Those Annoying Western Sky Commercials Are Gone. Here's Why.

Daytime and late-night television addicts may have noticed the once-frequent television ads urging consumers to "get off the payday treadmill" by taking out a personal loan with Western Sky Financial are no longer airing.

The company became fairly well known for its national barrage of commercials promising "up to $10,000 without collateral" and "enough to pay off payday advances once and for all."

Western Sky ads often acknowledged the high cost of its personal loans, asserting that getting money this way was still "a lot cheaper than a payday advance." However, the fine print on at least one ad stated that the annual percentage rate for a typical $10,000 loan was 89.68%, with 84 monthly payments of $743.99 -- so a borrower who received $10,000 was locked into fixed payments totaling $62,495.16 over seven years.

After officials in several states conducted investigations and/or filed lawsuits, Western Sky announced Sept. 3 that it had stopped lending money and suspended operations, citing what it called "unwarranted overreach by state regulators."

At issue in the various investigations and lawsuits are the company's interest rates and lending practices, and whether it is subject to regulation in the states where its borrowers reside, or if it operates under tribal law.

Legal documents filed in various lawsuits indicate that Western Sky and numerous related companies -- Payday Financial LLC, Great Sky Finance LLC, Red Stone Financial LLC, 24-7 Cash Direct LLC and High Country Ventures, among others -- are based in Timber Lake, SD, and are owned (or were owned before they ceased operations) by Martin A. Webb, a member of the Cheyenne River Sioux tribe.

"Regulators from the state of New York and other states lack the authority to regulate legal commerce engaged by members of the Cheyenne River Sioux Tribe on the Cheyenne River Indian Reservation," asserts Western Sky spokesman Steve Emery on the company's website.

The New York Attorney General disagrees, and filed a lawsuit in August alleging that Western Sky Financial violated state laws that cap personal loan interest rates at 25%. The lawsuit claims that Western Sky charged interest of 355% or more, and seeks to void any outstanding loans and to stop the company from doing business in New York.

Similar actions against Western Sky have been taken in Colorado, Maryland, Minnesota and Oregon. Consumers who have outstanding loans with Western Sky Financial should contact their state attorney general for information about protections in their state.

As an overall trend, the Center for Public Integrity reports that payday lenders and those offering high-interest personal loans adopted a "rent-a-bank" approach in the 1990s -- using out-of-state banks to sidestep states' lending laws. When that approach was shut down by revised legislation and court rulings, the center reports that the lenders moved to the current "rent -a-tribe" model, based on legal precedents saying state governments have little authority over tribes.

So with Western Sky commercials no longer a television staple, it is yet to be seen what will come next in the ongoing battle between state officials seeking to regulate loan interest practices and lenders who claim they are not subject to states' laws.

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