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A decade ago, strange billboards started showing up, including in New York’s Times Square. They weren’t advertising a product. They were vilifying Connecticut’s then-governor, Dannel Malloy.

And they could be traced to that state’s unusual effort to stop an Oklahoma tribe from offering Connecticut residents short-term consumer loans at exorbitant interest rates.

“Gov. Malloy, Don’t take away my daddy’s job,” read one of the billboards, alongside a picture of a Native American child with braids and traditional garb.

But Malloy was not dissuaded by what he called a “scare tactic.” He said he felt the state’s banking regulations were on his side. The Oklahoma tribe was claiming sovereign immunity as it flouted Connecticut law — charging over 400% interest annually, though the state capped rates on such loans at 12%.

“We knew we could win,” Malloy said. “We knew they were harming people in Connecticut.”

He said he came to believe that the sums Native American tribes were making were paltry compared with the money flowing to the outside investment organizations that had linked themselves to the tribes because of the protections that can come with sovereign status.

Connecticut officials spent years fighting in court, but their eventual victory on behalf of the state’s citizens proved a crucial point about regulation at the local level.

Even as federal authorities have struggled to make an impact on this controversial form of lending, a handful of states have upended the notion that tribes’ sovereign immunity must keep state regulators on the sidelines. The lesson: a little pushback can go a long way.

In addition to Connecticut, five other states — Arkansas, New York, Pennsylvania, Virginia and West Virginia — have been remarkably effective at eliminating most tribal loans, which are made online. A ProPublica review of the fine print on more than 80 tribal lending websites shows that the vast majority of tribal lenders now don’t lend in those states.

And a sample of cases filed in federal bankruptcy court bolsters the findings, with few filers in those states listing tribal lenders as creditors. Complaints, too, funneled to the Federal Trade Commission were minuscule in number in these states in recent years.

The six states tend to have strong consumer protection laws overall. Arkansas’ Constitution, for example, limits consumer loans to 17% interest annually. But, more significantly, the states have had aggressive attorneys, working for public agencies or private law firms, who have stepped in to protect consumers from high rates.

“They’d rather stay out than offer a product at a lower rate,” Connecticut Sen. Matt Lesser said of tribal lenders.

“They saw that Connecticut was aggressive in enforcing the law,” said the senator, who helped pass a bill to make such high-interest loans uncollectable in the state.

Minnesota is the latest state to confront tribal lenders.

Shortly before Thanksgiving, Minnesota’s attorney general filed a consent agreement in federal court in which the president of Wisconsin’s Lac du Flambeau Band of Lake Superior Chippewa Indians promised that their tribal businesses would never again lend to Minnesotans at rates that violate the state’s usury — or lending — laws, which caps many consumer loans at 36% interest annually. The attorney general found LDF companies lending at annual rates between 200% and 800%.

The LDF tribe, which is a leading player in the industry, has said its lending business helps people without access to credit, while the profits provide critical funding for tribal government services. It also has defended a common industry practice of partnering with nontribal entities that conduct many of the day-to-day operations, likening it to outsourcing.

It was the second enforcement action Minnesota had secured against tribal loan executives in 2024. Earlier in the year, a Montana tribal lending operation agreed to the state’s demands to stop making loans in Minnesota.

Loans from tribal lenders can carry astronomical rates because the operations claim that the tribes’ sovereign immunity allows them to be governed by federal but not state laws. There is no federal interest rate limit, aside from a 36% cap on loans to active-duty military members and their families.

Minnesota Attorney General Keith Ellison’s office had watched case law develop around tribal lending to the point where the state felt assured that it could enforce its interest rate caps against a sovereign entity offering loans to Minnesota residents.

In a March interview with ProPublica, Ellison said his office would share its knowledge with other states looking to crack down on tribal lending. “If people want to talk, we would love to see more enforcement action around the country,” he said.

Yet there are limits to what states can accomplish. Courts have ruled that states can only obtain injunctions to stop collections and prevent future harm, but they cannot collect fines or claw back money already lost by consumers. Their enforcement actions do not prevent tribes from making loans in other states. And they are only able to sue tribal leaders, not the tribes themselves.

And these legal battles can be lengthy and contentious, as exemplified by what happened in Connecticut.

In October 2014, Connecticut’s banking regulator ordered websites associated with the Otoe-Missouria Tribe of Oklahoma to stop providing loans to Connecticut residents, citing the state’s cap on interest rates and deeming the loans illegal.

The following spring, the Institute for Liberty, a pro-business organization in Washington, D.C., announced a campaign against Malloy. In social media posts, ads and mailings, the institute alleged that Connecticut’s actions were an affront to tribal sovereignty.

It further argued that the enforcement effort against the Oklahoma-based tribe would deprive Native American families of income for health care, education and employment.

But leaders of two Connecticut tribes uninvolved in lending joined state leaders in a press conference to reject the institute’s claims and to call on tribal lenders to stop taking advantage of the state’s consumers. Only a few dozen of the nation’s 574 federally recognized tribes have engaged in online lending.

As a political entity organized as a nonprofit, the institute did not have to publicly disclose its donors and so was considered a dark-money group. IRS records available online show its tax-exempt status has lapsed. Andrew Langer, the institute’s president, declined ProPublica’s request for an interview. “I have absolutely no comment,” he said in a phone call.

John Shotton, chair of the Otoe-Missouria Tribe of Indians, said in an email to ProPublica: “We did not financially support the campaign, the Institute for Liberty, or their executive director in any way. We had no knowledge of the campaign before learning about it from media sources.”

The Oklahoma tribe stopped lending in Connecticut but initiated a long court battle. The state Supreme Court ruled in 2021 that the tribe’s chair could not face civil penalties but could be subject to an injunction preventing future lending. The state also issued cease and desist orders to three other tribally affiliated lenders, which exited the state as well.

Forceful actions by state officials in New York and Pennsylvania targeting short-term lending also pushed out tribal operations.

In 2013, the New York Department of Financial Services sent cease and desist letters to dozens of online payday lenders, including some tribal lenders, and warned banks to cut off access to lenders operating in violation of state law. Two tribes sued the state to stop the crackdown, but were unsuccessful.

In 2014, Pennsylvania’s attorney general brought an ambitious case against Think Finance Inc., a hedge-fund-backed financial technology firm that was allied with three tribes. The state alleged that the arrangement was designed to enable Think Finance to profit from abusive loans by evading state lending laws. In court papers, Think Finance denied wrongdoing and said that it was not the actual lender on the tribal loans, arguing that it was providing “perfectly lawful services” to the tribes.

The litigation spurred additional private lawsuits, ultimately leading Think Finance to declare bankruptcy and resulting in multimillion-dollar settlements with borrowers.

“This is a model of how aggressive enforcement by one state can lend itself to nationwide relief for consumers,” Gov. Josh Shapiro, then attorney general, said in a press release.

In a 2019 deposition in a consumer lawsuit, an attorney previously involved in the tribal lending industry provided insight into tribal lenders’ avoidance of states where they may draw attention. Asked why a tribe might be advised not to lend in certain states, he replied “to avoid the headache of having to deal with an AG that was being aggressive.”

The attorney, Daniel Gravel, noted that the companies in the case believed that they were “engaging in perfectly legal activities” but “it wasn’t worth the time and effort of having to deal with state regulators who disagreed with us.”

In certain states, it’s not attorneys general or banking officials who are forcing out tribal lenders. The feat has largely been accomplished by private attorneys bringing consumer lawsuits, including sweeping class-action claims.

Most settlements remain confidential, but ProPublica tallied at least $2.9 billion in canceled loans and more than $360 million in restitution from class-action suits since 2019. The major settlements were all filed in federal courts in Virginia and were largely driven by consumer attorneys there.

The class-action cases are highly complex because of the difficulty in unraveling the layers of entities and people involved, which is why the circle of private lawyers challenging the tribal lending industry is small. In addition, private attorneys can be stymied by arbitration clauses in loan agreements, which aim to prevent consumers from going to court.

“This is rocket science. This is among the most complicated litigation you can do,” said Margot Saunders, a senior attorney with the National Consumer Law Center who has served as an expert witness in cases.

Tribal lenders now largely steer clear of making loans in Virginia.

They also largely avoid neighboring West Virginia, ProPublica found. That state has strong consumer protection statutes, and private attorneys and a previous attorney general have used them effectively in lawsuits against tribally affiliated lenders.

Bren Pomponio, a West Virginia attorney for Mountain State Justice Inc., a nonprofit legal services firm that brought a lawsuit against a tribal lender and its business partners in 2020, said that the past decade of litigation has cut through the “myth” that sovereign immunity enables tribal lenders to charge excessive interest rates.

“They thought they had a model to avoid state law, but they don’t really,” he said.

This content originally appeared on ProPublica and was authored by by Joel Jacobs and Megan O’Matz.

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More than a decade ago, loan financier Matt Martorello was worried that the golden days for his high-interest lending venture were over.

In an email to his accountants, he detailed how attorneys general in multiple states were sending cease-and-desist letters to the online enterprise he operated with a Native American tribe based in Michigan. Major banks wanted nothing to do with the business, which offered small-dollar loans at exorbitant interest rates far above limits set by many states. Federal regulators were suing his competitors.

The pressure was getting to be too much. Martorello feared the federal government seeking “every $ I have” in restitution, he wrote in the December 2012 email.

He was expecting his firm, then based in the Virgin Islands, to be audited by the U.S. Consumer Financial Protection Bureau and worried about the agency’s ability to put the tribal lending industry out of business. The federal agency was leaning hard on loan operations that formed alliances with tribes to claim sovereign immunity and bypass state laws that protect consumers.

“Bottom line is, this business will simply not exist in 2 to 3 years anything like it does right now,” Martorello wrote.

But none of that came to pass. In the 12 years since, the tribal loans kept flowing, fueling a multibillion-dollar industry built on punishing loan terms aimed at people who can least afford them.

How did the industry survive?

ProPublica found that tribal lending benefited from more than just sovereign immunity.

Powerful allies in the financial sector and payday loan industry, which encompasses all forms of short-term lending, have served as protectors at key junctures. Even as many states kicked out storefront payday and auto title lenders, online tribal lending flourished. Industry lobbyists helped beat back congressional plans for consumer protections, while payday industry lawyers dragged the CFPB to court and hindered the agency.

At the same time, differing approaches over three presidential administrations saw crackdowns on tribal lending excesses rise, then falter. Coming off a successful case that devastated one major tribal-affiliated operator, the Federal Trade Commission’s consumer protection bureau has been sidetracked by competing demands and a 2021 Supreme Court decision that constrained the agency’s ability to recover money from companies.

An FTC staff attorney who handled lending cases across a variety of industries told ProPublica that the agency monitors complaints but “can’t sue every bad actor.”

“We’re a small agency of limited resources. We have to pick and choose where we think we can make the greatest impact,” said Gregory Ashe, the attorney.

A wavering commitment at the federal level provided just enough leeway for the tribes to adapt and thrive. The consequences for consumers have been catastrophic.

Using a sample of personal bankruptcies nationwide over a three-year period, ProPublica found nearly 5% included unpaid high-interest loans linked to tribes. That translates to an estimated 19,000 cases on average per year.

“They gave me the money quick, but they also empty your pockets just as fast,” said Bobbie J. Williams, a sheet-metal worker from Rhode Island and father of four who needed an infusion of cash when he was sick with COVID-19. His 2022 bankruptcy petition included two tribal loans.

Since 2019, ProPublica found, on average more than 1,800 consumer complaints per year are routed to the FTC about these types of loans, which can carry annual percentage rates of over 600%. Complaints came from people in dire need, including single parents, people crushed under medical debt and others trying to stave off homelessness.

Consumer advocates do not expect that the second Trump administration will do anything to crack down on abusive lending practices linked to tribes or any other form of predatory lending. The billionaire Elon Musk, Donald Trump’s close adviser, posted “Delete CFPB” on X in November, signaling that the nation’s primary consumer watchdog could be on the chopping block in the new administration.

“We would like to see more enforcement action by both federal and state authorities,” said Lauren Saunders, associate director of the National Consumer Law Center, which has advocated for tougher measures on payday lenders.

Martorello, who lives in Texas, declined through an attorney to comment for this story, citing “ongoing and pending litigation.” In the email to his accountants, which was later revealed as part of a civil suit, Martorello stressed he was operating legally and acting on the advice of major law firms. “I don’t want you to think that we are doing anything wrong, we certainly are NOT,” he wrote.

With Martorello’s fears about regulation unrealized, the website affiliated with his tribal partners — Big Picture Loans — is still online offering short-term installment loans. The tribe, which split with Martorello, charges APRs between 160% and 699%, it told ProPublica.

“We’ve helped more than 400,000 people experience a smarter way to borrow!” the website boasts.

For more than a decade, U.S. Sen. Jeff Merkley has tried to protect consumers from outrageous lending rates.

Over and over again — seven times in 12 years — the Oregon Democrat has proposed a bill to force internet lenders, including Native American companies, to comply with state interest rate caps and to register with the CFPB. Year after year the effort fails.

On the Senate floor in 2016, he pressed his colleagues for their support, explaining the reality of high-interest online loans. “These payday loans pull families into a vortex of debt from which they cannot escape, and this vortex destroys them financially,” he said.

Merkley got only 13 co-sponsors that year: all Democrats and one independent, Vermont’s Bernie Sanders. The current version before the Senate has even fewer: 10.

His legislation has never even made it out of committee, a fate he attributes to the considerable influence of “the payday loan industry and big banks,” he told ProPublica in a prepared statement.

Payday lenders spent $4.9 million lobbying Congress in 2023, according to OpenSecrets, an organization that tracks money in politics. That includes $1.3 million laid out by the Online Lenders Alliance, a trade group that includes tribal lenders. “For Tribes involved in consumer lending, these enterprises have become a critical part of their economic development efforts as Tribes rely on business enterprises to provide essential government services to their members,” the Online Lenders Alliance told ProPublica in an email.

“This is a very entrenched industry with a lot of dollars at stake,” said University of New Mexico law professor Nathalie Martin, who has studied tribal lending.

Ellen Harnick, executive vice president of the Center for Responsible Lending, a nonprofit that works to end abusive financial practices, said the payday industry hires high-priced, experienced lobbyists who ingratiate themselves with state and federal lawmakers through campaign contributions, dinner invitations and casual meetings while roaming the halls of power. The access gives them opportunities to argue that high-cost loans are beneficial for people who find it hard to obtain credit.

The result, she said, is that even legislators who would never counsel anyone they love to take on such burdensome debt nonetheless decide, “I’m not going to shut it down.”

Reform measures have been opposed by the Native American Financial Services Association, which represents tribal lenders, and a larger industry group: the American Financial Services Association, which advocates for the consumer credit industry and does not include tribal lenders.

Congressional action is a direct threat to tribal lending because while tribes claim immunity from state laws, they must comply with federal lending laws. Merkley’s bill would have given the federal government a means to force tribes to abide by state interest rate caps. The Online Lenders Alliance is against such caps, arguing they block some consumers from getting smaller loans necessary to make ends meet.

Currently, there is no federal interest rate cap, with one notable exception: Payday lenders cannot charge active-duty service members and their families more than 36% annually.

In every congressional session since 2008, separate from Merkley’s efforts, lawmakers have unsuccessfully sought to extend that cap to all Americans.

Although banks and credit unions generally don’t charge over 36% for credit cards or other products, the larger financial industry has strongly opposed a cap. The U.S. Chamber of Commerce in 2021 also formally opposed the legislation, arguing that it would harm consumers by limiting access to credit. Proponents of the cap say that 36% is high enough to facilitate lending and that unconscionable rates lead to major debt traps.

At times the role of Native Americans in the industry has been used to beat back the 36% cap. At a 2021 hearing, U.S. Sen. Jon Tester, a Montana Democrat, acknowledged the need to protect consumers from “bad actors and unscrupulous practices.” But he said the Senate also had to consider “the sovereignty issue” of Native Americans and the “good-paying jobs” the tribal lending industry provided in his state.

He suggested that the committee “massage this bill” to make it better, fearing that the bill as written could have negative impacts on tribes. The legislation never passed.

The Scott Tucker case, with its tales of lavish spending and colorful deception, temporarily brought attention to some of the questionable practices and partnerships associated with tribal lending.

Tucker controlled AMG Services Inc., an online payday lender that grew into a billion-dollar business. Inside the call center in Overland Park, Kansas, employees were instructed to pretend they were on tribal lands somewhere else in the country. They were given out-of-state weather reports to help play up the ruse in their small talk with customers.

AMG’s success helped fuel Tucker’s splashy lifestyle that included a side venture: Level 5 Motorsports, a professional auto racing team.

But Tucker’s life in the fast lane — complete with luxury homes, a Lear jet, and a fleet of Ferraris and Porsches — came to a screeching halt. In early 2016, a federal grand jury indicted him on charges related to collecting unlawful debts and failing to truthfully disclose loan terms. It claimed he entered into “sham business relationships” with three tribes and “systematically exploited” more than 4.5 million borrowers.

Tucker and his lawyer were convicted of participating in a racketeering enterprise, wire fraud and other charges. A judge sentenced Tucker to 200 months in prison and his lawyer to 84 months.

Tucker’s spectacular downfall, the subject of an episode of TV’s “American Greed,” sent waves of fear around the industry. Federal prosecutors also indicted a Philadelphia-area tribal lender and his lawyer around the same time as Tucker, but then brought no major criminal cases against others in the industry in the years that followed.

“I’m not aware of additional cases, and wouldn’t be able to comment on any ongoing investigations that may or may not exist,” U.S. Department of Justice spokesperson Wyn Hornbuckle told ProPublica.

Earlier in the Obama administration, in an initiative dubbed Operation Choke Point, regulators sought to “choke off” fraud by pressuring bank executives and payment processors to scrutinize their relationships with industries deemed “high risk,” particularly payday lenders.

The effort briefly stalled tribal lending as the companies disabled lenders’ access to customers’ bank accounts, effectively incapacitating their operations.

But Republican lawmakers cried foul, seeing it as an attempt to stifle legal businesses. They hauled regulators into congressional hearings and chastised them. Faced with an uproar, regulators began to back off.

“I view it as tragic that it kind of blew up politically,” said Dru Stevenson, a professor at South Texas College of Law Houston who studied the firestorm around Operation Choke Point.

He believes that although the program’s image suffered from a few overly aggressive officials, if it had run its course, “tribal lending would be in a different place, where it would be less abusive and less exploitative.”

The fallout likely had a long-term effect on enforcement, he said. “There’s too many people at these agencies who lived through the backlash of Operation Choke Point and it’s not worth the risk of having that come up again.”

The Trump administration officially ended Operation Choke Point and set a new, friendlier tone across agencies.

Trump’s appointee to head the CFPB, Mick Mulvaney, wrote in the CFPB’s five-year strategic plan in 2018 that the bureau would refrain from “pushing the envelope,” so as not to trample on the liberties of citizens or interfere with the sovereignty or autonomy of Native American tribes. That year he killed a case against Golden Valley Lending, a tribal lender based in California.

The CFPB, under Trump, also repealed a rule requiring payday lenders to determine whether borrowers had the ability to repay.

Another tribal lending operation in California continued for about a decade before being shut down by the FTC in May 2020 for deceptive practices. By then it had issued 285,700 consumer loans, totaling nearly $60 million. With fees and interest, borrowers had repaid a whopping $175 million. By the time the FTC acted, most of the profits had been spent or transferred overseas by nontribal business partners. The government ultimately returned less than $1 million to borrowers.

Regulation never ramped up again under President Joe Biden. In part that’s because the CFPB was hamstrung by an unfavorable appellate court ruling in a case brought by the payday lending industry that challenged the agency’s constitutionality. In May, the U.S. Supreme Court handed CFPB a major victory, upholding its funding mechanism and, therefore, its existence.

Empowered once again, the CFPB vowed to pursue predatory lenders and restart a dozen or so cases that stalled during the court fight. No tribal lender, however, appeared on that list. The CFPB, via a spokesperson, declined to comment for this story.

Matt Martorello, the Texas man who in 2012 feared the U.S. government stomping out tribal lending, ended up in court, but not because of any federal action.

A Virginia law firm, Kelly Guzzo PLC, filed a class-action lawsuit on behalf of borrowers in 2017 against Martorello and council members of Michigan’s Lac Vieux Desert Band of Lake Superior Chippewa Indians. Also named in the suit was Big Picture Loans LLC, which is owned by the tribe. The suit challenged the legality of the loans, given Virginia’s longstanding policies capping interest rates, and was followed by additional civil suits across the country.

Big Picture Loans settled in 2020 for $8.7 million in restitution for customers and $100 million in debt relief. Martorello, however, refused to give in.

His company, Eventide Credit Acquisitions LLC, unsuccessfully sued Big Picture Loans and its parent company to prevent it from settling. “It was a massive waste of everyone’s time and money,” the tribe told ProPublica in an email.

The tribe said it has no current relationship with Martorello following the 2016 purchase of a Martorello company that had been servicing its loans.

A judge ruled against Martorello in 2023 and ordered him to pay tens of millions to Virginia borrowers. That same judge also found that Martorello had been the “de facto head” of the tribe’s lending business, a finding he has vigorously disputed.

Earlier this year, Martorello agreed to a $65 million settlement with borrowers across the nation. But he later filed for bankruptcy and couldn’t raise enough money to fund the settlement by an agreed-upon deadline, voiding the deal. His legal battle challenging the 2023 judgment now will continue in a federal appeals court.

Eventide, the company he founded, also has filed for bankruptcy.

As part of that case, it has argued that if online tribal lending was not appropriate and violated state lending laws, then “Congress, the CFPB, and other federal agencies would have shut it down a long time ago.”

To do the best, most comprehensive reporting on this opaque industry, we want to hear from more of the people who know it best. Do you work for a tribal lending operation, either on a reservation or for an outside business partner? Do you belong to a tribe that participates in this lending or one that has rejected the industry? Are you a regulator or lawyer dealing with these issues? Have you borrowed from a tribal lender? All perspectives matter to us. Please get in touch with Megan O’Matz at megan.omatz@propublica.org or 954-873-7576, or Joel Jacobs at joel.jacobs@propublica.org or 917-512-0297. Visit propublica.org/tips for information on secure communication channels.

Mariam Elba contributed research.

This content originally appeared on ProPublica and was authored by by Joel Jacobs and Megan O’Matz.