In the middle of the Ottawa National Forest, there is a Native American reservation where snowdrifts mark the main road into town. At the end of that town, there is a casino with penny slots and a three-story hotel. In back of that hotel, there is a locked, unmarked door with a punch code. And beyond that door is a repurposed ballroom, once used for wedding receptions, where 11 workers — backed by a Wall Street hedge fund, supported by a call center in the Philippines — now sell loans online to credit-constrained Americans at annualized interest rates of 780 percent.

In that old ballroom, sitting in a gray cubicle, looking at her Dell: A 25-year-old who only got off food stamps when she took this $11-per-hour job. Who doesn’t have Internet at home, but whose inbox now pings with questions from borrowers, 30 percent of whom end up defaulting.

Where did these fees come from? some of the e-mails ask, she says. You’re a disgrace to Native Americans, she recalls another one saying. And Amber McGeshick, one of the customer service workers at Castlepayday.com, weighs how she should respond.

“As for whether I am doing the right thing, yeah, I am doing my job,” McGeshick said. “But as a whole, I don’t know. I mean, I really don’t know.”

The high-rate loans that come from McGeshick’s office rank among America’s riskiest extensions of credit, capable both of aiding consumers in a pinch and leaving them with unmanageable fees and debt. The loans were controversial even before this latest twist, when Native American tribes entered the online lending business in what they describe as a last-ditch attempt to earn revenue and provide decent lives for their members.


With some two-dozen tribes now offering installment and payday loans, Native Americans have found themselves wrestling with the merits of this lifeline. Following the formula used in casino gambling, tribes capitalize on their right to govern themselves in an otherwise tightly regulated industry. Only in this case, revenue is earned from borrowers who are charged interest rates that sometimes are double what they’d find in a brick-and-mortar payday store. Some Castle Payday borrowers can find themselves facing $8,000 in financing fees on a $1,000 loan, even if they make payments on time. The lending is conducted exclusively online.

Since the financial crisis, more than a half-dozen states have created laws to restrict or curb payday lending, and the industry has responded with a transformation of its own — keeping ahead in part by embracing the safe haven of Indian country, where state laws don’t apply.

The transformation seems to be working: The high-rate lending industry has grown nearly 20 percent since 2009, much of that growth coming online. Some 4.2 percent of Americans took out a payday loan in 2013, according to a Federal Reserve survey, compared with 2.4 percent in 2007. During that span, traditional lenders have upped their own standards for creditworthiness, a course correction after the anything-goes sub-prime years.

“All of the market flow has been going to the tribes,” said John Hecht, a lending industry analyst who works at Jefferies LLC, a New York-based investment banking firm. “It’s almost like an unintended consequence of tightening regulation at a time when consumers have less access to credit.”

It is left to McGeshick and the others to manage the pitfalls of that influx. McGeshick never meets any of the borrowers, never even talks to them, but she reads their e-mails and sometimes wonders what brought them to a place of last resort. An accident? A medical bill? A life of mistakes?

She also sees the other side, how her tribe of 684 members — the Lac Vieux Desert Band of Lake Superior Chippewa Indians — depends on the lending revenues, which account for 42 percent of the annual budget, tribal officials say, and have filled a shortfall that otherwise would have brought many of the tribe’s health-care and education services to a halt. She sees how lending has brought a handful of decent jobs to one of America’s most remote regions, Michigan’s Upper Peninsula, where winter temperatures often fall to 20 below zero.

Lending has allowed the tribe to subsidize propane costs during winters, preventing members from facing a choice “between heat and food,” tribal Chairman James Williams Jr. said. Lending allowed the tribe to cover the combined $60,000 shipping costs for 12 old Federal Emergency Management Agency trailers — government hand-me-downs, including a few used in the Hurricane Katrina aftermath, that will soon turn into permanent housing. For McGeshick, lending proceeds even helped get her an affordable prefab home. She pays a $300 per month mortgage. Tribal subsidies cover the rest.


Earlier in her life, she faced problems much like those of her borrowers. Four years ago, she had finished one semester of community college when she was hit with a $700 tuition bill.

She decided a loan wasn’t worth it. Instead, she dropped out, returned to her reservation and tried to find a job.

A ‘panic’ move

It was 2011, and McGeshick, at first, tried grabbing occasional shifts at her tribe’s casino restaurant. But the tribe was in the midst of a financial collapse — “a panic,” Williams, the chief, said — because Michigan’s economy was foundering and foot traffic was down at its small casino, its only major source of revenue. Some full-timers had been cut to 30 hours per week, and McGeshick often worked fewer than 10.

The tribe’s plan to lure a cigarette manufacturer had fallen through. An Internet bingo site had lasted two months. The tribe had lost more than $6 million — nearly an entire year’s budget — in a bad investment with a Mexican casino czar, and unemployment stood at 50 percent.

Throughout the first half of 2011, the tribe debated whether to enter the lending business — something they’d heard about from other tribes at a Native American conference. The tribe consulted with lawyers and IT experts. They had to contract out nearly all of the start-up work, and they raised investment capital from what tribal lawyer Karrie Wichtman called a “multibillion-dollar hedge fund.” (Wichtman and other tribal officials refused to name the investor, citing privacy concerns.) On July 8, 2011, the council officially authorized a new enterprise, with the desire to “improve the Tribe’s economic self-sufficiency.”

McGeshick was in the casino break room months later when she noticed a job posting on the wall. “Duck Creek Tribal Financial, LLC,” the notice said. The pay was good enough that McGeshick could move out of her sister’s house.

“Duck Creek — I thought it was maybe something in forestry,” McGeshick said.

McGeshick had ended up in a business of which tribes have long been wary. For decades, Native Americans have been among the groups most targeted by usurious loans. Some 20 years earlier, the Lac Vieux Desert Band had briefly considered starting a brick-and-mortar payday lending store; the idea was shot down. “Most of the tribal council said, ‘Would this prey on our people?’ ” Williams recalled. But this time, in the aftermath of the financial crisis, the considerations were different.

“I can’t make a moral judgment on what a tribal government decides to do,” said Barry Brandon, past executive director of the Native American Financial Services Association, which advocates for tribal lending. “Does it surprise me? No, not at all, because I understand how tribal sovereignty works and how difficult it is for tribes to find businesses that provide any kind of revenue. If anything, a tribe is best-suited to deliver that [loan] product, given that they fully understand both the pros and cons.”

A few of the tribal online sites have vaguely evocative names — Great Plains Lending, for instance — but others like Mobiloans and American Web Loan give no indication of Indian backing, other than in the small print. Some tribes forbid their own members from taking out the loans, but in Lac Vieux Desert Band’s case, tribal members can theoretically apply. Very few, though, would be approved, tribal officials said; fees are deducted automatically from borrowers’ bank accounts, and most Lac Vieux Desert Band members don’t use banks.

McGeshick was among those who grew up in poverty. She was raised by a single mom and shared a room with her three sisters. For all the perpetuating problems facing Native Americans — alcoholism, obesity — McGeshick’s greatest obstacle was a worldview that anything worth doing was too far away or too unattainable. She was nominated in high school by a teacher for a poetry competition in New York. But just before her flight, she got too scared and bailed. Several years later, she dreamed about moving “downstate,” to the more populous Lower Peninsula, and trying a career as a creative writer. Instead, she got pregnant and never took the leap.

The job at Castle Payday gave McGeshick the first evidence that she was breaking a cycle of problems. She got her own house. She bought her first functional car, a used Dodge Stratus. She applied to the state for food stamps, but this time she was rejected: She earned too much. McGeshick took it as a sign she’d moved into the middle class.

But she’s also had to wrestle with some of the harsher parts of the lending business. She spends time on the phone with debt consolidators, hired by distressed borrowers. She responds to e-mails. Sometimes, she sees people in dire need. One borrower named Martha contacted Castle Payday every day for weeks, confused about how the loan worked.

McGeshick tells herself that this is just her job, and that the loan terms are clearly posted on the Web site, and that for some borrowers the loans really do help. McGeshick goes back and forth, trying to make sense of the business.

“I am sympathetic for individuals who are going through a tough time and don’t agree with the [loan terms],” McGeshick said. “Some cases stay with me. If people needed money because family members passed away.

“But they did sign their loan agreements. It’s not like we were grabbing them and saying, ‘You better get a loan with us.’ ”

The way Castle Payday is set up, borrowers’ problems can feel far away. Their calls land in the Philippines, largely because the tribe doesn’t have enough people to staff a call center; the Filipinos forward information to McGeshick’s office via an instant messaging program. Borrowers’ e-mails go directly to the tribe but even there, the responses are mostly prepackaged. When McGeshick writes back to customers, she picks from among several response templates — one explaining fees, for instance, another explaining payment options.

“This message is in regard to your recent customer service inquiry,” one such message begins.

McGeshick was instructed never to sign her name at the end.

“Customer Service, CastlePayDay.com,” the letter says instead.

‘Life’s Unexpected Expenses Covered’

The loans are geared to borrowers who lack savings or access to cheaper forms of credit — either from a credit card or bank. “Life’s Unexpected Expenses Covered,” Castle Payday says on its Web site, and it shows a picture of a woman kneeling beside a flat tire. “Getting a loan from Castle Payday is as easy as 1-2-3.”

Castle Payday offers what some in the industry describe as a “second generation” product — an installment loan for which the borrower pays back the principle and the fees over months or years. Over the last few years, many lenders have swung over to installment loans, as opposed to payday loans, which must be repaid in full at the time of the borrower’s next paycheck. Installment and payday loans have similar interest rates, but by structuring payments over a longer period of time, lenders are able to avoid some state legislation that strictly targets “short-term” lending.

The loans “are structured as installments but have very devastating consequences for consumers,” said Diane Standaert, director of state policy at the Center for Responsible Lending. “These are triple-digit [interest rate] loans made with access to borrowers’ bank accounts.”

Castle Payday’s loans come at a steep price. A $1,000 loan, repaid on the first payment date, will come with $350 in fees. And the fees escalate quickly if borrowers wait longer to pay back the principal. On its Web site, Castle Payday shows the example of a borrower repaying a $1,000 loan in 44 installments, spread over 1 1/2 years. The total financing fees: $8,916.25.

Wichtman, the tribal lawyer, responded by e-mail that the lending company “realizes that the loans it offers are sometimes an expensive form of borrowing,” and as a result takes “every opportunity” to tell customers that they can save money by paying early. About 20 percent of borrowers pay in full at the first opportunity, and others try to make their payments ahead of schedule. Very few borrowers — “certainly in the low single digits,” Wichtman said — allow their loans to fully mature. The tribe does not allow borrowers to refinance; they must pay off the first loan before they can take out a new one.

Among the Castle Payday customers who end up defaulting, some are approached by debt collectors whose practices, Jennifer Steiner, the Duck Creek chief operating officer, acknowledged are sometimes dubious. One collector last year hounded a borrower in St. Louis, threatening him with jail time and using racial slurs in messages left on his answering machine. Those messages, shared with The Washington Post by the borrower’s lawyers, came several months after he’d taken out a $700 loan from the tribe.

The Lac Vieux Desert Band’s 12,500-word lending code devotes only one sentence to the loans, prohibiting more than $50 in financing fees per installment period for every $100 borrowed. If the borrower has a dispute, he can only take it up with the tribe. The code provides “no real protections of any value,” said Andrew Pizor, an attorney at the National Consumer Law Center, who reviewed the document at the request of The Post.

Castle Payday has encountered obstacles from regulators, too. Last year, the tribe received a cease-and-desist letter from Benjamin Lawsky, New York’s financial services superintendent, who said they and other online lenders were violating New York’s 25-percent annual interest cap by dealing with borrowers in the state. The Lac Vieux Desert Band, along with the Otoe Missouria Tribe of Indians in Oklahoma, together challenged Lawsky’s power to regulate the loans. But they lost twice in court and then dropped the case.

Castle Payday is operating “at capacity,” said Steiner, but it does not issue loans to consumers in New York, Pennsylvania, Arkansas, Vermont, West Virginia or Colorado — other states that either banned high-rate lending or have challenged online lenders.

Wichtman and Williams, the tribal chief, often talk about the regulation attempts as misguided interference by outsiders, and say Indian tribes faced similar resistance when they entered the gambling industry decades ago. Williams, at one point, said with anger that the goal of regulation is to “keep us in poverty.”

“Anytime Indian country enters into something new, it’s a fight,” Wichtman said. “Because they think we should stay on the reservation.”

An ethical dilemma

In November, McGeshick pulled a check for $625 out of her mailbox. This was the yearly dividend that every Lac Vieux Desert Band member gets from the tribe, though this time it was particularly generous. In fact, in some years, there hadn’t been a payment at all. This time around, Williams said, the lending proceeds had left the tribe with more money to distribute.

Should it matter, in determining the merits of the industry, where the profits flow? McGeshick thinks it should, and she’s told herself that this is the missing piece in evaluating the lending business. Native Americans, she says, need to do everything possible to help themselves.

“I feel like we got screwed over,” she said. “We’re a sovereign nation, but we’re still being ruled. Still being controlled.”

So after receiving the check, McGeshick decided to try something new, something she wouldn’t have dared do years earlier. She handed her kids off to a friend and booked a ticket to Las Vegas. She went with a Castle Payday coworker, and the two stayed at Circus Circus and shopped and had a few drinks. It was the farthest McGeshick had ever been from home.

They didn’t talk much about work while on vacation, but when McGeshick returned, she wondered how borrowers would feel knowing about the old ballroom where she worked, the place where the money was flowing.

“Maybe it would make a difference,” she said, in how the borrowers felt. “I don’t know. Maybe it would.”

She laughed for a half-beat.

“They’d probably be like, ‘At least I’m helping out, somehow.’ ”