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Tribes consider ways to ease bank fears about reservation loans

By Ivan Moreno
Broomfield, Colorado (AP) 3-08

American Indians who had trouble getting loans because of a disparity between tribal and state laws are learning about new legislation that could make the process easier.

Representatives from about a dozen tribes around the country are expected to attend a meeting in this Denver suburb to discuss a model tribal law first adopted by Montana’s Crow Tribe last month.

Banks have previously been reluctant to loan money to people on reservations because of the difficulty of going through tribal courts if the borrower defaults. Under the “Model Tribal Secured Transaction Act,” tribal laws would conform to state laws if a default case ends up in tribal court.

“They’ll have the same basic laws as the states do, so the banks will feel more comfortable about it,” said Michael Kerr, legislative director and legal counsel for the Uniform Law Commission, which works to make laws consistent from state to state.

Tribal governments are considered sovereign nations in their dealings with state governments.

Kerr said banks and other financial institutions have been reluctant to conduct business on reservations because of uncertainty about whether state or tribal courts would have jurisdiction if a borrower defaulted.

Bill Henning, a University of Alabama law professor and member of the Uniform Law Commission, said the new tribal act is modeled after a law in place in every state that allows people to use collateral for loans.

In addition to the Crows, about 30 other tribes have either passed it or are considering it, said Melissa Johnson with the Tribal Judicial Institute, one of the sponsors of the seminar.

Kerr and Henning said the law will help spur economic development on Indian reservations because businesses will have more financing options and at lower interest rates.

 

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