GREAT FALLS — A bill making its way through Congress has U.S. Senator Jon Tester concerned about the impact it could have on tribal loan businesses, including one on the Rocky Boy Reservation.
At a recent Senate committee hearing, members of Congress and witnesses spoke both for and against a bill proposing a federal law capping the interest rate on consumer loans at 36 percent.
The chair of the committee, Sen. Sherrod Brown of Ohio, is in favor of the proposal: “We need national protections. Now is the time for this committee to again lead the country, passing a federal law."
The law would essentially be an extension of the Military Lending Act, signed into law in 2006, which provides loan protection to members of the military.
“We know the tired arguments against the bill. They’re the same ones we heard from the Military Lending Act. During the 2006 hearing, the payday industry claimed we would cut off access to credit for service members. That didn’t happen. According to a May 21 Department of Defense report, the act is currently working as intended,” Brown said.
Sen. Joseph Toomey of Pennsylvania, however, disagrees. “History is littered with examples of government planners and their failed attempt to override markets and set prices. They fail for many reasons, but mainly because they generate huge unintended consequences and inevitably harm the very people they're supposed to be trying to protect,” Toomey argued. "Although proponents claim extending the MLA to all consumers would help veterans, veterans groups have disagreed. In 2019, a number of veterans groups opposed legislation to extend the MLA."
Tester said he wants to make sure tribal sovereignty is protected. “The sovereignty issue sets Native Americans in a bit of a different category that I think we can accommodate, but we have to realize that there's a challenge here,” Tester said.
He continued, "For example, Plain Green Loans, which is owned and operated by the Chippewa Cree Tribe, one of the biggest businesses on the Rocky Boy Indian Reservation which is about 25 miles away from where I live, gives good paying jobs to a place that has about 80 percent unemployment."
MTN tried to contact Sen. Steve Daines for comment as well; a spokesperson said the Senator was still reviewing the legislation.
In a statement, Plain Green Loans CEO Steve Parker thanked Sen. Tester: “We thank Senator Jon Tester for his long-standing support of Native economic development. He understands that our remote location requires us to turn to FinTech and online services to provide jobs and opportunities for our tribe and the community. Plain Green has created 80 on-reservation jobs in five years. Revenue from Plain Green goes directly to the Chippewa Cree Tribe to fund tribal operations, basic social services and infrastructure development. Plain Green serves as a safety net for our customers to give access to emergency cash. The FDIC currently reports that 25% of U.S. households are unbanked or underbanked; thereby limiting or eliminating their access to traditional credit sources. Our loans serve as a bridge until our customers can get back on their feet.”
U.S. House members also spoke for and against the proposal as did several witnesses, including former Consumer Financial Protection Bureau assistant director Holly Petraeus and American Financial Services Association CEO Bill Hempler.
"It's time for Congress to extend to all Americans the protections of the MLA,” said Petraeus.
"Analysis by a Federal Reserve study found that with a 36 percent rate cap consumers would be unable to obtain a loan of less than $3,000. They'd be forced to borrow larger amounts than they need with higher costs (and) longer repayment periods despite having a lower APR,” Hempler said.
The Native American Financial Services Association also opposes the legislation. In a letter to the Senate committee’s leadership, NAFSA director Gary Davis said it would effectively eliminate tribal loan businesses and instead Congress should focus on “remedying and fixing this flawed policy.”