Short-term personal loans, sometimes referred to as payday loans, are being called into question all around the country. Recent actions in New York, however, have taken the fight against these loans a step to far. By attempting to halt all online loans to residents in the state, authorities have attacked the sovereignty of tribal lenders who offer loans in New York.
The doctrine of tribal sovereignty in the US goes back several hundred years. Congressionally-recognized tribes are protected from interference by state and local authorities. This sovereignty has been challenged many times in the past and has been upheld repeatedly by the Supreme Court as well as lower courts and federal laws.
On August 6th an official order from the New York Superintendent of Financial Services demanded that online lenders stop making loans in their state and pressured banks to stop helping those lenders process loans and payments. Some of the largest banks in the country were included in the order, such as US Bancorp, Bank of America, Capital One, Wells Fargo, JP Morgan Chase, and Citigroup.
Native American lenders and advocates labeled Lawsky’s actions an attack on tribal sovereignty and an attempt to bully banks into cutting off the legal lending practices of tribal nations. By pressuring banks to do the dirty work, New York is circumventing tribal rights and attempting to regulate businesses over which they have no authority.
By including at least four tribal lenders in his order, Lawsky has launched an attack on tribal sovereignty and is threatening the financial stability of those tribes. The Native American Financial Services Association responded to Lawsky with a letter demanding he “cease and desist” his unwarranted attacks on tribal lenders, tribal sovereignty, and the legitimate attempt of said tribes to develop economic self-sufficiency.
Should Lawksy hold his ground, NAFSA will pursue legal remedies, similar to those that recently cost Colorado taxpayers millions of dollars in legal fees. That case upheld the notion that tribes are immune from enforcements and lawsuits at the state level and that their immunity extends to non-tribal companies that assist and support their business endeavors.