You can now read 10 articles in a month for free on BostonGlobe.com. Read as much as you want anywhere and anytime for just 99¢.

The Boston Globe

Business

Western Sky to stop lending

WASHINGTON — Western Sky Financial, a prominent online lender that offers short-term loans at triple-digit interest rates, said it will stop funding loans on Sept. 3 amid mounting legal battles with authorities in several states.

The decision arrives as state and federal regulators are clamping down on payday lending, a burgeoning industry that operates under a patchwork of laws.

Continue reading below

These loans carry high interest rates and balloon payments that can trap Americans in a cycle of debt, critics say. Industry groups say payday lenders are being persecuted and argue that they serve a need that is not being met by traditional banks.

Officials at Western Sky did not respond to requests for comment, but the firm explicitly said on its website that it will no longer provide loans as of September.

Western Sky has been the subject of several lawsuits challenging its lending in states with strict usury laws that cap interest rates on loans.

The company is owned by a Cheyenne River Sioux tribal member and operates on the tribe’s South Dakota reservation. It claims the tribe’s sovereign immunity makes the company exempt from following state law.

This month, New York state’s attorney general, Eric Schneiderman, sued the company, alleging it violated state licensing and usury laws that cap interest rates on loans at 25 percent.

Schneiderman accused the company of charging New Yorkers annual interest rates upward of 355 percent.

You have reached the limit of 10 free articles in a month

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week