There's talk of more legislation to restrict payday lending abuses, but don't expect the payday loan interest to stand idly by while it's being enacted. Payday lenders have already spent millions on lobbying and campaign contributions and they're ready to dig even deeper to maintain their right to charge obscene interest rates.
And, sure enough, research by Citizens for Responsibility and Ethics in Washington (CREW) finds the payday loan industry is on course to donate more than ever to federal candidates this election cycle.
Unfortunately, voters seem inclined to sympathize with payday lenders' claims that they are performing a public service when they loan money at interest rates that can approach 1,000 percent. Consumers who have fallen into the payday loan trap know better -- but not until it's too late.
If consumers are inclined to think that payday loans are a good thing, it takes just a little extra persuasion from the industry's lobbyists to win support from wavering lawmakers. Without enraged consumers demanding tighter regulation, it's hard for groups representing consumer interests to get much traction on Capitol Hill. And currently, there is a lot of support for the payday loan industry among consumers who think the short-term, high-interest loans provide a good value to cash-strapped consumers, as a ConsumerAffairs analysis of about 1.2 million comments on Facebook, Twitter and other social media demonstrates.
Cash in hand
The payday loan industry is ready to rumble as the election season shifts into high gear. 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 the payday lenders.
Congress ready to help
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. 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, CREW notes. 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.
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There's talk of more legislation to restrict payday lending abuses, but don't expect the payday loan interest to stand idly by while it's being enacted. Pa...