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.

Advertisement

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.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

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.

Advertisement

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

Loading comments...
Real journalists. Real journalism. Subscribe to The Boston Globe today.