Roosevelt Institute | Cornell University

Pay-Day Loans and Native American Nations

By Crispinus LeePublished February 18, 2015

Native American Nations exist in an odd political junction: they govern independently, but are still dependencies of the United States. This puts Native Nations in the center of legal battles for corporations attempting to avoid financial obligations.

The United States is heavily reliant on tax bases for its revenue, but the coming of globalization has allowed businesses to move themselves or their assets overseas in order to avoid certain legislation. This is not a unique phenomenon in the United States, for example, raising taxes in a state typically results in upper class people moving away. Running away from high taxes is typically reserved for larger conglomerates that have enough assets to escape legal action in certain countries. But in the United States, smaller scale companies have the benefit to manipulate the system in the United States itself.

            Smaller loan companies in the United States, in order to avoid litigation, have recently been allying themselves with Native American Nations. Rulings from the judicial branch and clarification from the Bureau of Indian Affairs affirm that the United States and Native American tribes are  sovereign states, much like any other foreign country. However, the United States also maintains something referred to as a trust relationship which is governed by treaties between the U.S. and Native tribes.

            Within this odd political reality, companies, most notably payday loan firms, have presented themselves as tribal organizations in order to continue less than savory schemes. The sovereign immunity of tribes stunts the possibility of the federal court attacking such organizations. Interested in the opportunities that Native American Nations provide, multiple companies seem to be eager to "ally" with Native American tribes in order to exploit this status. In addition, due to the electronic nature of how pay-day loans operate, pay-day loan based companies are capable of engaging in transactions across state lines into any state.

            This may give off the impression to some that Native American tribes are willing participants in an economic scam that can put many in debt. Studies indicate, however, that Native American tribes receive more damage than benefit from payday loan companies. For starters, multiple Native American tribes do not participate in any kind of payday loans. In fact, the ones that do engage in payday loans are quite miniscule. Studies show that tribes that ally with payday loan companies do not receive any major revenues at all. In reality, Payday Loan companies actually burden Native reservations that are typically already ailing from extremely poor conditions. The nature of payday loaning is appealing to families in need of quick finances. Consequently, many individuals, including Native Americans, are forced to extract loans in order to cover immediate costs. This only serves to exploit an already depraved reservation. To be exact, tribes typically receive 1% of the entire revenue. An Al Jazeera study done in a California reservation mentioned that the companies attracted no jobs to the reservations. From an interview of a vice chairman of the Otoe Missouria tribe, it seems that much of the deals are struck by Native Americans in hopes of making revenue for the tribe.

            Native American Nations are not sovereign states in the conventional sense, but their unique status has served to breach the laws of the United States at times.  The odd political status that Native nations both enjoy and suffer from is a marker of attempted reconciliation by the United States. Though it is necessary to respect native sovereignty, such political structures can serve to dilute the effects of U.S. laws.