Georgia Supreme Court To Hear Case To Open Door For Payday Lenders

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Payday lending outlets have been illegal in Georgia for over a decade. / AP Photo

Out-of-state payday lenders are appealing to the Georgia Supreme Court to legally issue small loans in the state.

Western Sky Financial is challenging a Fulton County judge's 2013 ruling that such lenders are barred from dispersing loans less than $3000. The primarily online company has already written more than $15 million in loans to Georgians through the Internet.

University of Georgia Law Professor Kent Barnett says Georgia considers all payday lending in the state illegal.

“Georgia is arguing ‘no, what you’re trying to do is enter into the regulated industry within our borders. That would require you to get a license, you haven’t done that. And it doesn’t matter that you have another kind of licensure in another state,'" said Barnett.

Kent Barnett, Law Professor at the University of Georgia Athens

In 2004, the Georgia General Assembly passed the Payday Lending Act to shut down the industry, stating the practice has adverse effects on financially disadvantaged citizens.

Western Sky argues the Payday Lending Act applies exclusively to loans issued within the state, and that its loans are funded through bank accounts outside of Georgia.

Barnett also said if Western Sky Financial’s appeal fails, it will have to pay the state for the millions of dollars it has loaned out.

“At least in theory, it will shut down their businesses working in Georgia," Kent said. "And the Georgia authorities can go after them.”

Western Sky is owned by the Cheyenne River Sioux Tribe and are protected under the Indian Commerce Clause, which makes the federal government responsible for financial matters with Native American tribes.

Attorneys for Western Sky claim the tribe’s law trumps the Georgia law. They say the court in the initial trial erred in applying the Georgia Act because the ruling is “in violation of bedrock principles governing choice of law, tribal sovereignty, and the Indian Commerce Clause” of the U.S. Constitution.