The loophole involves payday lending firms affiliating with Native American tribes and taking advantage of tribal sovereignty to offer loans online that would otherwise be blocked by many US state laws.

Payday lenders—which make short-term cash loans, often to poor or financially struggling customers—target a national audience rather than members of the tribes involved and take advantage of their nominal affiliation with a tribe to charge annual percentage rates of more than 700 percent in some cases.

In some cases, the tribes receive a financial benefit from the payday lending firms — sometimes including a percentage of the overall business. The firms, in turn, lend cash to struggling borrowers at sometimes steep interest rates. (Read More: New Model Breaks From Payday Lender Pack.)

But CNBC found at least one case in which a tribal official said he had no idea a payday lending firm was using the tribe’s name, and, in an interview with CNBC, accused that lender of fraud.

Here’s how it works in one case:

An online lender called Cash Fairy is owned the Fort Belknap Indian Tribe in Montana. On its website, Cash Fairy explains that it is a “Tribal enterprise and economic arm, wholly owned and operated by the Fort Belknap Indian Community ("Tribe"), a federally-recognized sovereign American Indian Tribe, and created by the Tribal Council for the benefit of the Tribe.”

The website advertises cash loans of up to 50 days at an annual percentage rate of 782.14 percent. That means, the website notes, a customer would pay $10.71 to borrow $500 for just one day.

For most companies making loans in New York State, for example, the maximum allowable annual percentage rate is 25 percent.

But Cash Fairy can lend online to people living in New York State because tribal sovereignty means it is not subject to the New York regulations. And it’s operating in a growth area — a 2010 report by JMP Securities found that 35 percent of all payday loans made that year originated online and that share will grow to 62 percent by 2016.

The sovereignty loophole has angered some state leaders across the country, who say non-tribal businesses are simply using a Native American cover to charge exorbitant rates over the internet.

“We started to receive some complaints about outrageous rates, non-disclosure of those rates,” said Colorado Attorney General John Suthers. “And when we went after the payday lenders they showed up and said you can't touch us, we're not subject to your state regulations because we are affiliated with a tribe.” (Read More: 'Shadow Bank' System Will Thrive Under New Rules - Bove.)