Payday Lenders 2012 Update
It’s taken millions of dollars in lobbying and campaign contributions to preserve payday lenders’ right to charge obscene interest rates. Now, with the threat of more active federal regulation looming, payday lenders are stepping up their game.
CREW’s research shows the payday loan industry is on course to donate more than ever to federal candidates this election cycle. Payday lenders’ political action committees (PACs), trade associations, and employees have contributed at least $1.32 million so far, according to campaign contributions tracked by Political Moneyline. That is already almost equal to the $1.5 million payday lenders contributed over the course of the entire 2010 election cycle. So how, exactly, are payday lenders expecting to collect interest on this investment?
In Payday Lenders Pay More, a 2011 report on the payday lending industry’s influence efforts, CREW showed how the biggest players in the payday loan industry ramped up lobbying spending and campaign contributions during the 2008 and 2010 election cycles. Payday lenders waged a multi-million-dollar war to beat back federal regulation of their predatory industry.
The effort was partly successful, but payday lenders lost a key battle. Congress gave the new Consumer Financial Protection Bureau (CFPB) jurisdiction over payday lenders, and key players at the bureau have signaled plans to actively regulate it.
Now, payday lenders think they can elect a president and a Congress who will help them ward off the CFPB after all. Filings by Restore Our Future, a super PAC that has already spent millions of dollars supporting Republican presidential candidate Mitt Romney, show at least $162,500 in contributions from payday lenders and their parent companies. We’re sure it’s a coincidence that Mr. Romney has promised to repeal the legislation creating the CFPB.
So far this cycle, the top three recipients of campaign contributions from payday lenders are Republicans with key roles in regulating the financial services industry who have demanded changes to the CFPB that consumer advocates say could weaken the new regulator. Rep. Jeb Hensarling (R-TX), the vice chair of the House Financial Services Committee, has received $36,500 in donations so far. Sen. Richard Shelby (R-AL), the ranking member of the Senate Banking, Housing, and Urban Affairs Committee, took in $32,000. Rep. Spencer Bachus (R-AL), chair of the House Financial Services Committee, got $29,000.
Campaign contributions aren’t the only way payday lenders are attempting to slip the regulatory yoke. Payday lending companies and industry trade associations reported spending roughly $4.46 million lobbying the federal government in 2011, mainly lobbying over how the CFPB would be set up. The industry hasn’t forgotten about the role states play in regulating it, either. Payday lenders appear to be actively courting state legislators through the American Legislative Exchange Council (ALEC), a corporate front group that pushes business-friendly bills on state legislators.
Earlier this month, the Columbus Dispatch reported that payday lender Cash America was among companies secretly contributing to an ALEC “scholarship fund” used to pay expenses for Ohio legislators traveling to ALEC conferences. The Arizona Republic last year reported that payday lender ACE Cash Express fed legislators a “posh” dinner at a fancy French restaurant while they were attending an ALEC conference in New Orleans.
All this adds up to an old-fashioned influence campaign meant to allow payday lenders to keep doing business the way they always have: by preying on the poor and desperate with high-interest, high-fee loans that are nearly impossible to pay off. That’s what happened to Tyrone Newman. After a year of being unemployed, he got a job, and overspent to give his family a real Christmas to celebrate. As the Washington Post reported, he took out $1,500 in payday loans – at an interest rate of 651 percent. His boss bailed him out, saving him from paying back a tab that would have cost him $18,000 otherwise. Most of this predatory industry’s victims aren’t as lucky.