High cost “quick-fix” consumer lenders reported spending more than $15 million to influence Washington decision-makers during the last election cycle, according to an updated report (view or download full report here) released today by Americans for Financial Reform.
The Online Lenders Alliance (OLA) and Community Financial Services Association (CFSA) led the way, with combined contributions of $3.8 million. Top spenders also included some of the major members of these trade associations – the large national chains that dominate the high-cost consumer lending world: ACE Cash Express, Advance America, and Cash America International, which earned over half its 2013 revenue from payday lending, although it also has a pawn business. Cash America alone spent $1.9 million on lobbying and campaign contributions during this period.
Rep. Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, was the biggest congressional beneficiary of payday industry campaign money. The Top 10 congressional recipients (counting donations to the individual lawmaker and that lawmaker’s leadership PAC) were:
- Jeb Hensarling (R-TX) / Jobs, Economy & Budget Fund – $210,500
- Patrick McHenry (R-NC) / More Conservatives PAC / McHenry Leadership Fund – $105,300
- (former Rep.) Bill Cassidy (R-LA) / Citizens for Conservative Leadership – $95,600
- Former Rep. Jack Kingston (R-GA) / Southern Conservatives Fund – $88,500
- Kevin Yoder (R-KS) / Yoder Victory Fund – $85,757
- Steve Stivers (R-OH) / Support to Ensure Victory Everywhere PAC / Stivers Victory Cmte – $80,700
- Pete Sessions (R-TX) / PETE PAC – $76,630
- Blaine Luetkemeyer (R-Mo) / Building Leadership and Inspiring New Enterprise – $75,350
- (former Rep.) Tom Cotton (R-AR) – $62,800
- Tim Scott (R-SC) – $57,870
In a combined list of individual and organizational recipients, the National Republican Congressional Committee and the National Republican Senatorial Committee also made the top 10.
Payday, auto title and installment lenders make loans to economically stressed borrowers, with fees that typically work out to the equivalent of 300-500% annual interest. They generally make little or no effort to determine whether a borrower can afford to repay a loan, relying instead on direct access to someone’s bank account or car to ensure collection even if it takes priority over rent, utilities and other necessities. This combination of features means that while such loans may be marketed as a way of dealing with a one-time financial emergency, they routinely lead borrowers into long-term debt. The typical payday loan customer is indebted for more than 200 days a year. Many people end up paying far more in loan charges than they originally borrowed.
“Payday loans lead to a cascade of consequences, such as increased overdraft fees, delinquency on other bills, forced bank account closures, and even bankruptcy,” said Gynnie Robnett, payday campaign director at Americans for Financial Reform. “Yet the lenders show here they have no problem using the money they make off cash-strapped consumers to curry favor in Washington, DC. This underlines exactly why we need strong federal guidelines to end this cycle of debt with sky-high interest rates and fees.”
The Consumer Financial Protection Bureau (CFPB) is currently drafting new guidelines for payday and other high-cost consumer loans, and the industry is waging an all-out effort to get regulators and lawmakers (and regulators through lawmakers) to back off. Lobbying expenditures and campaign contributions are one big way in which quick-fix lenders loan industry hopes to achieve its goals in Washington. But those goals go sharply against the weight of public opinion. Broadly speaking, two-thirds of voters – including majorities of Democrats, Independents and Republicans – believe there should be more, not less, government oversight of financial companies. By more than a ten-to-one margin, voters across party lines favor a rule requiring small-dollar lenders to verify a customer’s ability to repay before a loan can be issued. In fact, Republicans are even more likely than Democrats to support such a rule. (AFR will post this new poll data tomorrow.)
The report, “Payday Pay-To-Play: How Payday, Title, and Installment Lenders and their Trade Associations Lobby and Line the Pockets of Powerful Washington Politicians,” covers spending by 68 payday, auto title, installment lenders and other entities that play an integral role in their operations. It draws on data compiled by the Center for Responsive Politics (CRP).
Other highlights of the report include:
Campaign Contributions. Individuals and entities associated with the high-cost consumer lending world reported making $4,176,283 in contributions to federal candidates for office during the 2013-14 election cycle.
Lobbying. The high cost quick-fix loan industry reported spending a total of $11,346,101 on lobbying in 2013 and 2014.
Big Spenders. The 10 companies and trade associations with the highest level of combined spending on lobbying and contributions (from their PACs and employees) include:
- Online Lenders Alliance (OLA) – $2,134,250
- Cash America International [Enova, CashNetUSA, Cashland, Payday Advance] – $1,887,550
- Community Financial Services Assn (CFSA) – $1,711,601
- American Financial Services Assn (AFSA) – $1,381,125
- JLL Partners [ACE Cash Express] – $1,097,050
- Amscot Financial – $821,150
- National Installment Lenders Assn (NILA) – $752,000
- Financial Service Centers of America (FiSCA) – $746,000
- Grupo Salinas / Grupo Elektra [Advance America Cash Advance Centers] – $743,170
- LTS Management Services / Online Consumers Network / Evergreen Capital Partners / Mount Oread Ventures – $639,000