Community Dividend

Leech Lake Band and State of Minnesota sign lien-filing agreement

Published January 1, 2012  | January 2012 issue

State-tribal arrangement will facilitate lending to reservation-based businesses

On October 21, in a ceremony held in the rotunda of the Minnesota State Capitol, the Leech Lake Band of Ojibwe and the State of Minnesota signed an agreement that will facilitate business lending and economic development on the Leech Lake reservation.

The Leech Lake–State of Minnesota Joint Powers Agreement assigns the Minnesota Secretary of State's Office to act as the filing administrator for liens made under Leech Lake tribal law on collateral that is located on the Leech Lake reservation. The agreement enables the Leech Lake Band to offer lenders a convenient and dependable lien-filing service that is fully interoperable with Article 9 of the Uniform Commercial Code, or UCC. Article 9, which has been adopted in all 50 states and U.S. territories, governs secured transactions, which are loans or other extensions of credit in which property other than real estate is used as collateral. Several crucial types of business loans, such as those used to cover start-up and inventory-purchase costs, fall into this category.

Article 9 requires a lender or other creditor involved in a secured transaction to file a UCC financing statement, or lien, on the borrower's collateral in order to establish legal priority in relation to other creditors or third parties that may have an interest in the same collateral. This filing, which is referred to as perfection of a secured interest, helps reduce the risks creditors face in the event of default. All 50 states have UCC filing systems in place for this purpose; typically, as in Minnesota, the systems are housed within the secretary of state's office. Modern UCC filing systems are set up as searchable, online databases, and they can be costly to implement and maintain.

The Joint Powers Agreement designates the State of Minnesota's UCC filing system as the location for creditors to file financing statements to perfect liens under the Leech Lake Band's law. The state-tribal agreement is designed to provide security and convenience for lenders and other creditors while saving the Leech Lake Band the expense of developing and maintaining its own lien-filing system. By enabling creditors to file liens confidently and seamlessly under tribal law, the agreement has the potential to encourage more lending to businesses in the Leech Lake community. The agreement in no way infringes on tribal sovereignty or tribal jurisdiction over disputes that may arise under the tribe's law.

The agreement is the final step in the Leech Lake Band's enactment of the Model Tribal Secured Transactions Act (MTSTA), a model law drafted by a special committee of the Uniform Law Commission (ULC), with advisory services provided by ten Indian tribes and a Community Development representative from the Federal Reserve Bank of Minneapolis. (For more on the MTSTA, see "A super model: New secured transaction code offers legal uniformity, economic promise for Indian Country," in Community Dividend Issue 1, 2006.) The Leech Lake Band joins two other tribes—the Crow Nation in Montana and the Oglala Sioux Tribe of the Pine Ridge Indian Reservation in South Dakota—that have enacted both the MTSTA and a state-tribal UCC filing agreement. One other Indian community, the Chippewa Cree Tribes of Rocky Boy's Reservation in Montana, has adopted the MTSTA but has not yet entered a UCC filing agreement. More than 20 additional tribes are currently considering or pursuing adoption of the MTSTA.

The October 21 signing ceremony featured remarks from officials who represent the key parties involved in the Leech Lake Band's adoption of the MTSTA, including Leech Lake Tribal Chairman Arthur LaRose, Minnesota Secretary of State Mark Ritchie, ULC member Frederick Miller, and Federal Reserve Bank of Minneapolis Senior Vice President Dorothy Bridges.