive.”

Payday loans like Wrenn’s — costly, short-term advances for those with poor credit — are illegal in North Carolina and about a dozen other states. That’s driving online lenders to Indian reservations, where tribes say they’re not subject to interest-rate regulations.