|The following is the opinion of Heather Dawn Thompson. All content © Native
Heather Dawn Thompson. Photo from Greenberg Traurig
Operation chokepoint: destroying online lending
By Heather Dawn Thompson
WASHINGTON — Each time Tribes finally find a way to “pull themselves up by their bootstraps,” state and federal governments try to destroy their new businesses.
It happened with gaming, tobacco, and gas sales. So maybe it is not surprising that it is now happening with a new Tribal business, online lending. What is surprising to many, however, is that it is President Obama’s Administration that is trying to kill these legal Tribal businesses.
Many tribes have turned to internet businesses for income, because they are too isolated and remote and lack more traditional revenue, such as a tax base. One of the most successful tribal internet businesses is lending money, or “online lending.” According to Barry Brandon, the Executive Director of the Native American Financial Services Association (NAFSA), there are probably about two dozen tribes running successful online lending businesses.
These online businesses have been an economic miracle for many isolated and impoverished Tribes. According to President Mark Azure of the Ft. Belknap Indian Community in Montana, income from their online lending businesses now makes up about 20% of their Tribal governmental revenue, and provides approximately $1.2 million in payroll to Tribal employees; revenue and paychecks that the federal government is not providing. In addition, they are using the profits to invest in their community. They started the Smokehouse Grille Restaurant, a construction company, IT company and will be opening a grocery co-op this summer in an area of the Ft. Belknap Reservation that is a food desert.
Most Tribal online lenders provide short-term, small-dollar installment loans (typically around $300) for a short period of time (4-6 weeks is a common repayment period) at higher interest rates. There is a great demand for these loans because of the large number of people who do not have credit cards or who cannot get loans from regular banks.
The Obama Administration is trying to shut these Tribal businesses down. At the heart of it, some uniformed federal officials lump good, legal, hard-working Tribal businesses in with bad actors and they fail to understand Tribal sovereignty. They also appear to think that lower income people are too ignorant to make their own decisions about loans. And apparently, if they cannot get one from a bank, they should not be able to get one at all.
At the Online Lenders Alliance conference in Washington, DC on May 2, a lawyer for the FTC, Nikhil Singhvi, said doing business with a Tribal online lender was tantamount to subverting the law, and said that non-Indians only support Tribal businesses or provide services to Tribes to “escape law enforcement scrutiny.” The Tribal attendees at the conference were outraged and demanded Singhvi’s apology. He refused.
You may ask, what is so interesting about the government trying to stop people from “subverting the law”? The answer: Tribes are not breaking any laws. Nor are business that work with Tribes breaking any laws.
There are no federal laws prohibiting Tribal online lending. There are some states that prohibit or limit it, but state laws do not apply to Tribes or Tribal government-owned businesses.
Congress has the power to regulate online lending, for both states and Tribes. But, Congress has chosen to leave most of these decisions to states and Tribes. Each individual state and Tribe decides if you can lend online there, and if so how much and what interest rate you can charge.
Some states allow online lending, some do not. Some Tribes allow online lending, some do not. Some states put heavy restrictions on interest rates, some do not. Some Tribes put heavy restrictions on interest rates, some do not.
The states that have placed heavy restrictions on online lending are mad at the Tribes who have not.
The Obama administration has decided to try and help these states force their state laws on Tribes despite the fact that the federal government is the trustee for Tribes.
There are at least four different Obama Administration agencies aggressively working to shut down these tribal businesses: the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), and the Department of Justice (DOJ).
The Obama Administration calls these efforts “Operation Chokepoint.”
President Obama’s “Operation Chokepoint” works like this: The Tribes are not violating any laws, so the federal government cannot go after them. So, these federal agencies bully banks into not doing business with the Tribes or their business partners. The federal agencies meet with the banks and tell them they will investigate the bank for having a “risky” business and for potential “fraud.” The banks get scared. The banks close the Tribe’s online lending bank account. Without a bank account, the Tribe cannot run its business.
Even more disturbing, the banks are now so intimidated by the Obama Administration’s efforts that they are shutting down all Tribal bank accounts. One Tribal entity in the Dakotas had two banks shut down their online lending accounts, sending the business into a crisis. At the same time, one of the banks decided to just shut down all of their Tribal bank accounts, including one that was for tribal tourism and one for tribal arts and crafts. The Tribal entity asked that their name be withheld for fear of additional targeting by Obama’s “Operation Chokepoint.”
Tribes have reached out in desperation to Congress to protect themselves from “Operation Chokepoint.”
At a closed door meeting on April 30, 2014 with the Senate Democratic Steering Committee, several tribal leaders asked Senate Majority Leader Harry Reid (D-NV), and Senator Jon Tester (D-MT), Chairman of the Senate Committee on Indian Affairs, to hold a congressional hearing on the destruction “Operation Chokepoint” is causing in Indian Country.
As of the date of this publication, no hearing has been scheduled.
Indian activists rightly focus on the Keystone XL pipeline and the “Redskins” mascot. But the economic oppression of Operation Chokepoint is just as destructive to Indian Country. If Tribes cannot make their own money by running their own businesses, they will be forced to continue to be dependent on the federal government. Perhaps the next Indian Country t-shirt should read “No Operation Chokepoint!”
Heather Dawn Thompson is a professor at the United Tribes Technical College and an Indian law attorney with Greenberg Traurig. GT represents a number of Tribes expanding their economies with online lending.
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