In an effort to improve lending on Indian reservations, North Dakota bankers are meeting with the state's five tribes.
About 20 bankers and 18 Native Americans recently discussed issues ranging from lending to concerns about security interest in property on reservations.
"I believe we've opened up a dialogue that is going to be a great benefit," said Al Nygard, Native American business development program coordinator for the state's Department of Economic Development and Finance. "I do believe that we will see increased lending sometime down the road."
The meeting was an important step, observers said.
"The big thing is communication," said John Misiewich, regional manager with the division of compliance and consumer affairs at the Federal Reserve Bank of Kansas City, one of several regulators who also met with bankers.
"If people talk together, they can resolve differences," he said. "North Dakota has done a very, very good job in that area."
Efforts to improve lending in the state began in part after Mr. Nygard's office examined economic development on reservations about a year ago. He found "there is not a whole lot of investment on the reservations," he said.
Additionally, he said he knew of discriminatory banking practices against Native Americans, such as requiring extra collateral.
Bankers, too, were concerned about reservation lending, particularly after the Justice Department last year charged South Dakota's Blackpipe State Bank with fair-lending violations.
They also see Native Americans as a source of new business.
"I think we've seen the tribes in our state becoming more progressive economically," said Jerry Long, president of State Bank of Bottineau.
For instance, four tribes have casinos and the fifth is building one, he said.
To help bankers balance fair lending with safety and soundness, theNorth Dakota Bankers Association's Native American Task Force organized the recent forum. Participants concluded that a lack of understanding on both sides could be resolved through education.
"We both agreed there has to be more trust both ways," said James D. Schlosser, the trade group's executive vice president.
"You have to understand that they're nations, and you really have to respect that," said Mr. Long, chairman of the task force. "You've got to understand each tribe is different."
Bankers also are concerned that because tribes are governed by tribal law and not state law, they are not subject to the Uniform Commercial Code or state foreclosure procedures.
Banks want to know, "If there is a default, what relief will the institution have?" Mr. Schlosser said.
Mr. Nygard said all but one of the tribes have equivalents to the UCC in their own codes that bankers should learn more about.
Another meeting is planned for the next few months with tribal leaders.
Some North Dakota banks already lend significantly to Native Americans. Rolette State Bank makes 47% of its loans to Native Americans, said task force member Robert Eckerdt, executive vice president.
The bank has always had a good working relationship with the Turtle Mountain band of the Chippewa tribe, he said.
The $21 million-asset bank, which received a rare "outstanding" rating on its last Community Reinvestment Act exam, has had few problems with foreclosure, he said.
