The sovereign immunity granted to tribes by the U.S. government produces hefty profits for tribal-owned payday loan companies. Tribes are shielded from interest rate caps and other industry regulations. Online lenders have become attracted to the “sovereign-loan” model, pursuing partnerships with economically struggling tribes – piggy backing on their freedom from state and U.S. lending laws.

Tribes doing business with online lenders made about 12,500 loans per month in 2010, equivalent to about $420 million in payday loans that year. Payday loans are approved to consumers who can secure a loan with their next paycheck. The average loan is about $400. No credit check is required, thus making it more convenient for cash-strapped consumers to borrow.

While states are increasingly cracking down on abuses by the traditional payday loan industry, seventeen U.S. states have capped interest rates on loans or banned them entirely. It has resulted in payday loan volume falling to $38.5 billion in 2009, down 24% from 2007, according to Stephens Inc., an investment-banking firm in Little Rock, Arkansas.

Traditional payday lenders have tried to avoid interest rate caps by incorporating their business in states like Delaware and Utah, who have no maximum rates, and then impose the higher rate on consumers throughout the U.S. That practice was defeated when Pennsylvania’s highest court ruled last October that Cash America International Inc., the largest payday lender by revenue, had to abide by the states’ interest and licensing rules and not Neveda’s rules where the company is incorporated.

U.S. states have been “powerless” to stop tribal-owned payday lenders according to Colorado Attorney General John Suthers. Since 2009, he has tried to force the Miami Nation of Oklahoma and the Santee Sioux Nation in South Dakota (both payday lenders) to stop making loans to Colorado residents. AG Suthers failed when Colorado’s Supreme Court ruled in Novemeber that both lenders were protected from enforcement action as arms of American Indian tribes.

Of 300 internet payday lending companies, more than 35 are owned by American Indian tribes. Online lenders seeking partnership with economically struggling tribes, and tribes already operating casinos, are expected to pursue new market opportunities in the payday loan industry – increasing the number of tribal owned companies to 400.

In an attempt to limit a viable solution for consumers struggling with debt, financial institutions are pressing the Federal Trade Commission to set strict rules for debt settlement firms under amendment 16CFR Part 310, commonly known as the “Telemarketing Sales Rule”.

The first of a series of new rules taking effect since the passing of the Credit Card Act of 2009 is set to begin on Aug 20th.

A Florida man is alleged to have re-set his own record for the largest credit card identity theft fraud. Prosecutors from the Department of Justice said that Albert Gonzales, a 28-year-old hacked into the credit card processors of Heartland Payment Systems and retail chains 7-Eleven Inc, and Hannaford Brothers Co.

Gonzales and two other associates were indicted on Monday accused of stealing more than 130 million credit and debit card numbers in the US. The DOJ describes the incident as “the largest alleged credit and debit card data breach ever charged in the United States.” The two associates have been indentified as “Hacker 1″ and “Hacker 2″ and are confirmed to be Russians. However, they are not in custody and prosecutors would not comment on their whereabouts.

When the indictment was filed, Gonzales was already in jail awaiting trial for another hacking case. He is currently being held in a Brooklyn jail. In this case, he is suspected of hacking into the network of major restaurant chains in May of 2008. Additionally, several months later, Gonzales was indicted for hacking into retail chains that affected eight major retailers and responsible for the theft of 40 million credit card numbers.

Gonzalez is a former informant for the U.S. Secret Service who helped the agency hunt hackers, authorities say. The agency later found out that he had also been working with criminals and feeding them information on ongoing investigations, even warning off at least one individual, according to authorities. At that time, the largest credit card data theft case in the US, Gonzales conspired with 10 others that hacked into retailers as TJX Companies, BJs Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority, Forever 21 and DSW. The data breach amounted to 45.7 million credit and debit card numbers. Prosecutors estimated the data breach had damages of $400 million.

Gonzales is facing life in prison for the charges that he is currently awaiting trail on and 35 years for the new charges.

NY Attorney General Andrew Cuomo is at it again vying to shut down a debt collection firm whose employees used outrageous tactics in several states.