Cheyenne tribe sets precedent by signing UCC agreement

Northwestern Financial Review, Mar 15, 2001 by Crews, Jennifer Goepfert

In an historic move, the Cheyenne River Sioux Tribe signed a compact with the South Dakota Secretary of State that allows the tribe to use the Uniform Commercial Code filing system. This agreement between a state and a reservation is the first of its kind in the nation and could work to increase business development on the reservation.

Prior to the signing of the agreement, banks were reluctant to lend in Indian country because the sovereign status of Indian reservations made securing collateral difficult. The signing of the UCC agreement provides a central filing systems for lenders and would allow tribal members to have their collateral perfected, said Joyce Hazeltine, South Dakota Secretary of State.

Hazeltine and Tribal Chairman Gregg Bourland signed the compact Jan. 4 during the Tribal Council's regular meeting.

Though the signing of the UCC agreement will not extend to personal, home and car loans, the agreement does provide an invaluable opportunity for the tribe to apply for small business loans, which makes the reservation more attractive to investors and businesses that had previously dismissed operating on tribal land. It will also allow for current businesses to grow.

"This puts us on the cutting edge," said Tom Van Norman, tribal attorney and a member of the South Dakota legislature."We had meetings with several federal and state officials and members of the lending industry, and as we met, we saw the need for a revolving loan program," Van Norman said. "We now have laws and codes which put us on a level playing field with the rest of the country."

About five years ago, the Federal Deposit Insurance Corp. sought out tribes that would be interested in finding ways to improve their ability to get credit. The Cheyenne River Sioux Tribe agreed to consider the offer.

"It was because of the forward thinking of chairman Gregg Bourland that this came to fruition," said Hazeltine.

The agreement did not come without a lot of effort on the part of many entities, including the FDIC, the South Dakota Bankers Association, the Secretary of State and the Cheyenne River Sioux Tribe. One challenge was reaching a consensus.

"Everyone had to be willing enough to give to the point where we could move forward," said Bob Sutton, SDBA executive vice president. "The other obstacle is being the first. There was no precedent. These discussions had never taken place before. We had to step back and say `Okay, we need to convince the tribe that it will work and the bankers that it will work'."

Education has also been key in implementing the agreement, said Hazeltine. Not every member of the tribe understands how the agreement works and what implications it has for the future of the tribe. During the initial discussion there was concern about the impact the agreement would have on the tribe's sovereign nation status. The ability to use a system that was already in place alleviated a lot of concerns.

"They recognized using the system would spur economic development and expand the quality of life on the reservation," said Sutton. "And tribes retain their sovereign nation status. Initially, everyone had their own ideas. The state stepped in and the tribal council said, `We can make this thing work without giving up the things that we have to have in our system.' Then we really started to move forward."

"There is a lot of creativity here," stated Van Norman, who is also a member of the Cheyenne River Sioux. "But with high interest rates and constantly being declined by loan officers, most people don't want to take the risk to start a business. We are trying to create opportunities for people within their own reservation. And we are trying to come up with new investment opportunities."

Since the adoption of the agreement by the Senate in February, the first loan application for a piece of small business equipment has already been processed.

"For equipment purchases and such, the opportunities are exciting," said Sutton. "The other thing that this agreement does is set an example. The ultimate goal is that this will be a story about Wisconsin and Minnesota and North Dakota and other states that have reservations with tribal government. They can use the Cheyenne River Sioux and the South Dakota legislature as their guide."

Since the agreement was established, Van Norman has received calls from Washington, Arizona and other parts of the country from people who are interested in implementing something similar. The FDIC plans to facilitate a conference that will use the Cheyenne River Sioux Tribe as an example of how this type of agreement can be reached.

"Great things happen when a tribe makes its own effort to take steps forward toward economic development," said Van Norman. "We are glad to take the lead in these efforts."

By Jennifer Goepfert Crews