The presence of so many American Indian tribes in Oklahoma
could be viewed as both a blessing and a curse for the state's
On the one hand, the growing concern for economic development
within the tribes may provide banks new lending opportunities
while also earning favor with regulators for community
reinvestment. A panel of legal experts on the issue of banking
with Indians warned, however, that lurking not too far beneath
the surface of such a deal could be a quagmire which would make
it impossible for the bank to recover on the loan.
"Tribal governments have been growing and becoming more
independent from the federal government and are using more
financial resources," said Margaret A. Swimmer, a Tulsa attorney
and panelist at the session on lending to Native Americans at the
Oklahoma Bankers Association's 97th Annual Convention and Trade
"Their need for banking services is growing. There are 41
federally recognized tribes in Oklahoma, and we have the largest
Indian population in the U.S. The opportunities are growing for
banking relationships with tribes."
Swimmer and other members of the panel urged bankers to enter
those relationships with caution. At the heart of that concern is
the tribe's sovereign immunity, which may make it impossible for
a bank to enforce a lending contract. If certain procedures
aren't followed _ including getting proper approvals from the
U.S. Department of the Interior _ banks could be left high and
A 1988 Rhode Island case illustrates the point. A company
contracted to finance, construct and operate a bingo hall for the
Narragansett Indian Tribe. Land was purchased for the venture,
deeded to the tribe, and mortgage notes were signed in favor of
the company. A change in political power within the tribe
resulted in a suit to rescind the contracts. The court held that
the contracts were void because they had not been executed
correctly. The tribe got to keep the land and bingo hall, and the
company lost all the money it had invested.
"When you are dealing with a tribe, you might as well be
dealing with Belorussia or the Ukraine. You better be sure your
documents will stand up under tribal laws," said John C. Platt,
an Oklahoma City attorney who was also on the panel.
Getting a waiver of the tribe's sovereign immunity for the
purposes of the contract is a must in order to protect the bank's
interest. The bank also must be sure that the entity granting the
waiver has the proper authority to do so. The waiver and other
documents related to the loan then must be approved by the
Department of the Interior through the Bureau of Indian Affairs.
The panelists said getting the federal government to act on
approvals can take time, so they suggested that the request be
presented to the Bureau of Indian Affairs by a tribal leader.
Another important question in dealing with tribes is the
status of the land. The bank needs to understand the status of
the land in order to determine the jurisdiction in case the bank
needs to enforce the loan.
Banks have noticed, for example, that they are unable to
repossess a car if that car is garaged on allotted land because
there is no jurisdiction for the repossession on allotted land.
Mary Beth Guard, legal counsel for the Oklahoma Bankers
Association, said the Oklahoma Supreme Court has ruled that
mortgage foreclosures against individual Indians are to be
handled in state court. The ruling recognized that no bank would
enter a mortgage if it could not be sure of its ability to
foreclose in case of default.
In Oklahoma, most Indian lands were allotted to individuals or
held in trust rather than placed in reservations. The legal
handling of probate and other issues relating to the hand is
different for the eastern part of the state than the western
part, factors which could affect the handling of a loan. …