payday lenders report_crew

8/7/2019 Payday Lenders Report_CREW

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1 Sue Kirchhoff, Some Consumers Run Into Big Problems With Auto Title Lending, USAToday, December 27, 2006.

2 Gabriela Rico, Payday Lending Industry Down, But Not Out,Arizona Daily Star(Tucson), November 12, 2008; Thomas Suddes, Payday Lenders Stealth Campaign, PlainDealer (Cleveland), November 2, 2008.

3 Consumer Federation of America, 2008 Payday Loan Legislative Update, November21, 2008.

4 Rico,Arizona Daily Star, Nov. 12, 2008.

Executive Summary

Momentum to federally regulate so-called payday loans -- short-term consumer lendingproducts that can often lock borrowers in a cycle of high interest rates and increasing debt --recently has increased. As a result, the industry has stepped up its lobbying and public relationsefforts as well as its campaign contributions to federal candidates. Citizens for Responsibilityand Ethics in Washington (CREW) has examined those campaign donations, whichdemonstrate how an industry with a low federal profile seeks to influence members of Congressto achieve a particular policy outcome.

Background

Historically, small loans have been regulated mainly by state law.1 In 2008, the paydayloan industry fought ballot initiatives in two states2 -- Arizona and Ohio -- and state legislatorsintroduced payday reform initiatives in several others.3 In Arizona, the industry spent $14.5million on a failed effort to kill a sunset provision on a law that allowed payday lenders tooperate in the state.4 In Ohio, lenders spent $14.6 million in a losing effort to try to convince

voters to repeal a 28% interest cap.

5

With one exception,6 the payday industry has largely avoided federal regulation,7 but theelection of President Barack Obama has put the issue before Congress. During his campaign,President Obama called for a cap on payday loan interest rates,8 a position he has maintained


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9 http://www.barackobama.com/issues/economy/;

http://www.whitehouse.gov/agenda/urban_policy/.

10 Melissa Allison, State Takes On Predatory Lending, Chicago Tribune, December 15,2000; http://www.barackobama.com/issues/economy/.

11 Id.

12 Welch, USA Today, Oct. 10, 2006.

13

http://thomas.loc.gov/cgi-bin/bdquery/D?d110:17:./temp/~bdX3QZ:@@@D&summ2=m&|/bss/d110query.html.

14

http://thomas.loc.gov/cgi-bin/bdquery/D?d110:1:./temp/~bdkBPG:@@@D&summ2=m&|/bss/d

since his election.9 This issue has resonated with the president since his days in the Illinois StateSenate, when he spoke out against payday lending abuses.10 As a direct result of the increased

federal attention, payday lenders have increased their lobbying, PR efforts, and campaigndonations.

Current Legislative Landscape

Payday loans had long been a problem for enlisted service members, who often fellvictim to predatory lenders set up outside of military bases.11 In 2006, the payday loan industrysuffered a major federal setback when Congress passed a law capping the rate that members of

the military could be charged for consumer loans at 36%.12

Momentum for expanded regulation picked up last year when Senator Richard Durbin(D-IL) introduced S. 3287, which would apply the 36% military interest rate cap across theboard, but the measure died.13 Although other bills regulating the industry were also introducedin the 110th Congress, none ever reached the floor for a vote.14

In 2009, Sen. Durbin re-introduced the 36% interest cap as S. 500.

15

He also introduced abill to create a Financial Product Safety Commission to protect the public from inappropriatefinancial products.16 In addition, Rep. Luis Gutierrez (D-IL) recently introduced the Payday


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17 Press Release, Rep. Luis Gutierrez, Financial Institutions Chair Emphasizes Urgencyfor Payday Lending Reforms That Protect Consumers, March 11, 2009.

18 Id.

19 Murray,Roll Call, Mar. 18, 2009.

20 Telephone conversation between CREW staff member and House Financial ServicesCommittee staff member, April 10, 2009.

21

http://www.responsiblelending.org/issues/payday/briefs/page.jsp?itemID=29557924#six;Stephens Inc., Payday Loan Industry Report, (Dennis Telzrow, Managing Director & DavidBurtzlass, Associate) April 17, 2008.

22 Id.

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Loan Reform Act (H.R. 1214), on which a hearing was held on April 2nd.17 According to Rep.Gutierrez, his bill would create a federal floor for consumer protection related to payday

loans.18

The legislation has been criticized both by lenders for potentially driving them out ofbusiness and by consumer advocates for not going far enough.19 No further action on the bill iscurrently scheduled.20

Methodology and Terminology

CREW used public records on OpenSecrets.org and CQ Moneyline to research campaigndonations, the House Clerks website for lobbying information, and internet research for the

public relations section. Bills and legislation were compiled based on media reports andsearches on thomas.gov and govtrack.us.

The payday loan industry is broken down into two main groups: monoline companies,which mainly sell payday loans,21 and multiproduct companies, which have other revenuestreams, including check cashing, pawnshops, and rent-to-own, and are generally larger andmore financially stable.22 In addition, the industry is represented mainly by two groups:

Community Financial Services Association (CFSA), and Financial Service Centers of America(FiSCA);23 both operate PACs and employ lobbyists.24


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25 Stephens Inc., Payday Loan Industry Report, (Dennis Telzrow, Managing Director &David Burtzlass, Associate) April 17, 2008.

26 See http://www.govtrack.us/congress/bill.xpd?bill=h108-2407;http://www.govtrack.us/congress/bill.xpd?bill=h109-458;http://thomas.loc.gov/cgi-bin/bdquery/D?d109:1:./temp/~bdvcJD:@@@C|/bss/d109query.html.

27 Michael Barone and Michael E. Cohen, Almanac of American Politics, 2004-2008.

In this report, CREW studied the five largest monoline companies, the five largestmultiproduct companies, and the two main industry groups. CREW defined largest as those

companies with the greatest number of storefront locations operated.25

CREW analyzed thecontributions of Advance America, Check n Go, Check into Cash, QC Holdings, Allied CashAdvance, ACE Cash Express, Cash America, EZCorp, CompuCredit, and Dollar Financial aswell as the industry trade associations: CFSA and FiSCA. All the statistics in this report refer tothe aggregate of these twelve entities, which are collectively referred to as the payday loanindustry throughout the report.

The key members referred to in the campaign donations section of the report are

defined as the chairmen and ranking members serving on committees and subcommittees withjurisdiction over the payday lending industry:26 House Financial Services Committee, HouseSubcommittee on Financial Intuitions, Senate Banking Committee, and Senate Subcommittee onFinancial Institutions.27

Lobbying

The payday loan industry has increased its lobbying expenditures steadily over the lastseveral years, spending at least $730,000 in 2005 to over $2.1 million in 2008.28 Lobbyingexpenditures more than doubled from $2,045,000 in the 109th Congress to $4,182,550 in the 110th

Congress.

Lobbying 109th Congress 110th Congress

Year 2005 2006 2007 2008

Amount $730,000 $1,315,000 $2,041,300 $2,141,250Firms 8 9 12 16


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29 See Chart 2, Payday Loan Industry Donations. Raw data for this section was takenfrom OpenSecrets.org and CQ Moneyline.com. CREW aggregated campaign donations from thepast three campaign cycles from all donors listing Advance America, Check n Go, Check intoCash, QC Holdings, QC Financial, Allied Cash Advance, ACE Cash Express, Cash America,and EZCorp, CompuCredit or Dollar Financial as their employer and all donations made by

The seven payday entities that employed lobbyists -- Cash America, ACE Cash Express,Advance America, Check n Go, CompuCredit, FiSCA and CFSA -- doubled the number of

lobbying firms they collectively employ from eight in 2005 to 16 in 2008.

Campaign Donations

Federal campaign donations by the employees and political action committees (PACs)

of the five largest monoline lenders, the five largest multiproduct lenders, and the two industrygroup PACs have more than doubled over the last three campaign cycles.29 Donations totaled$592,653 in the 2004 campaign cycle, but jumped to $1,529,973 in the 2008 cycle.

TotalDonations

2004 Cycle 2006 Cycle 2008 Cycle

CompanyEmployees and PACs

$519,399 $769,231 $1,248,413

CFSA $0 $0 $207,060

FiSCA $73,254 $81,150 $74,500

Totals $592,653 $850,381 $1,529,973

FiSCA was established in 1987 and has operated a PAC since at least 1993,30 as has CashExpress.31 ACE Cash Express opened its PAC in 2004.32 For the 2006 election cycle, Advance


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33 EZCorp, Inc., FEC Form 1, Statement of Organization, August 12, 2005; QC Holding,Inc. PAC, FEC Form 1, Statement of Organization, May 19, 2005; Advance America, FEC Form1, Statement of Organization, September 25, 2006.

34 Community Financial Services Association of America, FEC Form 1, Statement ofOrganization, February 26, 2007; http://www.cfsa.net/about_cfsa.html.

35See Chart 3, Donations to Key Chairman and Ranking Members. Raw data for thissection was taken from OpenSecrets.org and CQ Moneyline.com. CREW aggregated campaigndonations from the past three campaign cycles from all donors listing Advance America, Checkn Go, Check into Cash, QC Holdings, QC Financial, Allied Cash Advance, ACE Cash Express,Cash America, and EZCorp, CompuCredit or Dollar Financial as their employer and all

America, EZCorp and QC Holdings launched their own PACs.33 Although established in 1999,CFSA did not form a PAC until the 2008 election cycle.34

The payday loan industry appears to be donating more strategically. In the 2008 cycle,payday groups donated $160,810 to key members of Congress, or about 10.7% of their totaldonations, while in the 2006 cycle, these members only received $55,000, or about 6.5% of totalpayday giving.35

Key Members 2004 Cycle 2006 Cycle 2008 Cycle

CompanyEmployees and PACs

$57,000 $45,000 $122,450

CFSA $0 $0 $19,860

FiSCA $12,000 $10,000 $18,500

Totals $69,000 $55,000 $160,810

Top Recipients of Campaign Contributions - 2008 Cycle36

By far the largest recipient of payday loan campaign cash was Sen. Tim Johnson (D-SD),the chairman of the Senate Subcommittee on Financial Investigations, who received $47,400


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37See Chart 4, Top Recipients of Payday Loan Industry Campaign Contributions, 2008Cycle. The raw data for this section was taken from the Center for Responsive Politics and CQ

Moneyline. CREW aggregated campaign donations from the 2008 cycle from all donors listingAdvance America, Check n Go, Check into Cash, QC Holdings, QC Financial, Allied CashAdvance, ACE Cash Express, Cash America, EZCorp, CompuCredit or Dollar Financial as theiremployer and all donations made by PACs of those companies and the PACs of FiSCA andCFSA to create the ranking.

from the payday industry in the 2008 cycle.37 He is followed by Rep. Dennis Moore (D-KS),who took in $34,419 in the last cycle. Rep. Moores district includes the town where QC

Holdings is headquartered38

and he serves on the House Subcommittee on Financial Institutions.Rep. Carolyn Maloney (D-NY), the former chair of the House Subcommittee on FinancialInstitutions was the third highest recipient, accepting $30,750 in payday campaign cash. Theranking member on the Senate Banking Committee, Sen. Richard Shelby (R-AL), was the fourthhighest recipient, receiving $25,560. Sen. Jeff Sessions (R-AL) rounds out the top five, havingreceived $25,150.

Rep. Kendrick Meek (D-FL) is the 6th largest recipient, receiving $23,650 from the

payday industry in 2008. Senate Banking Committee chair, Sen Chris Dodd (D-CT), and theranking member on the House Financial Services Committee, Rep. Spencer Bachus (R-AL),finished 7th and 8th in CREWs ranking, taking in $22,900 and $22,500 respectively. Rep. JebHensarling is 9th on the list, receiving $20,000 and Sen. Mitch McConnell (R-KY) is 10th, havingreceived $18,600.

Rep. Gutierrez, who introduced the Payday Reform Act of 2009, has taken $18,500 fromthe payday industry, making him the 11th highest recipient last cycle. Notably, Rep. Gutierrezreceived no contributions from donors associated with the industry in the 2004 and 2006campaign cycles. In contrast, Sen. Durbin took only $1,000 from the industry last cycle beforeintroducing his legislation.

Public Statements by Industry Donation Recipients

Most of the leading recipients of donations have said little publicly about the issues

surrounding payday loans. Sen. Johnson was critical of the military loan cap in 2006 citingconcerns over unintended consequences.39 Rep. Moore has co-sponsored the Payday ReformAct of 2009, finding the bill probably strik[es] it close to a proper balance.40 In 2005, Rep.Bachus argued against an early attempt to cap military payday loans due to the potential effects


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41 Panel Aims to Protect Military from Insurance Hard Sell, Congressional QuarterlyToday, March 16, 2005.

42 Marcy Gordon, Democrats Press Bankruptcy-Bill Provisions to Help Seniors, MilitaryPersonnel,Associated Press, March 1, 2005.

43 Rick Maze, Lawmakers Question Payday Loan Cap,Marine Corps Times, October 2,

2006.

44 Press Release, Financial Service Centers of America to Hold National Conference, PRNewswire, October 8, 2004.

45 Press Release, Advance America Announces Appointment of Tony S. Colletti to Its

on legitimate creditors.41 Sen. Sessions supported a more constrained version of a militarypayday loan cap championed by Sen. Durbin in 2005.42 Despite the financial support he has

received from the industry, Sen. Shelby offered support for military payday reform in 2006,saying, as long as certain unscrupulous lenders continue to employ predatory practices, ourservice men and women suffer."43 CREW was unable to find any public statement on the issueby Rep. Maloney, but she was scheduled to address FiSCAs conference in 2004.44

Public Relations

The largest payday lender in the country, Advance America, recently named public

relations expert Tony Colletti to its board.45 The industry also seems to be getting support from,if not working directly with, infamous D.C. PR consultant Rick Berman, who has criticizedregulation of the industry on one of his websites since at least February 2008.46 Tim Miller, ofBermans Center for Consumer Freedom, penned a letter in support of the payday industry inMarch 2008.47 Mr. Berman also is behind the website Econ4U.org, which advocates for paydayloans.48


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Chart 1

Payday Loan Industry Lobbying Expenditures

$2,045,000

$4,182,550

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

109th Congress 110th Congress

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Chart 2

Payday Loan Industry Donations

$592,653

$1,529,973

$850,381

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000


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Chart 3

Donations to Key Chairmen and Ranking Members

$69,000

$160,810

$55,000

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000


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Chart 4

Top Recipients of Payday Loan Industry Campaign Contributions

2008 Cycle

Rank Amount Last Name

1 $47,400 Sen. Tim Johnson (D-SD)

2 $34,419 Rep. Dennis Moore (D-KS)

3 $30,750 Rep. Carolyn Maloney (D-NY)4 $25,560 Sen. Richard Shelby (R-AL)

5 $25,150 Sen. Jeff Sessions (R-AL)

6 $23,650 Rep. Kendrick Meek (D-FL)

7 $22,900 Sen. Chris Dodd (D-CT)

8 $22,500 Rep. Spencer Bachus (R-AL)

9 $20,000 Rep. Jeb Hensarling (R-TX)

10 $18,600 Sen. Mitch McConnell (R-KY)

11 $18,500 Rep. Luis Gutierrez (D-IL)

12 $16,000 Rep. Debbie Wasserman-Schultz (D-FL)

13 $15,500 Rep. John Boehner (R-OH)

14 $15,400 Sen. John McCain (R-AZ)15 $15,000 Rep. Bobby Rush (D-IL)

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