Industry leaders in e-commerce and online payments gathered last week at Harvard University for Innovation Project 2017. Innovation Project, a two-day conference created by the web publication PYMNTS.com, brings executives and innovators in banking, lending, shopping, and payments together to discuss the unique challenges to electronic payments in the areas of data security and consumer engagement and interaction. Some of the high profile speakers at Innovation Project 2017 included Visa CEO Al Kelly and PayPal CEO Dan Schulman. Day 2 of the conference explored the long-term future of short-term lending and collected a strong panel of experts in the field, including the CEO of Advance America, Patrick O’Shaughnessy, and the Executive Vice President at Enova, Kirk Chartier.
The panel’s discussion centered on the effects of the Consumer Financial Protection Bureau’s proposed rule on auto title, payday, and certain high cost installment loans. Despite combined decades of experience in the legal nuance of online lending, the panelists exhibited a poor understanding of the sophisticated regulatory structures in place for tribal lending enterprises (TLEs). Summarizing the session, PYMNTS.com demonstrated a misguided view of the sovereign and co-regulatory relationship between tribal governments, their economic arms, and the federal government:
“In a world where the majority of short-term lending goes away, a possible future the panel pondered was one where the future of innovation is synonymous with the future of evasion — small dollar providers’ signature innovations will be around avoiding the reach of federal rules (by licensing offshore, or with Indian tribes or bouncing their servers all over the world).”
Contrary to the beliefs of Innovation Project 2017 panelists and the staff at PYMNTS.com, tribal governments and their economic subdivisions adhere fully with all applicable federal laws. Contingent to admission into the Native American Financial Services Association (NAFSA), TLEs must demonstrate compliance with 19 different federal laws related to lending and consumer finance. In many areas, NAFSA Best Practices go beyond federal requirements, mandating a stricter, more controlled ecosystem for our TLE members’ operations.
Beyond our Best Practices, each NAFSA member’s tribal council adopts its own lending code. Many of these codes have memorialized federal regulations in key areas. At the National Reservation Economic Summit last week, John Shotton, Chairman of the Otoe-Missouria Tribe and NAFSA, explained during a panel session that his tribal council spent a year researching and debating different provisions before finally adopting a lending code. Jay Abbasi, NAFSA member and CEO of Plain Green LLC, added that Plain Green hires an outside bank regulator each quarter to conduct a compliance audit and ensure compliance with all tribal and federal regulatory demands.
While the relationship between the U.S. government and tribes has not always been one of mutual respect and understanding, NAFSA and its members are nonetheless committed to working with federal agencies and Congress to protect tribal sovereignty and promote regulations that help tribal communities establish sustainable economies. The U.S. Dept. of the Treasury incorporates a tribal consultation initiative into its rule-making process, and tribes, defined as “states” in the Dodd-Frank Act, are recognized as co-regulators along side federal agents in enforcing consumer financial protection laws. Any lender seeking shelter from regulation by partnering with a tribe will be sorely disappointed to find a heightened level of oversight and regulation among TLEs.
Misinformation about the regulatory rigors in Indian Country is not a new phenomenon. Economic development in tribal communities begins with the tribal government and its ability to adopt sound business regulations to support entrepreneurial growth and foster industries that can provide for future generations. NAFSA looks forward to and accepts the vital role of promoting credible and sustainable tribal online lending solutions and services across America. Anyone hoping to avoid responsible regulation in this industry need not apply.
