Economic development compact could spur new investment in Indian Country

The Crow Tribe in Montana has become the first Indian tribe to enter into a so-called "Economic Development Compact" with a state to make it easier for banks to file secured loans within the Tribe's Reservation.   This, in turn, should lead to a greater flow of capital to the Crow community.

The Compact covers transactions in which personal property is used as collateral for loans, including bank loans for business startups, auto loan financing, and revolving lines of credit. Such transactions usually fall under state law.  Because Indians living on Indian reservations are generally not subject to state laws, banks often refuse to enter into such loans for fear of being unable to recover on the loan.  The Compact addresses this problem by allowing a bank to file its claim on collateral as a lien with the Montana Secretary of State's office.  The Compact enables the lien to be enforceable within the Tribe's Reservation.  The Compact was made possible by the Tribe's decision to adopt a Model Tribal Secured Transactions Act. 

Similar efforts could yield substantial benefits to Indian tribes, lending institutions, and businesses looking to relocate or enter into joint ventures with Indian tribes in the Pacific Northwest.  Businesses and lending institutions should look to encourage Indian tribes to adopt a version of the Uniform Commercial Code and seek out similar compacts with the states of Oregon and Washington.