Nov 02, 2013 Quinn Thomas
During the last several months, short term lending outlets that operate online have dominated news headlines. Most of the coverage involved the aggressive regulatory attempts made by New York financial officials to limit the activity. These individuals took steps to not only prohibit access to online lending organizations operated by Native Americans, they painted a dark, inaccurate picture of the industry.
In a recent blog post for The Hill, Barry Brandon of the Native American Financial Services Association (NAFSA) countered the arguments made by online short term lending critics who have been vocal in recent weeks. Brandon suggested that many outlets chose to focus on one or two lenders who may be using suspect practices. However, he noted that many online lending companies that are members of reputable industry organizations such as NAFSA offer useful services that many Americans rely on.
Simply grouping these businesses in with enterprises who act in predatory ways is hardly responsible. In fact, he noted that Western Sky - one of the organizations that has recently been lambasted in the press - is also opposed by NAFSA. This shows that there is indeed a short term lending group that is regulating the sector just as much as they are advocating for its members.
Finding the differences
Brandon noted that there are several ways to distinguish a reputable Native online lending group from those such as Western Sky. For example, he stated that NAFSA members are the sole owners of their respective lending businesses. Revenue generated from their financial activity helps fund their tribal governments to pay for essential infrastructure and life expenses such as health care and facility management.
On the other hand, Western Sky is private enterprise that just happens to be owned by a Native American. In many cases, tribes obtain more than half of their overall budget from lending operations. With such a reliance on these businesses, the vast majority of Native lenders take aggressive steps to ensure their practices are legal and useful for consumers because they need to sustain their operations.
Also, Brandon indicated that NAFSA outlets operate within sovereign borders because they are recognized as independent groups under the United States Constitution. However, they still comply with federal regulations and follow strict best practices guidelines. Western Sky is not representative of a sovereign body and was sued for failure to comply to federal laws earlier this year.
More over, Native nations have their own regulatory authorities that control business within the tribe. These bodies are proactive at ensuring that all practices that fall under their jurisdiction are acting in a legal manner. Under the Dodd-Frank Act, Native organizations were given the same status states have in order to act as regulatory groups in conjunction with the federal government.
Lawmakers stand up
Even elected officials have spoken out against the harsh treatment online lenders have been subject to in recent months. Indian Country Today reported that 31 members of Congress signed a letter demanding an end to the government crackdown on online lenders. The source noted that U.S. Attorney General Eric Holder and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg are likely read the letter at some point.
If it does indeed reach them, the Holder and the FDIC may take the necessary steps to stop the overzealous regulations being implemented against Native online lending companies.
The letter stressed that as is the case in any industry, there are a handful of unlawful enterprises that give the online lending sector a bad name. However, the Congressmen warned against projecting the values of lenders such as Western Sky onto the other, reputable outlets that provide quality service to Americans.