New report reveals which members of Congress are “payday puppets”
Inside Subprime: May 1, 2018
By Lindsay Frankel
A new report published by Allied Progress reveals the names of several members of Congress who accepted campaign donations from the payday lending industry. The report exposes the suspicious timing of the contributions, most of which were received just days before or after members of Congress had taken legislative action that would prove advantageous for payday lenders.
The payday lending industry profits most from low-income borrowers who are unable to repay their loans on time. More than 80 percent of payday loan customers renew their loans within two weeks, and because of the triple-digit interest rates on most payday loans, more than 20 percent of payday loans end up accruing more in fees than the original amount borrowed. This results in huge gains for payday lenders, while trapping borrowers in an insurmountable cycle of debt.
Political action in Congress has moved steadily towards deregulation of the payday lending industry, even though the majority of Americans support tighter restrictions on payday loans. The Center for Responsible Lending conducted a bipartisan poll that found only one tenth of Americans reported favorable impressions of payday lenders. Yet members of Congress continue to take action that supports the largely disfavored industry, and the new report provides some insight into the motivation for these decisions.
The payday lending industry has exerted its influence on politics since well before the Consumer Financial Protection Bureau was created in 2010. Payday lenders have provided nearly $13 million in campaign donations over the years, according to the Center for Responsive Politics. The Allied Progress report correlates contributions made to more than a dozen senators and representatives with the political decisions they made around the same time.
One of the notable “Payday Puppets” in the report was republican Sen. Richard Shelby of Alabama, who received $46,250 in campaign donations from payday lenders and political action committees a few weeks before he voted against an amendment that would “ensure the CFPB has the authority and autonomy to protect consumers from predatory lending.”
Florida Rep. Alcee Hastings wrote an op-ed for the Washington Examiner in 2015 that praised payday loans, despite the average annual interest rate of 278% on payday loans in Florida. Three weeks after it was published, he received $20,000 in campaign contributions from payday lenders.
On several occasions, Texas Rep. Jeb Hensarling, the chair of the House Financial Services Committee, voted to benefit the payday lending industry within days of receiving campaign contributions from payday lenders in Texas.
The report includes a multitude of additional examples that raise suspicion about the exchange of campaign contributions for official action. While these details don’t provide direct evidence of wrongdoing, the analysis attempts to answer why so many members of Congress have made political decisions that contest popular opinion and overlook research that suggests the payday lending industry causes undue financial harm to working class Americans.
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