Cash Advance Lenders Contribute Plenty of Campaign Cash
Since early 2013, cash advance loan providers as well as those with connections to the industry have spent more than $13 million toward the campaign and lobbying efforts of at least 50 different lawmakers.
Americans for Financial Reform, or AFR, reports that the recipients of this cash include well-known politicians on both sides of the aisle. Democrat Debbie Wasserman Schultz has received campaign funds from cash advance loan lenders as has John Boehner. However, less familiar politicians have been the biggest beneficiaries of campaign cash from the industry.
How Much Have Cash Advance Loan Lenders Donated?
One lender has invested $1.8 million on donations and lobbying efforts as did another major lender, claiming that the money was spent to educate policymakers on the industry’s benefits. While money from cash advance loan lenders is pouring into the campaign accounts of those who enact laws, consumer watchdogs and federal regulators have increased their scrutiny of cash advance loans that feature short payoff terms and high fees much like payday loans.
These loans are notorious for featuring fees that translate into startling triple-digit interest rates as they ensnare consumers into seemingly never ending debt cycles. A few years ago, the Department of Justice, or DOJ, launched an initiative, which it called Operation Choke Point, to come down on banks that enter into business transactions with companies that operate fraudulently. This includes payday loan lenders that break federal or state laws.
According to a number of payday lenders, the crackdown on their business practices is unfair. Many in the industry also claim that those who operate legally are being targeted by the agency. One lender asserted that the government agency is “bullying banks into choking off legal businesses because they simply don’t like the industry.”
Getting Government Agencies off Their Backs
To get Uncle Sam to back off, cash advance loan lenders are trying to cash in on the $13 million account that they’ve established through campaign and lobbying contributions over the last few years. Some lenders have increased their lobbying efforts significantly. In fact, according to reports, one major lender expanded its lobbying dollars by more than 40 percent.
Gynnie Robnett, AFR’s campaign director, said, “They have no problem using the money that they make off of vulnerable cash-strapped consumers to curry favor in D.C.” Dallas News reports that in 2013, the payday loan industry hired an estimated 82 lobbyists for contracts that came to around $4.4 million.
Reports of the cash advance loan industry donating millions to campaigns goes back to 2012. That year, lenders gave $2.4 million just to Texas political candidates. In 2013, lenders gave $2.5 million to candidates. Craig McDonald, the director of Pew Charitable Trusts, said, “They’ve put a lot of money into the system to stop reforms, and it’s worked.”
Paving the Way to Influence
When controversial industries donate campaign dollars to politicians, questions of influence usually arise. However, for every election, politicians raise millions of dollars from many different sources. Because of this, the contributions made by cash advance lenders is just a small fraction of the campaign cash amount collected by politicians.
The practice is suspect though. For instance, Jeb Hensarling, who is a Texas republican, is highly critical of the Consumer Financial Protection Bureau, or CFPB, which is an agency that’s currently considering regulatory action against the short-term loan industry. In 2013, Hensarling received an estimated $183,400 from the payday lending industry.
Hensarling has regulatory clout since he is a member of the House Committee on Financial Services. He is also in charge of congressional oversight for the Federal Reserve.
Sponsoring Bills and Asking Questions
To show their support for the cash advance online loan industry, some lawmakers have sent letters to the DOJ asking about the legitimacy of Operation Choke Point while others have sponsored bills that would put an end to the agency’s initiative. Legislators have attempted to pass regulations that would permit short-term loan lenders to bypass state laws. A few lawmakers have even tried to pass legislation designed to weaken the CFPB.
Attorneys General around the nation and consumer groups have been derisive of these efforts. According to them, current and new safeguards are required to prevent the cash advance online loan industry from targeting the country’s most defenseless consumers.
Robnett said, “We hope that those in Congress who work most closely with the payday industry shouldn’t have to be reminded that they work for all of us, not just those with the money to influence elections.”
Analyzing Donations Given to Political Candidates
When the AFR analyzed the donations given to political candidates for the purposes of lobbying and campaigning, the organization found that money came from payday, installment and auto title loan lenders as well as from those who lend out cash advance loans. Funding also came from companies that are related to the industry as well as from their employees and groups that aid short-term lenders.
In Missouri and Kansas, two local political contests are in dispute due to campaign contributions made by payday lenders. In Missouri, the governor’s race is under scrutiny while a U.S. House seat competition is facing an inquiry in Kansas.
During a recent news conference, Missouri republicans alleged that Chris Koster, a democrat and his party’s candidate for the position of governor, took funds from short-term loan lenders when he campaigned for attorney general. In return for their generous donations, republicans claim that Koster chose not to go after these types of companies for their lending practices.
In considering the Kansas race, campaign records confirm that Representative Kevin Yoder, a republican, has accepted almost a quarter of a million dollars over the years in donations from those who operate within the payday loan industry. According to democrats, Yoder has helped the industry in Washington D.C.
Cash loan lenders are facing more legal and political scrutiny than they have in the past. The industry is frequently accused of charging excessive interest rates for small dollar cash advance loans that in some cases, cost borrowers thousands of dollars in added fees and finance charges.
Will the Cash Loan Industry Deregulate Itself with Campaign Contributions?
Regulatory agencies should never overlook the power of a generous cash contribution. With cash advance loan lenders supporting candidates who are sympathetic to their business practices, the industry may be able to deregulate itself by helping these candidates reach powerful positions. To read more about political contributions made by cash loan lenders, visit the Personal Money Store.