The Division of Economic Development (DED) provides technical assistance to tribes wishing to enact or implement a secured transactions code.

Like nations worldwide, tribal nations require a durable legal infrastructure on which entrepreneurs and investors can depend. Among the reasons why Native American communities persist as pockets of poverty is that many lack business and commercial codes to assure participation by outside investors. Commerce is not possible without the rule of law embodied in strong commercial does that secure collateral and allow credit to flow freely between persons inside and outside reservations.

As Forbes Magazine has observed, “Companies and investors are often reluctant to do business on reservations – everything from signing up fast food franchisees to lending to casino projects – because . . . commercial codes aren’t well developed . . .”[1]

Without such codes and an accurate, accessible system for filing claims, Native Americans and their firms are unable to finance the purchase of business-related equipment from sellers located outside tribal jurisdictions because a dealer cannot enforce his lien (or security interest) in the purchased item once it has been transported to the reservation. This is because most tribes have not adopted commercial codes to specify how security interests may be created, perfected, and enforced. Absent these rules, creditors may increase borrowing costs to offset risks or refuse to lend altogether.

DED works to acquaint tribes with the Model Tribal Secured transactions Act adopted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and a working group of tribal officials.[2]

Upon request, it also works with tribes to negotiate joint powers agreements with states in order to include in state commercial lien recording systems financing statements and liens incident to tribal commercial codes. Public filing offices determine when filings will be accepted, how records must be maintained, what kind of fees will be charged, and how information is made available to the public. Some tribes have adopted codes but failed to designate a filing system, while others have adopted codes and designated a state filing system but neglected to enter into a formal agency arrangement with the state filing office.[3]

DED has also placed on its website a primer, “Why Tribes Should Adopt a Secured Transactions Code,” as part of its “Tribal Economic Development Principles at a Glance” series.

[1] John Koppisch, “Why Are Indian Reservations So Poor? A Look at the Bottom 1%,” Forbes Magazine, December 13, 2011.

[2] NCCUSL joined with the American Law Institute to create the Uniform Commercial Code in 1940, providing a comprehensive solution to conflicting state commercial codes.

[3] “Implementation Guide and Commentary to the Model Tribal Secured Transactions Act,” National Conference of Commissioners on Uniform State Laws, 2005, p. 94.