MODEL TRIBAL SECURED TRANSACTIONS ACT AND TRIBAL ECONOMIC DEVELOPMENT
December 22, 2012 Comments Off on MODEL TRIBAL SECURED TRANSACTIONS ACT AND TRIBAL ECONOMIC DEVELOPMENT
Does the Model Tribal Secured Transactions Act (MTSTA) really promote tribal economic development? The drafters of the MTSTA believe it will provide certainty and protection for lenders and borrowers in Indian Country, but at least one law-review article has taken a critical view of the MTSTA. In the end, however, each tribe must make its own choice whether to adopt the MTSTA.
The Model Tribal Secured Transactions Act
In 2005, after several years of work, a committee of the National Conference of Commissioners on Uniform State Laws (NCCUSL) produced a final draft of the MTSTA. Based primarily on Article 9 of the Uniform Commercial Code (UCC), the MTSTA provides a consistent and predictable legal framework for secured transactions involving a tribe or tribal member and personal property on tribal land. Secured transactions are agreements between creditors and debtors in which the debtor gives some property interest (called a security interest) to the creditor as collateral for a loan or other financial arrangement.
In some ways, the MTSTA is unique because it is a model law proposed for adoption by Indian tribes. To be suitable for use by tribes in Indian Country, the drafters had to consider issues such as tribal sovereignty, custom, and cultural traditions, yet also provide consistency and uniformity with state commercial laws and the UCC. For example, in recognition of sovereign immunity, the MTSTA provides that, if a tribe is a party to a transaction with a non-member, the parties may agree whether the transaction will be governed by the MTSTA or by the law of the other party’s state or tribe. For a detailed discussion of the MTSTA, see Tim Berg, Growing Indian Economies: The Model Tribal Secured Transactions Act, Ariz. Att’y, Mar. 2006, at 30-35.
The main purpose of the MTSTA is to promote economic development on tribal land. As early as the mid- to late-1990s, the NCCUSL had identified a need for a “sound legal and business infrastructure to accommodate [the] growing cross-border commercial activity” between Indian Country and businesses located outside of Indian Country. Because of the importance of loans and other financing for business and entrepreneurship, the NCCUSL viewed the development of consistent and predictable commercial laws as essential to tribal economic development. As Arizona attorney Tim Berg stated in a 2006 article:
Access to financing and capital is key to economic growth, and such access is hampered in Indian Country by the lack of standard laws governing business and lending transactions. Lenders and other sources of capital want the protection of commercial laws with which they are familiar. When it comes to loans on personal property . . . they are looking for enforceability of their security interest. And when a dispute arises, they seek assurance that they have sufficient recourse to enforce that security interest.
Criticism of MTSTA
At least one commentator has strongly criticized the MTSTA, arguing against tribal adoption of this model act. In a 2010 law-review comment, Aaron Drue Johnson argued that tribes should “just say no” to American capitalism and to the MTSTA because the MTSTA will promote predatory lending practices by non-Indian businesses to tribal members residing on tribal land.
In particular, Johnson cites data suggesting that Native Americans often lack financial literacy, have limited English proficiency, and are not experienced at dealing with off-reservation banks. Off-reservation creditors, according to Johnson, will consider loans in Indian Country to be high-risk and charge higher interest rates compared to the rates offered to off-reservation debtors. As further support, Johnson points to a federal study that concluded that unfair lending practices are often directed toward ethnic and racial minorities.
Examining the MTSTA itself, Johnson contends that the model act is inadequate on three grounds. First, he argues that the MTSTA is inadequate because it does not distinguish between the debtor in a commercial transaction and the debtor in a consumer transaction—leaving the latter at higher risk of predatory lending. Second, the model act is inadequate because it does not limit the type of property that can serve as collateral, exposing Indian Country debtors to financial disaster. Third, Johnson argues that the MTSTA is inadequate because the term “default” is not clearly defined, which allows a creditor to define the term in a favorable way.
Although he acknowledges the need for tribal economic development, Johnson believes that “the negative consequences of the MTSTA will likely outweigh its practical economic benefits.”
Economic Development, Self-Determination, and MTSTA
Since the 1970s, the prevailing policy toward Indian tribes has been to foster tribal self-determination, and tribal economic development is best seen within the context of the self-determination policy. Viewed from the perspective of self-determination, Johnson’s rejection of the MTSTA seems to have a rather narrow—and perhaps even protectionist—view. Johnson seems to ignore the purpose of self-determination, which allows tribes to make their own choices and determine their own future. Those choices include decisions regarding whether and how to pursue economic development on tribal land.
Since its final draft, the MTSTA has been considered important to tribal economic development. In 2006, William H. Henning, former Executive Director of NCCUSL, reported that one tribe had adopted the MTSTA, that eight tribes were considering whether to adopt it, and that eleven other tribes were seeking funding from the Department of the Interior “with a view toward ultimate enactment.” Currently, the Bureau of Indian Affairs and the Federal Reserve Bank are jointly sponsoring a series of training workshops on the MTSTA for tribal judges and attorneys.
Contrary to Johnson’s suggestion, the MTSTA will not force American capitalism onto the Indian tribes, thereby exposing them to inevitable exploitation. Rather, like all uniform laws, the MTSTA is offered as a choice to those Indian tribes that desire to promote the economic development on tribal land. Very few people, if any, will deny the existence of predatory lending, but the choice for Indian tribes is one between continued dependent nation status with few good options and the opportunity for self-directed economic development. Given the number of tribes interested in the MTSTA, a significant number of tribes appear to be pursuing in the latter. The reason is simple: they do not want to be left behind as a complex and technological global economy rushes into the future.
In the end, the policy of self-determination allows each tribe to make its own choices about its social and economic interactions with the off-reservation world. Based on this policy, a tribe’s decision to adopt the MTSTA should be left to the tribe.
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 Tim Berg, Growing Indian Economies: The Model Tribal Secured Transactions Act, Ariz. Att’y, Mar. 2006, at 32 (Mr. Berg is the chair of the NCCUSL committee that drafted the MTSTA), available at http://www.myazbar.org/AZAttorney/PDF_Articles/0306Tribal.pdf.
 Nat’l Conference of Comm’rs on Unif. State Laws, Implementation Guide and Commentary to the Model Tribal Secured Transactions Act 13 (2005) [hereinafter Implementation Guide], available at http://www.uniformlaws.org/shared/docs/mtsta/mtsta_implemguide_jun05.pdf.
 Berg, supra note 1, at 34.
 Model Tribal Secured Transactions Act § 9-117 (2005), available at http://www.uniformlaws.org/shared/docs/mtsta/mtsta_aug05_final.pdf.
 Implementation Guide, supra note 2, at 14.
 Berg, supra note 1, at 32.
 Aaron Drue Johnson, Just Say No (to American Capitalism): Why American Indians Should Reject the Model Tribal Secured Transactions Act and Other Attempts to Promote Economic Assimilation, 35 Am. Indian L. Rev. 107 (2010).
 Id. at 120-23, 140.
 Id. at 116-18.
 Id. at 118-20.
 Id. at 119-20.
 Id. at 120-23.
 Id. at 107.
 Nell Jessup et al., Cohen’s Handbook of Federal Indian Law § 1.07 (2005 ed.).
 William H. Henning, A History and Description of the Model Tribal Secured Transactions Act Project 3 (2007) (presentation at 2007 annual conference of Int’l Ass’n of Commercial Adm’rs), available at http://www.iaca.org/iaca/wp-content/uploads/MTSTA_Article.pdf.
 Fed. Reserve Bank of San Francisco, Tribal Courts and Secured Transactions Law Workshops, http://www.frbsf.org/community/resources/2013/0131-Tribal-Courts-and-Secured-Transactions-Law-Workshops/index.html (last visited Dec. 22, 2012).