Consumer Protection in Native Communities

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