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What is the Western Sky Financial scam?

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Quick Answer

Western Sky Financial offers unsecured loans that have repayment periods of between one to seven years but have annual interest rates as high as 355 percent, according to DailyFinance This payday lender is based in the state of South Dakota and is Native American-owned. The company claims it operates under Native American laws, which allows it to circumvent state and federal criminal usury laws.

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Full Answer

Western Sky Financial, which operates online, offers instant payday loans to Americans who cannot obtain credit from traditional lenders, such as banks, due to poor credit history. The lender offers balloon payments at high interest rates. In response to Western Sky Financial and similar lenders, many states have introduced caps on interest rates for these types of loans.

After receiving numerous complaints from consumers, several states, starting with the state of New York, filed lawsuits against the company seeking to bar the firm from operating as a lender in their jurisdictions and to force the firm to compensate their clients for any illegal charges. The lawsuits have forced Western Sky Financial to announce that it would stop offering loans. The Online Lenders Alliance trade group has opposed these lawsuits, claiming they help to deny millions of Americans access to small loans.

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