Sherry Treppa, the chairwoman of the Habematolel Pomo of Upper Lake in California, appears in An Unlikely Solution, a film about the online lending industry in Indian Country. Still image: An Unlikely Solution

Trump administration signals major changes for tribal lending industry

Note: This post has been updated with comments from Gavin Clarkson, a candidate for U.S. Congress.

Indian Country advocates are cheering the Trump administration for dropping a case that targeted the tribal lending industry.

With little fanfare, the Consumer Financial Protection Bureau withdrew a lawsuit against lending companies owned by the Habematolel Pomo of Upper Lake. All that was filed in federal court on Thursday was a one-sentence brief.

But the short document hints of major changes for tribal lenders. President Donald Trump already promised to take the agency in a new direction and tribes see the dismissal as a sign of progress.

"The notice of dismissal hopefully ends a litigation strategy by the bureau that targeted tribal sovereignty through the use of the agency’s authority to combat unfair, deceptive, and abusive acts and practices," the Native American Financial Services Association, which represents tribes in the lending industry, said on Friday.

The National Congress of American Indians was equally pleased. The organization had filed a brief in the case, arguing that the agency failed to take tribal sovereignty into account.

The bureau, according to the nation's largest inter-tribal organization, "appeared to have overlooked important federal Indian law precedents and tribal sovereignty principles, namely that tribal powers of tribal self-government are inherent, and that their exercise is vital to fostering economic prosperity and healthy communities in Indian Country."

"NCAI is pleased that the bureau is following U.S. Supreme Court precedent and honoring sovereign rights of tribal governments by taking corrective action to dismiss the case," the organization said in a statement on Friday.

The dismissal is all the more significant in light of a recent legal setback. Earlier this month, the U.S. Supreme Court refused to hear a case that represented a clash between tribal sovereignty and the bureau, which was created by an act of Congress in 2010.

Tribes argued that they should be treated as co-regulators of their own businesses. But the 9th Circuit Court of Appeals ruled that the bureau, which rose to prominence during the Obama era, has the power to investigate tribal lenders as a matter of "general applicability."

The new administration's withdrawal from the Habematolel Pomo case does not alter the decision in Great Plains Lending v. Consumer Financial Protection Bureau. But it shows that the Trump team is more than willing to change course.

"NCAI and its member tribal nations stand ready to continue to work with the bureau on a government-to-government basis to assist the bureau in its important mission," the organization's statement read.

And on another front, the bureau has reopened discussion on a rule that tribes say will adversely impact their lending businesses. The rule was developed during the Obama presidency and had been finalized by a holdover director.

But the new administration on Tuesday said it was going in a different direction, giving tribes another opportunity influence the controversial regulation, which imposed some limits on lending practices in Indian Country.

"The bureau intends to engage in a rulemaking process so that the bureau may reconsider the Payday Rule," the agency said in a statement.

The move "could be the first opportunity for new CFPB leadership to show their respect and commitment to tribal sovereignty and self-determination, instead of furthering a harmful agency policy that tramples Native rights," NAFSA said in response.

Hear from Sherry Treppa (Habematolel Pomo of Upper Lake) on how #onlinelending is impacting her tribe. #IndianCountry

Posted by An Unlikely Solution on Friday, December 4, 2015
Chairwoman Sherry Treppa on Online Lending: 'It's changing the lives of our people'

The bureau is currently being overseen by Mick Mulvaney, who is serving as its "acting" director. He was named to the post by President Trump last November as a replacement for Richard Cordray, who had overseen enforcement efforts against tribal lenders during the Obama era.

Mulvaney, whose official title is director of the White House Office of Management and Budget, was a critic of the bureau when he served in Congress, once calling it a "sick, sad" joke of an agency.

“It’s a wonderful example of how a bureaucracy will function if it has no accountability to anybody,” Mulvaney said in a 2014 video interview with the Credit Union Times.

It now looks like Mulvaney is intent on dramatically reshaping the agency's focus. In addition to withdrawing from the Habematolel Pomo case and reopening the Payday Rule, Mulvaney has ordered a comprehensive review of basically all of its efforts.

"Moving forward, the bureau will consistently seek out constructive feedback and welcome ideas for improvement," Mulvaney said in a press release on Wednesday.

Gavin Clarkson, a former Trump administration official who is now seeking the Republican nomination for New Mexico's 2nd Congressional District, joined tribes in hailing the shifts at the bureau.

"During my time at the Department of the Interior, we tried to make sure that tribal sovereignty was more than just words, and I am glad that, with Mick Mulvaney now in charge of CFPB, the Trump administration is again demonstrating that Republicans are better than Democrats when it comes to core issues of tribal sovereignty," Clarkson, who is a citizen of the Choctaw Nation, told Indianz.Com.

Clarkson announced his run for Congress after working on tribal economic development issues at the Department of the Interior for six months last year. He plans to make Indian Country a key part of his campaign for the House seat -- the 2nd District is home to a half dozen tribes.

"Tribes, like states, should be treated, constitutionally speaking, as regulators rather than the regulated," Clarkson said, echoing the positions tribes laid out in their challenges to the CFPB's authority. He also said Sherry Treppa, the chairwoman of the Habematolel Pomo of Upper Lake, deserves credit for securing a "hard-fought victory on behalf of all of Indian Country."

By making changes at the agency that previously target Treppa's tribe, "Trump has now struck a mighty blow in favor of tribal sovereignty and self-determination," Clarkson added.

The tribal lending industry has long faced scrutiny from regulators across the nation. States in particular argue that tribes should follow state laws that were written to protect consumers from high interest rates and other predatory practices.

Tribes, on the other hand, say they should be able to set their own rules. In the case of the Habematolel Pomo's businesses, loans have been offered with annual percentage rates of between approximately 440 percent and 950 percent, according to the lawsuit that has been dismissed.

"For an $800 loan, a typical loan contract requires the consumer to repay a total of approximately $3,320 over the course of ten months," attorneys for the bureau wrote in an April 2017 complaint that identified the tribe's businesses as Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial and Majestic Lake Financial.

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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