Tribes Facing Loss of Health Care & Other Services in Attack on Online Lending

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Tribal lenders provide necessary revenue to Native Americans across the country.  Actions taken by New York banking officials are threatening to cut off that revenue stream, putting health care clinics, child care, and schools at risk.

Benjamin Lawsky, the banking czar for the state of New York, recently demanded that that internet lenders cease making personal loans to residents of the state.  His statement characterized the lenders as offering “illegal payday loans” despite the fact that many of said lenders are tribal entities which are licensed financial institutions that comply with all federal laws.

At the root of the problem is the issue of tribal sovereignty.  Native American tribes that are recognized as sovereign by Congress have long been protected from state interference for over two centuries. These laws are generally attempts by local governments to erode the rights of tribes to operate as sovereign entities.

Native America tribes are guaranteed the right to operate their businesses according to federal laws and are immune to state interference.  Lawsky’s order is just the latest attempt by states to interfere with tribal sovereignty and is unlikely to succeed.

Just recently Colorado spent seven years attempting to win a case very similar to the New York order. The court ruled that states have no authority to interfere in the economic activities of tribes, even if the tribes contract “non-Indian operators.” This decision was only the most recent in numerous Supreme Court and state decisions that upheld tribal sovereignty and is grounded in the US Constitution.

At stake is more than just the success of individual tribal lenders.  Tribal businesses are a key factor in the health and stability of individual tribes. Revenue streams from these lenders support essential services, including education, child care, housing, and health care.  Given the recent cuts in federal funding to tribes, a figure topping $552 million, the loss of additional funds could prove devastating to tribes in New York — and tribes across the country if this attack on sovereignty is somehow allowed to stand.

The official response from the Native American Financial Services Association came on August 14th in a letter to the banks involved in the Automated Clearing House for internet loans.  It declared Lawsky’s actions illegal and a “direct threat to tribal sovereignty and our efforts to develop economic self-sufficiency.”

New York taxpayers could also be at risk if Lawsky continues to pursue action against tribal online lenders.  The Colorado case that was decided in favor of tribal sovereignty cost those taxpayers millions of dollars in legal fees.

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