Tribal Nations Defend Their Lending Rights

The doctrine of tribal sovereignty extends to all Native American tribes that have been recognized by Congress and dates back to the US Constitution.  It extends to tribes the right to operate business and economic entities without the interference of individual states.  That sovereignty has be repeatedly upheld by Supreme Court decisions and state cases for 200 years. But Benjamin Lawksy thinks that he and his state can infringe on those sovereign rights.

Lawsky is the Superintendent of Financial Services for New York and a former Acting Superintendent of Banks.  In early August, Lawsky issued an official order to internet lenders to stop lending money to NY residents.  The letter was directed to 35 lenders, including over a dozen tribal entities, and also went to over 100 banks that help these online lenders with loan processing.  It called the loans “illegal” and threatened banks who helped tribal lenders if they did not cease operations.

cash to digitalAlthough Lawsky is a former assistant US Attorney, his failure to separate tribal from state banks has resulted in accusations of intimidation and bullying against tribal businesses that are operating in complete compliance with federal laws and regulations.

The Native American Financial Services Association (NAFSA) countered with a cease and desist letter to Lawsky stating “we strongly disagree with your characterization of these payments as illegal. To the contrary, our businesses are legal and licensed and owned and operated by American Indian tribal governments across the United States.”

With centuries of court decisions upholding Native American sovereignty, including a 2011 Colorado decision in a case also involving personal or “payday” loans, it is curious why New York would attempt to erode tribal rights in this manner — and at a potential huge financial cost to New York taxpayers.  The Colorado case is believed to have cost several millions of dollars in legal fees and was decided against the state.

At stake is not only tribal sovereignty in operating these online businesses, but also the growing efforts of involved tribes to develop financial self-sufficiency.  Revenue from tribal lenders goes to support many services such as health care and education.  Economic self-sufficiency is especially important given that the recent budget sequester cut $552.7 million in federal funding for Native American schools, child care, and health clinics.

NAFSA Executive Director Barry Brandon warned Lawsky that unless he ceased and desisted in the unwarranted attacks on Native American businesses engaged in licensed lending activities, they would seek appropriate legal remedies.

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