The state’s banking commissioner recently found that two online payday lenders owned by the Otoe-Missouria Tribe do not have sovereign immunity where Connecticut’s lending and usury laws are concerned.

In a May 6 filing, Commissioner Jorge Perez concluded that Great Plains Lending and Clear Creek Lending are not arms of the tribe and moreover that Tribal Chairman John R. Shotton does not have tribal sovereign immunity from “either the financial penalties or prospective injunctive relief.”

The banking department has alleged the two companies violated Connecticut’s small loan laws by making loans to Connecticut residents via the Internet; the loans’ interest rates  ranged from 199.44 percent to 448.76 percent. The state caps small dollar loans (those under $15,000) at an interest rate of 12 percent.

Late in 2014, the state banking department reacted with a temporary cease-and-desist order, demanding the lenders stop violating Connecticut law, asking for a list of Connecticut residents who had applied for or been granted those loans, and finally demanding the lenders make restitution of the excess interest to those people.

The lending companies instead moved to dismiss those enforcement actions on the basis of sovereign immunity. When the companies, along with Shotton, failed to respond to the banking department’s orders, the regulator fined the two lenders and the chairman a total of $1.5 million in civil penalties.

A New Britain judge sent the case back to the banking department last year and ordered Perez to make a finding of fact concerning the two lending companies. In finding that he did have the authority to pursue those lenders for violating Connecticut law, Perez cited a documentary released last summer in which Shotton touts the benefits of online lending.

Perez also cited an article from Bloomberg that suggested the tribe had established the companies after being approached by non-tribal interests that wanted to evade state law.

Moreover, the commissioner pointed out in the filing that Great Plains actually violated the tribe’s own criminal usury cap of 24 percent.

“Because the predominant purpose of Great Plains is not clear and the company does not appear to be operating in accordance with tribal law, the commissioner is hard-pressed to find that the organization and purpose of the business predominantly serves the tribal government,” Perez wrote.

In appealing the banking commissioner’s finding, the companies and Shotton argue that the film and Bloomberg article were “new evidence” that Perez should not have been able to consider in his finding and that he had no other valid basis for his finding.

Last year, an Oklahoma judge ruled in favor of former banking commissioner Howard Pitkin, who the tribe accused of overstepping his authority when he penalized the lending companies.