Payday Lenders Ask DC Friends for Government Document

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As the coronavirus devastates the U.S. economy, apparently all industries under the sun, from Airlines companies and casino to farmers and investment bankers – has sent its lobbyists to Congress to seek relief in Washington.

Few of this hat-in-hand contingent, however, are as unpopular with the American public as the low dollar consumer lenders – primarily the so-called “payday lenders” – who offer some sort of short-term, high-interest loan. which has indebted millions of American borrowers.

Now the industry is claiming its own financial distress, and its representatives have spent months lobbying the federal government for relief, including access to the $ 670 billion pot of new paycheck protection program. dollars in loans for small businesses.

According to federal documents reviewed by The Daily Beast, two large payday loan companies lobbied lawmakers over congressional small business loans and the broader industry aid provisions: Populus Financial Group, the parent company of ‘ACE Cash Express, and online lender Enova.

The industry has received limited help so far: The Small Business Administration, highlighting long-standing rules on lending to financial institutions, has blocked payday lenders – as well as other short-term lenders who aren’t. not banks – access to PPP funds. On April 25, the SBA turned down a $ 644,000 forgivable loan from a California company called Payday Loan LLC on the grounds that giving them access to federal aid alongside hard-hit small businesses was not in “l ‘public interest’. The company filed a lawsuit in federal court in DC to overturn the SBA’s decision.

But industry efforts to change have found sympathetic ears on Capitol Hill: On April 23, a bipartisan group of 28 lawmakers sent a letter to the SBA and the Treasury Department asking consumer lenders to have access to PPP funds. A lead author of the letter, Representative Blaine Leutkemeyer (R-MO), confirmed to Politics that the group intended payday lenders to qualify for this relief.

The industry’s influence on Capitol Hill is evident in the list of lawmakers who approved the letter. This group includes some of the industry’s top campaign money recipients in Congress, according to the Center for Responsive Politics, a watchdog for money in politics. Representative Alcee Hastings (D-FL), for example, has received more industry contributions (over $ 200,000) than any other sitting member of Congress. And Representative Henry Cuellar (D-TX), another signatory, is Congress’ primary recipient of payday loan contributions for the 2020 cycle, with nearly $ 35,000. Cuellar narrowly beat a main challenge this year.

These two Democrats, and Rep. Tom Graves (R-GA), are so far three of the industry’s top four recipients of the 2020 cycle money. Others on the letter have reliably secured the industry support over time, including Leutkemeyer and Representative Steve Stivers (R-OH), who have each received at least $ 160,000 for their campaigns over the course of their careers. Other signatories, such as Representative French Hill (R-AR) – the person appointed by the House GOP to a bipartisan panel to oversee the economic aid funds allocated by the CARES Act – received five-figure sums from the ‘industry.

The industry and its supporters are simply saying that these companies employ workers who deserve relief, just like workers in any other company. To be forgivable, P3 loans must be spent largely on employee payroll, rent, or other business expenses.

But many industry critics, including some vocals on Capitol Hill, say Washington shouldn’t lift a finger to help run businesses they say hurt the economy just by being open.

“It is outrageous that payday lenders are asking Congress to subsidize their predatory loans that trap consumers in debt cycles,” said Sen. Sherrod Brown (D-OH), the top Democrat on the Senate banking panel and author of a bill to cap wages. loan interest rates during the COVID-19 crisis, The Daily Beast said in a statement. “We need to stand up for American families and not only prevent payday lenders from accessing P3 funds, but cap the interest rates they can charge at 36%.”

For industry watchdogs, the lobbying efforts offer another vivid example of how well-equipped and advantaged business interests, including those with less than stellar public records, have been able to secure a hearing with them. the very people who are shaping the federal response to the coronavirus.

“It’s not surprising to see members calling for help from payday lenders after being pressured by payday lenders,” said Jordan Libowitz of the Center for Responsibility and Ethics in Washington, a group of non-partisan government oversight. “Just as it is not surprising to see money going to other industries which have lobbied heavily for this or which have close connections with the administration or powerful members of Congress.”

While some of these sectors might have good reason to be relieved – even if they have a head start in the influence game – financial industry watchdogs say that on paper, the The political argument for payday lenders to access these funds is slim at best. “The payday loan industry, from our perspective, does not present a compelling case for changing the SBA rules,” said Brent Adams, senior vice president of the Woodstock Institute, a financial reform group based in Chicago.

“It would be different if their industry was dedicated to public service in one way or another. but it’s not, ”Adams told The Daily Beast. “From our perspective, probably the worst thing a cash-strapped consumer could do is get a payday loan. “

While it is not clear exactly how demand for payday loans and other high interest short-term loans has changed amid COVID-19, demand for most forms of consumer credit has generally changed. declined, according to a new report from the Consumer Financial Protection Bureau. Federal industry watchdog’s May 1 report found applications for auto loans, mortgages, credit cards and other credit flows have fallen 30-50% nationwide in March, with particularly notable declines in areas hard hit by the virus, such as New York.

The breakdown industry is likely seeing similar declines, according to Adams. “People keep their dollars handy. They are accumulating their money, being very conservative, ”he said.

One of the companies whose documents show it lobbied COVID-19 legislation, Populus Financial Group, specifically mentions PPP as an issue it lobbied lawmakers on in March. Its nearly 1,000 stores, which carry the ACE Financial brand, are located in 23 states and offer payday loans as well as other short-term loans and check cashing services. The company has entered into settlement agreements with government regulators in the past regarding its lending practices, including a $ 10 million settlement with the CFPB over debt collection practices, which ACE has denied to be abusive.

As a private company, ACE’s parent company, Populus, doesn’t have to divulge much information about its performance, and there aren’t many signs of how it is weathering the economic crisis. The company fought to keep its stores open across the country; in Saginaw, Michigan, it successfully rescinded a city order that one of its stores was not an “essential business” under state home support law.

Enova, is a Chicago-based public company that offers payday loans and other lines of credit under the CashNet brand .USA has also lobbied for federal help. There is no evidence that Enova, like other publicly traded companies, requested or received PPP loans. According to its latest quarterly earnings announcement, Enova’s turnover is up more than a third compared to the same period last year. The company told investors it was waiving late fees and offering more flexible repayment options to “support our hard-working customers.”

Populus and Enova did not respond to requests for comment on their lobbying activity.

But the industry’s calls are echoed in the April 23 letter to the Treasury and the SBA from the 28 lawmakers. They argue that the government rule that blocks non-bank lending institutions from PPP funds hurts workers. They also accused that the SBA’s denial of loans to these institutions was applied inconsistently and gave the impression that Washington was “picking winners and losers.”

“These companies were completely excluded from the PPP, which forced many of them to lay off their highly qualified employees who would have preferred to keep their jobs rather than requesting unemployment assistance from the government,” the letter read. non-PPP finance providers employed in these difficult times will help restore America’s productivity as soon as the health crisis subsides.

Lawmakers are arguing for a wide range of lenders to have access to P3s, such as auto title lenders, so that their attractiveness would affect more than just payday lenders. But so far, this sector has failed to secure specific help during the COVID crisis, and industry opponents like Brown may find the time to be right to impose further restrictions on lenders.

Critics, however, point to the industry’s strong presence on Capitol Hill as a primary reason it has won concessions in the past and may again in the future.

On this issue, according to Adams of the Woodstock Center, “there is a disconnect between what the public wants and what elected officials are prepared to do.”

“Otherwise,” he says, “this problem would have been solved a long time ago. “

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