By: Barry Brandon, Executive Director at the Native American Financial Services Association (NAFSA)
The Huffington Post recently published a lengthy story about Native American tribes operating online installment lending businesses. Unfortunately, instead of using the opportunity to highlight the resiliency and entrepreneurship of Native American communities, the story cherry-picked and twisted facts to create an extremely misleading picture of an industry that is essential for many tribes’ economic development, is an exercise of tribal sovereignty, and sadly, for some tribes, critical to tribal survival.
Despite the story’s assertions, the Native American e-commerce lending businesses that are mentioned in the piece are legal, licensed and regulated businesses that follow all federal laws and operate under sovereign tribal law – as are all members of the Native American Financial Services Association (NAFSA). The businesses are owned and operated by federally-recognized sovereign Indian nations as arms of the tribes.
It is clear The Huffington Post is completely unfamiliar with the concept of tribal sovereignty given the story’s repeated distortions regarding Tribes’ legal status within the United States. Native American sovereignty is enshrined in the Constitution, codified within an array of federal statutes, and supported by hundreds of years of Supreme Court and other judicial precedents – yet the article continually attacks this cornerstone of Native American rights, and is even so brazen as to call it a “cultural minefield.”
The story goes on to call Native American tribes a “regulatory shield,” and claims they have “no meaningful role” in running their own businesses. Not only are these shameless assertions completely false, the derogatory implications inherent in such claims are insulting to all Native Americans, reflecting racial stereotypes that should have been stamped out hundreds of years ago.
The truth about the tribes and their members is much clearer: with one in four Native Americans living in poverty and the labor force participation rate of Indians the lowest for all racial and ethnic groups, these e-commerce business are an essential economic development tool for Indian Country.
Tribes’ profits from their businesses go directly into the operating budgets of the tribal governments that they are a part of. These funds, which can account for as much as 75 percent of a tribal government’s revenue, go towards providing vital social programs like health care services, housing assistance, subsidizing home heating oil during the winter, education for children, elder care and more. Tribes are having to find ways to pay for essential services like these that the United States promised to provide in treaties, but which have been broken. The businesses also create jobs on the reservations, reducing the unemployment rate and giving tribal members the opportunity to free themselves from dependence on government support. The economic development supported by the businesses is helping real people who are in dire need – yet the story doesn’t mention them at all.
In addition to helping members of Native American tribes, there is scant mention in the story of the benefit that consumers have received from the industry. Products offered by NAFSA members fill a critical consumer need, providing small-dollar short-term access to credit for the more than 93 million Americans the FDIC reports are unbanked or underbanked.
As Richard Cordray, Director of the Consumer Financial Protection Bureau, has himself acknowledged: ‘There is a clear demand for small-dollar credit products, which can be helpful at times for consumers who use them on an occasional basis and can manage to repay them.’ NAFSA member products help meet this demand for small-dollar credit and give consumers options beyond pawn shops, payday loans, and similar alternatives.
Failing to distinguish between payday loans and the installment loans offered by NAFSA members is yet another deceptive feature of the article. Installment loans cannot be ‘rolled over’ or renewed to cover the costs of new loans the way payday loans can; installment loans offer penalty-free prepayment at any time, which payday loans do not; and the APR of installment loans is typically lower than those available with payday loans, among many other substantive differences. Yet the story repeatedly cites information and regulations that are only relevant to payday loans, blatantly ignoring the fact that they are completely different credit products.
The story even manages to attack tribes for engaging in common business practices that are used by countless other companies every single day. As is the case with starting and growing businesses of any kind, Native American tribes have the right and option to seek outside investors to help finance the costs of establishing and expanding their businesses. These investments can come in many forms, including the acceptance of loans as collateral, issuance of bonds, securitization of debt, and more – all of which are common, available to every other business and state in the country, and not nefarious in any way.
Indian tribes are also faced with the unique challenge of being unable to leverage the value of their real estate due to all reservation lands being held within federal trust agreements. Regardless of any investment received, NAFSA member tribes retain complete control over the operation of their businesses, the making of loan determinations and the issuance of loans, free of any interference from any outside party.
The story also completely omits any mention of the regulatory authorities created by tribal governments to regulate these businesses. Every NAFSA member has strong consumer protections in place through these regulators. Consumers receive repeated disclosures about every aspect of their loan. Before receiving a loan, consumers are informed of the exact repayment schedule, the amount of every payment, the options available for making payments, the APR the payments equate to, the details of the agreement being made under tribal law, and much more. Consumers who have trouble making payments have multiple options provided by the lending businesses, including customer service call centers, complaint resolution procedures, financial education services and more.
NAFSA also has its own mandatory code of minimum standards to protect consumers and ensure all relevant laws and regulations are followed. Members who do not follow these regulations are subject to penalties including revoking their NAFSA accreditation and involuntary removal from the organization.
Though The Huffington Post didn’t hesitate to heap criticism on an industry it seems to have no interest in truly understanding, it is clearly more than happy to profit from it in the form of advertising revenue. Even on the page the story was published on, an ad from a lead generator for online lenders appeared, linking to a site featuring loans with APRs as high as 1,304 percent and requiring direct access to consumers’ checking accounts – practices the article directly attacked. This blatant hypocrisy would be laughable if it wasn’t so offensive.
As is clear by now, there is a lot more to this story that the Huffington Post decided to ignore when publishing their article. Even after the story was released and we asked for the opportunity to post this response, The Huffington Post refused. It is disappointing – though certainly not unprecedented – for Native Americans to be short changed like this. We can only hope that in the future, The Huffington Post and others who examine tribal economic development do so in a fair and complete way.
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