In the first positive federal response to widespread Indian protests over government attacks on tribal companies’ online loan businesses, U.S. Department of Justice officials Wednesday (Aug. 21) assured eight tribal officials that they are not being illegally targeted.

The Department of Justice’s Financial Fraud Task Force’s recent activities were “not directed at tribal entities short-term lending businesses,” eight tribal leaders were told Wednesday in a meeting with Deputy Assistant Attorney General Maame Ewusi-Mensah Frimpong, said John Shotton, chairman of the Otoe-Missouria Tribe and chairman of the Native American Financial Services Association (NAFSA). Shotton participated with other tribal leaders in the meeting with Frimpong.

Also on Wednesday, NASFA, which Shotton chairs, sued the state of New York in federal district court demanding that the state stop trying to shut down tribe-owned online lending companies. New York’s attack on at least 16 tribal lending companies launched Aug. 6 was filed by former federal prosecutor Benjamin Lawsky, the new czar of NY’s Department of Financial Services.

“Defendant Lawsky and the State of New York have overstepped their bounds with their illegal attacks on our tribes,” said Barry Brandon, NAFSA executive director whose members filed the complaint.

Any government crackdown on tribal lending companies – by federal or state regulators -- would produce devastating cuts in education, health care and housing on Indian lands. Income generated by the tribal online lenders generates millions of dollars of income used to fund those core services, all of which have sustained huge cutbacks from sequestration of the federal budget.

The catastrophic sequestration cuts in promised funding to the tribes, $552.7 million cut so far, occurred despite assurances from the Obama Administration that guaranteed federal support for essential services to the tribes granted in treaties and agreements would be exempt from sequestration, mandatory across-the-board budget cuts ordered by Congress.

In response to Wednesday’s meeting with DOJ officials, Shotton said in a letter, “We were pleased to hear from you today that your actions are not directed at our tribal government short-term lending businesses. In particular, it was a relief to hear Deputy Assistant Attorney General Frimpong make the statement that, ‘It didn’t occur to me that we should consult with tribes in advance because we are going after fraud. Never have we focused on tribal payday or payday. We go after financial fraud, so we are not going after you.’ ” Shotton’s and other tribal leaders’ letter to Frimpong was posted on the NAFSA website Thursday (Aug. 22).

Shotton also revealed that the DOJ has invited the tribal representatives to be part of the new DOJ Consumer Protection Working Group. Shotton added, “Tribal governments share your dedication to protecting consumers by offering responsible financial services products and services.”

The letter to the DOJ also noted the “recent … proud tradition of consultation between our governments that was memorialized by Executive Order during the Clinton Administration. Both the George W. Bush and Obama Administrations have continued this legacy of cooperation and respect for the sovereign rights of American Indian tribal governments.

“President Obama confirmed this commitment on November 5, 2009 by reaffirming Executive Order 13175, requiring all heads of departments and executive agencies to consult with American Indian tribal governments before taking any action which may affect the sovereign rights of an Indian Tribe. The recent Executive Order, dated June 26, 2013, establishing the White House Council on Native American Affairs, specifically acknowledges, ‘that self-determination--the ability of tribal governments to determine how to build and sustain their own communities -- is necessary for successful and prospering communities.’ ”

The key legal precedent governing tribe-owned businesses, including online lenders, is sovereign immunity, which recognizes the tribes as sovereign nations within the U.S. with complete control over their lands, businesses, laws and governance. Sovereign immunity was guaranteed in numerous treaties with the U.S. government in exchange for the surrender of vast tracts of Indian land and natural resources.

Tribal sovereign immunity has repeatedly been upheld in the Supreme Court and in numerous states. First expressed in Article I, section 8, of the United States Constitution, the courts have since consistently found that any erosion of Tribal Sovereignty would lead to a complete loss of the rights of recognition granted to the tribes by the federal government.

In 2112 in Colorado, tribal rights to operate online lending businesses under circumstances very similar to those in New York were upheld. In State of Colorado v. Cash Advance and Preferred Cash Loans, fully recognized as “arms” of Congressionally acknowledged tribes, dragged on for seven years with a final ruling that proved to be an overwhelming affirmation of tribal sovereign immunity.

Despite the Colorado case, former federal prosecutor and New York’s new banking czar, Lawsky, issued a written order August 6 against internet lenders – including at least 16 tribal entities – demanding that they stop making loans to New York state residents. His letter went out to 35 lenders and 112 banks that help process the loans.

Some tribal officials worry that the Department of Justice actions may have inspired New York’s attack on tribal lenders. Despite his experience as a former federal prosecutor, Lawsky’s reference to “illegal payday loans” shows a complete disregard for the centuries-old federal doctrine of tribal sovereignty, in which states have consistently been prohibited from meddling in the business affairs of Congressionally recognized tribes.

CNN reported Thursday that New York has made several attempts in recent years to interfere with tribal commerce. It attempted to atop the sale of tobacco by the tribes by arranging agreements with credit card companies to stop processing tobacco sales. That attempt ultimately failed when the U.S. Postal Service adopted rules allowing it to facilitate the transactions.

Lawsky’s cease and desist order against online lenders has already prompted the layoffs of 300 workers in Tennessee who worked for online lenders. NAFSA’s Brandon said several other online lenders may close because of Lawsky’s order to banks to stop acting as clearing houses for such loans.

In a telephone press conference Thursday, Brandon said, "We wrote a letter to Lawsky with our concern about his actions, requesting a meeting. We received no response from him."

Brandon said for some tribes online lending businesses fund as much as a quarter of the government’s operational budgets, money they can ill-afford to lose for schools, health care and housing in economically depressed Indian communities.

Jane Daugherty, former associate professor of journalism at Florida International University, is a doctoral candidate at the University of Miami School of Communication. An investigative reporter and editor for 25 years, she is a four-time winner of the Robert F. Kennedy Journalism Award for coverage of the disadvantaged and was named a Pulitzer Prize finalist in commentary in 1994. Her great-great-grandmother was a member of the Creek nation who fled Indian removal.

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