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					    Building Trust:
 Consumer Protection
in Native Communities
             Levon B. Henry
            Executive Director
         DNA People’s Legal Services

South Dakota Indian Business Alliance Conference
           Rapid City, South Dakota
                 May 17, 2011
          Predatory Lending

• Subprime lending, housing market collapse
  and increased attention on predatory lending.
• Predatory lending encompasses a number of
  abusive practices including unreasonably
  high interest rates, charging hidden or
  excessive fees, offering loans borrows cannot
  repay, high pressure tactics or fraud and
  deception in loan transactions.
Predatory Lending in Indian Country

• Lack of access to mainstream banking services
  – 28.9% of American Indians and Alaska Natives are
    under banked
  – 15.6% are unbanked
• Previous studies by First Nations
  – 2007 survey 71% of tribal leaders indicated that
    predatory lending was a problem in their
  – Native communities use refund anticipation loans at
    higher rates than non-Native communities
     What Can Native Nations Do?

• Tribes can and have developed consumer
  protection laws to protect tribal consumers
   – 7 Native Nations have passed consumer protection
• This kind of legislation is an exercise of
  sovereignty and an expression that Native
  nations take the protection of tribal citizens
  Consumer Protection Laws Are…
• Intended to maintain adequate protection and
  high ethnical conduct in transactions related to
  business and financial services
• Statutes that govern sales and credit practices
  involving consumer goods and can include
  prohibition of deception, unconscionable
  dealings, or usury caps
• Legal means to correct for market imperfections
  that may produce inefficient outcomes or distort
  information in regard to consumer choice
   Consumer Protection Codes Are
• Intended to replace normal market mechanisms
  of competition.
• Intended to be blanket responses that protect
  consumers from all liability in business
      Jurisdictional Considerations

• Native nations can regulate Indian business
  dealings on reservations-“Indian v. Indian”
• Indian v. non-Indian?
     • Montana v. United States (1981)
     • Land status
        – fee simple owned by non-Indian vs trust vs
          fee simple owned by tribe/member
                 Navajo Nation

• Passed consumer protection legislation in 1999.
  – In drafting the legislation, Navajo leaders recognized
    the absence of consumer protection laws and that
    Navajo citizens can fall prey to unscrupulous
    business practices
• Comprehensive code that includes regulation of
  pawn transactions, truthful lending and business
  dealings, vehicle sales, and usury cap (prime rate
  plus 15%).
          Navajo Nation (cont.)

• Has supportive institutional infrastructure
• Strong court system for enforcement
  – Capital Loan Corporation V. Platero, Henry and Largo
• Created regulatory offices and licenses for pawn
• Long Arm Law
   Emerging Trends in Predatory
  Lending and Consumer Protection

• State coalitions and cap the rate movements
• “Rent a Tribe”
  – Tribal partnerships with payday lending business that
    mostly offer internet loans nationally.
  – Hiding behind tribal sovereignty
               Lessons Learned
• Native Nations can develop consumer
  protection laws to protect tribal consumers
  – Native leaders should consider jurisdictional issues
    and tribal infrastructure for enforcement
• Native nations can offer access to alternative
  loan products
  – This can include offering loans to tribal employees
• Native nations can collaborate with broader
  statewide activities
• Native nations can provide consumer and
  financial education
        To obtain the full report:

• Go to (publications
• Model consumer protection code includes
  11 chapters that tribes can consider
          Contact Information
• Levon B. Henry
  Executive Director
  DNA People’s Legal Services
  928-871-5630 (Voicemail)
• Sarah Dewees
  Senior Director of Research, Policy, & Asset
  Building Programs
  First Nations Development Institute