By Gary Davis
Recently, the Otoe-Missouria Tribe of Oklahoma purchased the MacFarlane Group, a company headquartered in the Kansas City metro area, nearly 300 miles from Otoe-Missouria lands in Red Rock, Oklahoma. While tribes acquiring non-tribal businesses is nothing new, the Otoe’s investment in MacFarlane Group signals a burgeoning trend in tribal financial services—business model integration.
MacFarlane Group had a six-year business relationship with American Web Loan, a tribal lending entity (TLE) wholly owned and operated by the Otoe-Missouria Tribe. The MacFarlane Group provided underwriting, software development, marketing, and call center support to the TLE. The acquisition is expected to result in the tribe’s retention of a significant portion of revenues and shift additional jobs to tribal lands.
Tribal online lending can be a complex and multifaceted labyrinth of federal consumer laws, tribal codes, and ancillary services like lead generation, underwriting, marketing, call centers, software and management. By learning from the mistakes made in other highly successful sectors in Indian Country, tribal online lenders are integrating their lending models from top to bottom, cutting out disadvantageous agreements with nontribal businesses, and returning more profits to tribal governments and communities. TLEs currently comprise about 10 percent of the online installment loan industry at an estimated $320 million. One of our goals at the Native American Financial Services Association (NAFSA) is to aid our members in keeping more of their profits in Indian Country.
Integration of tribal online lending begins at the tribal government level. Our members are encouraged to establish their TLEs through existing tribal commercial enterprise laws. Next, the tribal government passes a series of lending laws that closely mirror NAFSA’s best practices and federal regulations, which govern areas like truth in lending, consumer protection and fair debt collection, to name a few.
Finally, our members are instructed to create an independent regulatory commission to oversee consumer complaints and advise the tribe on improvements that can be made to the regulatory structure. A robust and modern regulatory structure is an essential protection against challenges to the sovereign status of TLEs and a credible and responsible way to garner consumer trust.
To ensure the continued viability of TLEs and capture the highest returns from the business, NAFSA members are buying out nontribal ancillary services and fusing each component into the structure of the TLE. Through this fusion, NAFSA TLEs gain important control over critical intellectual property (like rate algorithms), customer service response and operations management. This equates to more jobs on tribal lands and more profits staying in the community.
It is solely up to Indian Country to decide if we will succeed or fail. We must understand our value and use our strategic advantages to disrupt markets and build a better future for our people. NAFSA members are adopting the types of regulatory structures and business models necessary to innovate the online lending industry and safeguard our position as leaders and trendsetters.
Profits from these TLEs are not used frivolously or simply focused on increasing returns for growing a single bottom line. Rather, the revenues from TLEs have a triple bottom line as its profits go back to the tribal government to improve roads, build schools and hospitals, and provide much needed infrastructure and other essential services in the community.
That is the type of self-sufficiency, innovation and sophistication that is vitally necessary in order for Indian Country to take its place as standard-bearers in the modern economy. ♦