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Indian Tribes Subject to Lending Laws

By William Vogeler, Esq. on January 25, 2017 | Last updated on March 21, 2019

The Ninth Circuit has ruled that lending companies operated by Native American tribes are subject to investigation by federal lending authorities.

According to the circuit's ruling, the companies, operated by various tribes, must comply with civil investigative demands from the Consumer Financial Protection Bureau. The court rejected the tribes' argument that they were sovereign and that the bureau had no authority over them. The judges said that general laws apply to tribes, unless Congress excludes them.

"In the Consumer Financial Protection Act, a generally applicable law, Congress did not expressly exclude tribes from the Bureau's enforcement authority," the court said.

Consumer Protection Act

The case arose after bureau initiated an investigation into the tribes' online lending practices violated federal consumer financial laws. This investigation sought information to determine whether the companies had "engaged or are engaging in unlawful acts or practices relating to the advertising, marketing, provision, or collection of small-dollar loan products" in violation of Section 1036 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The tribes -- the Chippewa Cree, Tunica Biloxi, and Otoe Missouria -- directed the lending companies not to respond to the investigative demands. The Chippewa Cree's lending company, Plain Green, had been accused of predatory loan practices.

Limited Sovereignty

The tribes responded to the probe by offering to cooperate as co-regulators with the federal agency. The bureau rejected the offer and sought enforcement in federal district court. The trial court ruled against the tribes, and they appealed.

The tribes argued that the Consumer Protection Act did not confer authority on the bureau to investigate Native American tribes. They contended that the Act acknowledge the tribes as sovereign states, and established that states may act as co-regulators to enforce its provisions.

The appeals court said the tribes made "appealing arguments," but they could not overcome precedents establishing that general laws apply to Native Americans. Since its ruling in Donovan v. Coeur d'Alene Tribal Farms, the court said it had consistently ruled that tribes enjoy limited sovereignty.

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