The Lac Vieux Desert Band of Lake Superior Chippewa Indians was featured in An Unlikely Solution, a film about the online lending industry in Indian Country. Still image: An Unlikely Solution

Tribes see opening under Trump to reshape agency that targets lending industry

The leader of an independent federal agency that has targeted the tribal lending industry will be stepping down, opening the door for President Donald Trump to reshape its efforts.

As director of the Consumer Financial Protection Bureau, Richard Cordray has overseen lawsuits against tribal lenders and announced new limits on loans issued by tribal lenders. He's due to leave by the end of the month and whomever Trump picks as his replacement is bound to shift course.

"Regardless of the eventual nominee, the CFPB’s agenda and enforcement activity will likely see significant changes in the coming year," the Native American Financial Services Association, a group that represents tribes in the lending industry, wrote in a blog post on Thursday that discussed potential picks.

Sensing an opportunity to influence the Trump administration, the organization publicized a letter that had been sent to Cordray before he announced his departure. An order the agency issued in a recent lending dispute represents an "unprecedented attack on tribal sovereignty and self-determination," according to NAFSA, and tribes are seeking an explanation.

“By completely disregarding tribal law, the CFPB is harming tribes’ rights to regulate commerce originating from our own lands," Navajo Nation President Russell Begaye said in a press release about the October 30 letter. "This could undermine our ability to provide protections and accountability for our own people and economies."

Indian Country's ability to shape CFPB's future is all the more significant in light of a legal decision that went against tribal interests. On January 20 -- the same day Trump was sworn into office -- the 9th Circuit Court of Appeals ruled that the agency has the authority to investigate tribal lending businesses even though the federal law that created it does not mention tribes at all.

"We have consistently held that similar laws of general applicability govern tribal entities unless Congress has explicitly provided otherwise," Judge Johnnie B. Rawlinson wrote in the unanimous 20-page decision.

The tribes that were targeted by CFPB have asked the U.S. Supreme Court to overturn the ruling. But the chances of the petition in Great Plains Lending v. Consumer Financial Protection Bureau being granted are remote because of the small number of cases accepted by the justices.

Still, the petition is notable because tribes were able to draw in some unusual allies -- state governments. The attorneys general in Oklahoma, Indiana and Nevada submitted a brief, urging the Supreme Court to reign in the CFPB, arguing that it represents a threat to all sovereigns.

"The CFPB’s decision to unleash the full panoply of its regulatory armory against tribes, states, and their agencies is without textual support, bad policy, and contrary to our system of federalism and the separation of powers," the September 5 submission read. NAFSA also filed a brief with the court in support of the tribal petition.

The Department of Justice defended the CFPB's authority in a November 6 response. The tribes submitted their final reply on Friday, meaning the petition can be taken under advisement by the Supreme Court. An announcement on the petition is expected in the coming weeks.

Whatever the outcome, tribal lenders still have to deal with a controversial rule that Cordray finalized just last month. While NAFSA said the limits that were initially proposed have been scaled back, the organization believes tribes will be adversely impacted.

But the rule, which was published on Friday in the Federal Register, isn't due to go into effect for another 21 months. That gives tribes and other lenders another opening to influence the Trump administration into revising or even scrapping the limits.

The rule was proposed to prevent consumers from falling into so-called "debt traps." Tribal businesses have drawn scrutiny because they aren't normally subject to state laws that regulate lending practices.

“Too often, borrowers who need quick cash end up trapped in loans they can’t afford," Cordray said last month. "The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.”

9th Circuit Court of Appeals Decision:
Great Plains Lending v. Consumer Financial Protection Bureau (January 20, 2017)

Federal Register Notice:
Payday, Vehicle Title, and Certain High-Cost Installment Loans (November 17, 2017)

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