Once upon a time, Indian tribes created revenue streams by producing interesting crafts and trinkets. Nowadays, a small percentage of tribes have Indian casinos which rival those of Las Vegas. In addition, there has been a significant increase in tribes generating revenue by providing online short term lending solutions. These loans usually allow for installments, where a borrower makes payments over time. A majority of these loans carry extremely high interest rates.
Tribal lenders provide a needed service for tribes.
Tribal lending serves a purpose and provides a needed service, particularly to groups of people who do not have access to banking or credit cards. However, some consumer advocates argue that the loans take advantage of this population, primarily because tribal entities have sovereign immunity from state regulations and lawsuits. This allows tribes to charge interest rates beyond what states normally allow for payday lenders. Put another way, interest rate caps that are applicable to regulated payday lenders do not apply to these entities, leaving them free to charge those high rates.
The Native American Financial Services Association (NAFSA), an organization that supports the financial activities of many tribes, makes the case for tribal lending as a means to provide financial support, particularly for tribes which are geographically isolated. There is a common misperception that most Indian tribes have casinos now – this isn’t the case for many tribes that are out in the middle of nowhere. These require a revenue stream supported by e-commerce. Whether the business is a partnership or a completely tribal entity these businesses have a positive economic impact on the tribes. Much of the proceeds go to necessary services such as health care, housing assistance, and education.
NAFSA also provides information on the consumer protections in place for tribal lending. Transparency and disclosure are critical for lenders – every consumer borrower receives detailed information regarding the cost of the loan, the interest rate, and payment terms. In addition, borrowers must show they are employed and must provide identification. The ability to own and run a short term lending company on tribal lands gives Native Americans more options for economic self reliance. Sovereignty gives them the right to engage in commerce and regulate business within their own borders.
Merchant accounts provide a needed service to tribal lenders.
Still, tribal lenders often become targets of state regulators. The issue of sovereign immunity is often in constant play. In New York, tribal entities have repeatedly been requested to stop offering “illegal payday loans.” However, sovereign immunity still protects these tribes and allows them to continue to operate.
Even payment processors that work with tribal entities can be targeted. The logic is that if the tribal lender’s partnerships become problematic, payment processors will stop doing business with them.
Are there steps a tribal lender can take to avoid disruptions in business relationships? The answer is a resounding yes. Tribal lenders are often considered “High Risk Payment Processing,” and may require special handling. Working with a payment processor that handles high risk payment processing will decrease the chances of a tribal lender losing its means of receiving payments.
Bankcard Brokers offers high risk payment processing for tribal lenders, and is a leader in the industry.
We have over a decade of experience and a fully ETA – CPP (Electronic Transactions Association – Certified Payment Professional) certified staff. We have earned our outstanding reputation as the industry’s clear leader in high quality, dependable, and affordable merchant accounts with our transparent rates and world class service.
Because our solutions are transparent and affordable – we are up front with all costs, and strive to offer the best rates- your tribe keeps more revenue for much needed services. Contact us today to see how we can provide your tribe with the best services at the most affordable cost!