Wahido Lending Faces Lawsuit Over Alleged 400% Interest Rates

In the heartland of America, a legal battle is unfolding that could have far-reaching implications for the online lending industry. Sarah Rehfeldt, an Indiana resident, has filed a lawsuit against Wahido Lending, doing business as River Valley Loans, CreditServe, Inc., and an individual named Eric Welch, along with 20 unidentified defendants.

Rehfeldt alleges that these defendants engaged in a predatory lending scheme, targeting Indiana residents with loans that carried astronomical annual interest rates exceeding 400%. The loans were conducted entirely online, with funds transferred directly into borrowers' bank accounts and repayments automatically debited - all without the borrowers ever setting foot in a physical bank.

"Defendants targeted Indiana residents and conducted their lending activities over the internet, via email, text messages, and Automated Clearing House (ACH) transactions," the complaint reads. The ACH system, typically used for direct deposit of paychecks and automatic bill payments, was allegedly used here to facilitate high-interest loans.

The lawsuit hinges on two key pieces of legislation: the Indiana Uniform Consumer Credit Code and the federal Racketeer Influenced and Corrupt Organizations Act (RICO). The former is a state law designed to protect consumers from unfair lending practices, while the latter is a federal law originally enacted to combat organized crime.

According to the complaint, the defendants violated the Indiana Uniform Consumer Credit Code by charging interest rates far above the state's legal limit. In Indiana, most lenders are restricted to an annual interest rate of 36% or less. The complaint alleges that the defendants not only exceeded this limit but did so by a staggering margin.

The RICO charges stem from the alleged pattern of unlawful debt collection. The complaint asserts that the defendants' lending practices constituted a "pattern of racketeering activity," a key element in a RICO claim. If proven, this could lead to treble damages - a tripling of the amount of actual damages.

The lawsuit also alleges a unique twist: a so-called "rent-a-tribe" scheme. The defendants, according to the complaint, claimed to be affiliated with the Crow Creek Sioux Tribe, a federally recognized Indian tribe. This affiliation, they argued, granted them sovereign immunity and exempted them from state usury laws.

"Defendants attempted to evade state usury laws by claiming sovereign immunity through a 'rent-a-tribe' agreement with the Crow Creek Sioux Tribe," the complaint states. This claim of tribal affiliation, if proven false, could add another layer of legal trouble for the defendants.

The damages sought by Rehfeldt include statutory damages and attorney's fees for the alleged violation of the Indiana Uniform Consumer Credit Code, and treble damages and attorney's fees for the alleged RICO violation.

This case serves as a stark reminder of the potential pitfalls of online lending, and the importance of consumer protection laws in an increasingly digital economy. As the lawsuit progresses, it will no doubt be watched closely by consumer advocates, the online lending industry, and legal observers alike.