Payday, auto title and installment lenders and their trade associations reported over $15 million of political spending in the 2013-14 election cycle, notes nonprofit Americans for Financial Reform.
In its June 2015 report titled: “Payday Pay-To-Play”, AFR highlights how payday, title and installment lenders and their trade associations line the pockets of powerful Washington politicians with their lobbying dollars.
Lobbying expenses to influence regulators
The AFR report notes payday lenders routinely lead borrowers into a cycle of long-term debt. Due to their extremely high fees, many people end up paying far more in loan charges than they originally borrowed. Because of strong-arm collection tactics, payments to these predatory lenders often take priority over rent, utilities and other necessities.
The report highlights that the entire business model of payday lending depends on getting people to borrow again and again and pay more and more in fees.
Moreover, lobbying and campaign contributions are used by the industry to influence regulators and lawmakers as decisions are made both about the enforcement of existing rules and the development of new rules against abusive lending.
The report notes the Consumer Financial Protection Bureau (CFPB) created under the Dodd-Frank financial reform law of 2010 has taken on unfair and deceptive practices in the high-cost loan industry through supervisory and enforcement actions, including a $10 million settlement with ACE Cash Express, which markets loans and related services both online and through retail storefronts in 36 states and the District of Columbia.
The CFPB is expected to announce a set of proposed consumer protection rules later this year that could bring dramatic changes to the quick-fix lending market.
Payday lenders objected to enforcement
The authors of the report point out that in a project titled “Operation Choke Point”, the Justice Department has begun to crack down on banks and payment processors that knowingly facilitate fraud, including the collection of illegal debts. Similarly, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have taken similar steps to clarify due diligence requirements for banks that may be processing fraudulent transactions.
Interestingly, storefront and online payday lenders, as well as payment processors, have vigorously objected to this kind of enforcement, which threatens the industry’s ability to collect payments on loans that violate state or federal lending laws.
The report notes the quick-fix loan industry has gone to Congress in an effort to garner sympathetic legislators to take up its cause in oversight hearings and public statements, and even seen to the introduction of legislation designed to end Operation Choke Point.
The quick-fix loan industry uses political contributions to seek policy goals that are strongly opposed to public opinion. The report notes about 80% of voters say that payday and other small-dollar lenders should be required to verify a customer’s ability to repay before a loan can be issued, which would directly undermine the business model of much of the quick-fix high-cost loan industry.
Providing more specific data on the political spending, the Online Lenders Alliance (OLA) spent $2.1 million in the 2013-14 election cycle, and the Community Financial Services Association (CFSA), a national trade association for companies that offer small, short-term loans or payday advances, spent $1.7 million.
The following tables capture the top 30 payday lenders and trade associations with the largest total campaign contributions and lobbying expenditures during the most recent national election cycle:
The report also highlights the top 50 recipients of campaign contributions from these lenders, trade association PACs and employees during the election cycle:
See full PDF below.