Payday Lenders Pushing for Legalization, Hiding behind Nonprofits

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February 19, 2014; Center for Public Integrity

Among the more repugnant industries taking advantage of poor people in the United States is the payday lending industry. In Louisiana, for example, state laws that “regulate” payday lending allow the providers of these loans to charge more than 700 percent in annual interest and fees. (That’s not a typo—and it’s even higher in other states.)

When the Louisiana Legislative Black Caucus held a town meeting in Baton Rouge recently, citizens implored the legislators not to accept campaign contributions from payday lending industry lobbyists. Saying that she couldn’t be bought by any campaign contributor, the head of the Caucus, state representative Katrina Jackson, pledged not to accept any future payday lending lobbyist contributions—”future,” because she had done so in the past.

Which state legislators would ever possibly accept contributions from this industry? According to Edgar Cage of Together Louisiana, payday-lending lobbyists have been targeting black caucus members in other states to oppose legislation that would reform and regulate these professional, legal usurers.

It seems that Cage’s warning of payday lending lobbyists using their influence to weaken reform bills is based on fact, but it’s hardly just black legislators they’re aiming for—it’s any legislator willing to do their bidding. For example, the Missouri state senate just passed a payday lending reform bill that is widely seen as so weak that “it does almost nothing to protect consumers.” The state senator who sponsored the bill, Republican Mike Cunningham, has been a recipient of payday lending campaign contributions, which may explain why his bill does almost nothing to rein in these players. In Missouri, the legal cap on payday loan interest rates is an annual 1,950 percent and the average payday loan’s annual interest rate is 454 percent.

Payday lending is prohibited in Pennsylvania at the moment, but a bill to legalize payday lending that passed Pennsylvania’s lower house in 2012 is back up for consideration by the legislature. The author of the 2012 bill and plumping again for legislation this year is Republican state representative Chris Ross.

Payday lending may be odious, but clearly there are business people and politicians who think it’s just fine. In fact, there is a new online campaign called “Stop the Choke“ that links efforts to curb payday lending abuses to efforts, according to the Center for Investigative Reporting, that “will take away people’s guns, close down charities and destroy the free market.” The target is the Obama administration’s “Operation Choke Point,” a recently revealed effort by the Department of Justice to investigate whether banks are helping payday lenders in a variety of ways. Republican members of Congress, notably Darrell Issa (R-CA) and Jim Jordan (R-OH), have excoriated the administration for this effort.

“Stop the Choke” has no overt connections to Issa or Jordan or Republicans or anyone. It’s a completely mysterious site, with laudatory information about Senator Ted Cruz (R-TX), for example, but even Cruz’s people told CIR that they have nothing to do with it and don’t know who’s behind it.

The industries purportedly threatened by the Obama administration’s investigation of banks helping payday lenders are grouped together on the “Stop the Choke” website; for example, one grouping contains raffles, gambling, sweepstakes, and as-seen-on-TV. Charities get grouped together with home-based industries and “short-term loans”—that is, payday lenders. The site offers no explanation of the link between the threat to charities and the threat to payday lenders from the Obama administration’s review of the banks. One might guess that by charities, “Stop” is referring to charities that operate as third-party processers of some sort, the category of financial players that encompasses payday lenders.

Missouri’s pathetic payday lending reform bill, Pennsylvania’s potentially revived payday lending legalization bill, and others point to money flowing from the industry to pressure or, in some cases, buy legislators. It appears that payday lenders are quite willing to glue themselves to imaginary allies in the charitable world if it leads to expanded, less regulated, legal loan-sharking.—Rick Cohen

  • Scott Walter

    Payday lenders and the nonprofits that defend them are fair game for criticism, though it would be nice if an article like this mentioned their arguments and the critics’ responses to them. But I’m esp. puzzled why nonprofits and funders who oppose the lenders don’t receive any scrutiny? “Advocacy” is illegitimate on its face if you’re on one side, but advocacy on the other side is so pure that neither grantees nor grantors deserve scrutiny?

    That seems dubious here, given that the Center for Public Integrity, whose advocacy is the cause of this piece, took over $600,000 from Pew in that politicized funder’s highly questionable advocacy for “campaign finance reform.” As Pew’s Sean Treglia admitted, once he was safely off the payroll, Pew wanted “to create an impression that a mass movement was afoot,” even though Pew’s own polls showed the public didn’t care. (

    Of course, the main reason this scam worked for Pew & its billionaire friends was the failure of anyone to look at either the nonprofits leading the crusade or their funders….

  • Rick Cohen

    Good to hear from you Scott. I’m sure any number of the critics of payday lending would be glad to debate with you the pros and cons of the industry, but let’s hold that aside and look at the two organizations in question: the Center for Public Intregriy, which posted the story about Stop the Choke, and Stop the Choke itself.

    On the webpage of the Center for Public Integrity — — which to its credit is extraordinarily navigable, I could easily find the following information:

    *the name of the founder of CPI, Chuck Lewis, and the background on the history of the organization
    *the name and email contact information for the executive director, Bill Buzenberg
    *the name and profiles of the members of the board of directors
    *a list of the Center’s institutional and individual funders for the year 2012 (a search on the Foundation Center’s online directory would yield more of the institutional funders for past and current years, though not the individual funders who are almost never identified by other organizations)
    *The Center’s annual reports from 2002 through 2012
    *the Center’s 990s for the same years (which of course are available on GuideStar for free for a few years, but the Center makes it easy to find them all in one place)
    *a list and detailed descriptions of the issues that the Center for Public Integrity addresses in its work

    In all candor, all of that was discoverable on the Center for Public Integrity website in a matter of seconds.

    For Stop the Choke, I was less able to find basic information. The website is Unless I’m missing the links, I can’t find anything as to who are the leaders of this organization, its board members, its founder(s), the funders, or its history. It is probably too new to have a record of annual reports or 990s, but it doesn’t even post its corporate documents online (the Center for Public Integrity does). If you can point to some of that basic information for us, that would be most welcome.

    Regarding the Treglia/Pew issue, if I recall correctly, Treglia’s revelations were in 2004 or 2005, something like that, and he actually went back and forth on his revelations, at one point apologizing and saying that Pew had not done anything to deceive anyone and the revelations were basically due to his sensationalist language in a speech or presentation.

    Let’s assume that campaign finance reform–in those days, focused on McCain-Feingold, I presume–wasn’t exactly a mass movement. I’d hazard a guess that a full decade after Treglia’s revelations, there’s something afoot that is more of a movement in favor of campaign reform than a movement to revive or legitimize payday lending.

    Always good to hear from you, Scott.

    Rick Cohen

  • BustaLoan

    I’ve been a collector in the payday loan industry for 8+ years. Granted, the abuses are rampant BUT people do need access to small loans without a hassle. I simply question who decides the rates charged. No one tells Uber how much they can charge. No one tells Coke. Competition, tech, cost of capital… all help determine what margins can be sustained.

    Borrowers are really struggling out there. They want these loans. Lenders, allowed to exist and compete, will provide the product as long as there is money to be made. 36% APR’s simply do not leave enough on the table for “the money.”