Payday Loans

Preying on Desperate Borrowers

Finding customers whose finances have already spun out of control is a key to the fintech business model. Fintech companies decide what interest rates to charge by analyzing the risk profiles of prospective borrowers. Some base their calculations largely on a borrower’s FICO score. Others use custom algorithms. The higher the risk, the higher the interest rate.

“Part and parcel of the thinking [was] the customer we wanted to serve,” said Jeffrey Meiler, the founder and CEO of Best Egg, on a podcast for fintech investors. “When we really analyzed who we were going to be working with, who we were going to be helping here, it was typically a consumer who is 46 years old, is an individual that has liabilities that exceed assets, and they’re carrying typically $15,000-plus in credit card debt. And they’re looking to make a change.”

In Cleveland, Ohio, Kenneth Gibson fit that description. In the mid-2000s, he opened a restaurant and nightclub down the road from a strip mall in Cleveland Heights. Business was good. But in the winter of 2014, the movie theater in the strip mall closed, along with the nearby Walmart, leaving the area largely desolate during a rough winter. Business at the nightclub fell precipitously, Gibson recalled.

Gibson, now 63, was determined to keep the business going. He ran up tabs on multiple credit cards. But the business still wasn’t making enough money for him to pay back the debts that were piling up or to carry out the renovations he wanted to make on a new location in nearby Shaker Heights. He needed another source of funds.

In the summer of 2016, Gibson’s son suggested that he try getting a loan from Best Egg. It was simple for Gibson to apply online. Initially, he said, Best Egg turned him down. An agent got back to him a few weeks later, however, to discuss some adjustments to Gibson’s application, Gibson said. Once the updated application went through, $17,576.85 appeared in his bank account: the result of an $18,500 loan, minus a 5 percent cut for the lender.

That lender, the loan papers spelled out, was not Best Egg, nor its Delaware-based parent company Marlette Funding. The money actually came from a New Jersey financial institution called Cross River Bank. That meant Gibson’s loan would be subject to New Jersey’s interest rate, not Ohio’s.

Not that Gibson was paying attention to the details. “I don’t even know the amount they gave me,” he said. “I was scrambling. That wasn’t enough to do what I needed to do, so I got other loans, from credit cards or something, to upgrade the business.”

The annual interest rate on Gibson’s loan from Best Egg was a steep 27.25 percent, which vastly exceeded Ohio’s 8 percent annual interest rate limit. With broad exceptions, including payday lending, charging higher interest is barred as usury. But Best Egg and other fintech companies leapfrog over state interest rate caps via a legal springboard that allows lenders from elsewhere in the country to rely on their home state laws — and New Jersey allows interest of up to 30 percent for consumers.

Other online lenders charge even more to some borrowers by piggybacking on Utah banks with a special charter that licenses them to charge interest without any maximum at all. Utah’s WebBank supplies loans for Prosper, Avant, and other mainstream fintech lenders.

According to the terms of his loan, Gibson was required to make monthly payments of $567.67 for 60 months. For five months, he managed to stay current on his payments.

Ultimately, though, the loan from Best Egg didn’t provide a path to financial security. Instead, it dragged him even deeper into distress as his business and health took a turn for the worse.

Marlette Funding and Cross River Bank did not respond to questions about Gibson’s loan.

Gibson is in good company. Even before the pandemic, as much as $1 in every $10 borrowed from Best Egg could ultimately go unpaid, analysts at Kroll Bond Rating Agency estimated. And Best Egg performed better than peers like Avant, which as of early this year was projected to see as much as $1 in every $5 in certain pools go south.

In mid-July, KBRA, the leading ratings agency for the online personal loan industry, announced ratings watches with the potential for future downgrading on $5.6 billion in securities, noting that “uncertainties remain as to how borrowers will perform after the extra $600 weekly unemployment benefit expires at the end of July, other consumer debt products exit their deferral periods, and if the unemployment rate will remain elevated or increase due to continued economic pressure caused by efforts to contain the spread of COVID-19.”

In mid-June, KBRA found that about 10 percent of Best Egg borrowers had asked for payment extensions and another 6 percent in some loan pools were at least a month behind on their payments despite government coronavirus financial aid programs.

And in their August 2020 report on a Best Egg loan pool, KBRA’s analysts acknowledged that high-interest, high-risk loans in the mix could be perceived as “predatory lending” and lead to a backlash.

“These customers may have low income, limited financial means and a negative or limited credit history,” says a section headed “Perception of the Subprime Lending Market.” “Based on one’s view of this sector, it may be interpreted that these lenders are providing credit to an underserved demographic or conversely that they are engaging in predatory lending. This perception could cause lenders and capital providers to exit this market in an economic downturn or if social acceptance is negative.”

A decade after the financial crisis, overleveraged Americans once again stand to lose all that they have.

“Like a fool, I borrowed all that money and just couldn’t catch up,” Gibson said.

Hamster Wheel

For most lending institutions, having so many borrowers default on their loans would be unsustainable. Indeed, in 2017, investors including George Soros supplied a financial lifeline of up to $5 billion to Prosper Marketplace, after a surge of borrower defaults and balking investors had the fintech firm facing a threat to its survival. Still, Prosper continues to operate in the red: Itlost $39.9 millionin 2018, despite issuing $2.8 billion in loans that year, and another $13.7 million in 2019.

But, at least before the pandemic struck, investors continued to buy the securities packed with fintech loans, based on analyst projections that the high interest paid will more than offset the hefty share of risky loans that borrowers will be unable to pay off.

Early this year, KBRA reported that privately held Marlette, owner of Best Egg, is profitable.

The need to turn a profit puts pressure on fintech companies to issue even more loans, in order to generate more revenue from interest and fees for issuing the debt. (Borrowers often pay 5 percent or more on top of the principal and interest just to close the deal.) Last year, Best Egg lowered the minimum credit score that it required borrowers to have — from 640 to 620 — deeper into subprime territory, widening its potential customer pool but also opening itself to borrowers who may have an even harder time repaying their loans.

Todd H. Baker, a former banker and now senior fellow at the Richard Paul Richman Center for Business, Law, and Public Policy at Columbia Business and Law Schools, calls the online lending business dynamic “the hamster wheel.”

“They don’t make any money unless they sell the next loan,” he said. “That leads to enormous incentives to do things that you shouldn’t.”

To keep the cash flowing in once borrowers stop paying, fintech investors sell off bad loans to other investors who specialize in collecting whatever they can. And so it was that a Minnesota company called Absolute Resolutions Investments purchased Kenneth Gibson’s loan in June 2017, along with a heap of other rotten Best Egg debts.

IRS, SEC, and New York State records show a fund affiliated with George Soros’s investment management firm has been an investor in Best Egg loans as well as Prosper Marketplace. One of the 11 investment funds that offloaded the pool of Best Egg loans to Absolute Resolutions was QPB Holdings LTD, which is tied to Soros Fund Management and the Fund for Policy Reform, a financial engine behind Soros’s global projects advocating for human rights, democracy, and progressive politics.

Having purchased the rights to the loans from the Soros funds and other investors, Absolute Resolutions sued Gibson in Cuyahoga County court in early 2018, seeking more than $20,000 once interest and penalties were piled on — more than Gibson had borrowed in the first place.

Soros Fund Management has since established a policy precluding investments in products that do not provide a path to financial resilience.

Gibson had no way to pay that money back. The Cleveland Heights City Council declared his nightclub a nuisance in 2016, after police were repeatedly called to the parking lot to respond to disturbances. That was the end for the business.

Unable to repay the loan, and with their finances hurting even more following a medical crisis, Gibson and his wife declared bankruptcy in October 2018.

Yet Best Egg keeps on rolling. As platforms that simply serve as intermediaries between borrowers, banks, and investors, fintechs aren’t set back by borrowers’ failure to pay — as long as someone keeps buying blocks of the securities. Last year, Marlette packaged $1.3 billion worth of consumer loans for sale.

“They may be able to make the loan work for the company, even if [borrowers] ultimately default,” said Lauren Saunders, associate director at the National Consumer Law Center.

A Recipe for Consumer Suffering

In Washington, fintech fanaticism has been a bipartisan affair. It was a banking regulator appointed by Barack Obama, Thomas Curry, who in the final weeks of that administration moved to allow the Office of the Comptroller of the Currency to charter fintech institutions, authorizing them to issue loans without partnering with traditional state-based banks. A federal fintech charter — a license for banks to do business under the oversight of federal regulators — would allow the companies to sidestep state regulators and state interest rate caps.

If fintechs have assurances they can charge higher interest rates, without concern that state regulators or courts might clamp down, the industry and its supporters contend, many consumers who previously couldn’t qualify for a loan would be able to get one.

In a speech at Georgetown University in December 2016, Curry raved about how fintechs had “great potential to expand financial inclusion, reach unbanked and underserved populations, make products and services safer and more efficient, and accelerate their delivery.”

A fintech charter also could help address a problem that has dogged online lenders since 2015: a federal appeals court decision that found that only the bank originating a loan could use its home state’s higher permitted interest rate in a state with lower caps, and could not transfer that rate to another company, such as a debt collection agency. That not only deterred lenders from making high-interest loans in New York, Connecticut, and Vermont but raised the possibility of the products getting blocked in other states too. A federal charter would allow fintechs to charge essentially whatever interest rates they wanted, anywhere in the country.

Donald Trump’s appointee as comptroller, Joseph Otting, took up the crusade to create a federal fintech charter and put out a call for applications in the summer of 2018. Otting had served as CEO of OneWest Bankwhile Treasury Secretary Steve Mnuchin was the bank’s chair, and there presided over aggressive foreclosures of mortgages relying on robosigned documents.

Otting resigned from the post in May 2020, handing the reins to another OneWest colleague, Brian Brooks, who in a statement upon taking office as acting comptroller made clear his intentions to carry on Otting’s work to deregulate fintech.

Dozens of firms expressed interest in a federal fintech charter. Speaking at the Antonin Scalia Law School at George Mason University in March 2019, Otting said his office was in talks with “25 to 50 entities” that “feel because they operate across multiple states that having a national banking charter is critical to their business plan.”

Earlier that day, his calendar shows, he made an appearance at the annual meeting of the Marketplace Lending Association, a trade group that represents fintech companies. He had already met with the Online Lenders Alliance, an association representing fintech firms specializing in high-interest loans — just as the Consumer Financial Protection Bureau was readying to roll back regulations requiring payday lenders to ensure that their borrowers have the ability to repay their loans. That change took effect in July.

Otting’s quest for a fintech charter suffered a setback in October, however, when a Manhattan federal court ruled against the Trump administration in a lawsuit filed by a state banking regulator. Judge Victor Marrero had found that the comptroller has the power only to license financial institutions that take customer deposits — a definition Congress set long ago with the National Bank Act. Because fintechs lend money that does not come from customer deposits, they don’t fall under the comptroller’s purview, Marrero ruled. In December, the Trump administration appealed the decision to the Second Circuit.

The lawsuit that led to Marrero’s ruling was filed by Maria Vullo, who until last year was superintendent of the New York State Department of Financial Services, which oversees hundreds of state-chartered financial institutions.

In an interview in her office a short stroll from Wall Street during her last weeks on the job, Vullo said she didn’t see an alternative to challenging the fintech industry’s push for a national charter.

“Combined with that attack really on the state regulatory system was the great concern of consumer groups with respect to payday lending and predatory practices,” she said. “Knowing what happened during the financial crisis.”

While serving as deputy attorney general of economic justice in 2010, when Andrew Cuomo served as New York state attorney general, Vullo had seen firsthand the wreckage left by Wall Street banks. A federal fintech charter, she had warned Curry in a January 2017 letter, would “imperil crucially important state-based consumer protection laws,” “create institutions that are too big to fail,” and “increase the risks presented by nonbank entities.”

Vullo remained concerned, even though Congress took steps to prevent a recurrence of the crisis driven by consumer debt and speculative investment. One provision of the 2010 Dodd-Frank Act requires banks that partner with investors on securitizations, including those associated with fintechs, to hold at least 5 percent of the product on their own books, aiming to discourage excessive risk-taking.

However, given the fintech industry’s complex web of online lending platforms, banks, securities pools, and investors, Vullo still sees no substitute for direct oversight by regulators.

“A lot of these nondepository institutions just have investors that are backing them, and I don’t know whether their credit decisions and their underwriting decisions and everything else are valid,” Vullo said. “They’re often selling these things in buckets and securitizing them — and, well, we’ve seen that before.”

And, as was the case during the financial crisis, if these lending institutions run into trouble, it’s consumers who stand to suffer most.

“These companies could be fly-by-night companies that then don’t survive, go away, and they’ve already sold the loans to people who are left holding them,” Vullo said. “And they are going after consumers for repayment of the loan, and there’s nobody to go to.”...

trump mofo, reg capture:

https://theintercept.com/2020/08/12/cfpb-coronavirus-predatory-payday-loans

on jULY 30, Chair Maxine Waters opened the House Committee on Financial Services hearing with a frustrate and ominous message: “I would like to welcome Director Kraninger to what I hope will be her last appearance before this committee as CFPB director.”

Kathy Kraninger was being called to account for the Consumer Financial Protection Bureau’s failure to protect consumers during the coronavirus pandemic. In separate House and Senate hearings, committee members levied their sharpest criticisms against the agency’s plan to deregulate small-dollar lending by repealing key consumer protections on predatory products like payday and auto title loans. The final rule decided on by the agency tore out the heart of the policy by rescinding provisions that required lenders to assess a borrower’s ability to repay their loan.

small-dollar lenders, such as Speedy Cash and TitleMax, intentionally design high-cost, low-quality products to make it almost impossible for borrowers to repay their loans under the original terms. Finance fees and average annual interest rates of 400 percent prevent most borrowers from repaying payday loans in full, with borrowers ending up in debt five months out of the year for what was deceptively marketed as a two-week loan. Other loans within this industry are just as harmful. Ninety percent of auto title loans are re-borrowed, and 20 percent of borrowers have their vehicles repossessed. This rule makes it easier for lenders to trap borrowers in cycles of debt.

Payday lenders are well known for taking advantage of the precarious conditions experienced by working-class and poor people — and which disproportionately affect Black and brown people. The average loan amount borrowed from a storefront payday lender is about $1,000. Contradicting the assumption that these lenders profit primarily from unpredictable crises such as a pay cut or medical emergency, a majority of borrowers — 69 percent — rely on payday loans to cover recurring expenses. People use these higher-cost loans to live day-to-day: buying groceries, paying bills, and making their rent or mortgage payments.

The CFPB’s rule makes this form of racial capitalism even more punishing by paving the way for predatory lenders to prey on marginalized borrowers and extract lucrative profits.The economic stimulus payments that Congress approved under the CARES Act appeared to help people make it through the early months of the pandemic, and new applications for small-dollar loans declined during March and April. Now, with Congress’s failure to extend benefits, loan applications are rising steadily along with eviction fears, job losses, and coronavirus infection and death rates. In one survey, 36 percent of lower-income households applied for some type of small-dollar loan in June and July. Black and brown households applied for these loans at a rate three times higher than did white households.

Near the end of the House Committee on Financial Services hearing, Illinois Rep. Jesús “Chuy” García described CFPB’s final rule as a scary example of how the agency is working on behalf of predatory lenders instead of consumers. “I represent a working-class, immigrant district. There are a lot of payday lenders in my district,” said García. “My community was hit hard by the last crisis and many people never recovered. … That’s why the CFPB was established during the last crisis to give ordinary people, like my neighbors in Chicago, their own voice. … But that’s not what we see from watching the bureau today.”

THE CFPB first revealed its proposed rule to regulate the small-dollar lending industry at a 2016 field hearing in Kansas City, Missouri. Up to that point, regulators had allowed the industry to escape federal oversight. Then-Director Richard Cordray, an Obama appointee, had led the agency in conducting extensive research on the industry’s harms to borrowers.

The CFPB’s decision to reveal its proposed rule in Kansas City was far from random. Kansas City and its white, wealthy suburbs were swimming with payday and other small-dollar lenders hungry for people’s money. Lenders sold payday loans with 1,000-percent interest rates nationwide out of their call center based in Overland Park, and local investors helped bankroll these lenders.

A multibillion-dollar payday lending enterprise overseen by a man named Scott Tucker was located just a few miles away in Leawood, with businesses that had names like Cash Advance and OneClickCash. Tucker put together the seed funding for his payday lending business in the 1990s, about the same time as the industry’s rapid nationwide expansion. By his early 30s, he had already developed several financial schemes and defrauded investors out of $100,000 — credentials he used to pitch investors.

Tucker grew his payday lending business into a nationwide enterprise over the next few decades. He worked hard to keep his illegal enterprise under the radar, including paying off local officials through campaign donations, creating a near-impenetrable multistate maze of shell companies, using the internet to expand his business, and exploiting Native tribes for sovereign immunity. His relationships with payday lenders were hard to pin down. Tucker had succeeded in keeping his name out of states’ earlier lawsuits against the payday lenders from which he was profiting, including in Colorado, Kansas, Nevada, North Carolina, Oklahoma, and Washington.

Trump Nominee for CFPB Admits in Hearing She Has No Background in Consumer Protection or Financial Regulation

A 2011 investigative report revealed the sources of Tucker’s wealth, publicly chaining him to the payday lenders whose affiliations he had worked so hard to suppress. The Federal Trade Commission filed suit against Tucker in 2012, and Tucker and his attorney were arrested on racketeering and other charges in 2016. Tucker was sentenced to 16 years in prison, and the FTC won their largest penalty at the time with a judgment for $1.3 billion in 2018. The FTC returned $505 million to the people Tucker had defrauded. The judge presiding over the decision estimated that Tucker had victimized 1 percent of the U.S. population through predatory loans and fraudulent activity.

Tucker wasn’t even the only person from Kansas City running a payday loan enterprise. Numerous Kansas City-area moguls have been sued in recent years, including Timothy Coppinger, Frampton T. Rowland, Richard Moseley Sr., Richard Moseley Jr., and Josh Landy. The initial rule stopped them from abusive practices, such as charging unaffordable payments that forced repeat borrowing and created debt traps.

trump was elected to the presidency a few months after the Kansas City field hearing. Since that time, his appointees, Interim Director Mick Mulvaney and current Director Kathy Kraninger, have hacked away at rule-making and used bureaucratic malaise to whittle away at the agency’s commitments to oversight and enforcement. One of Mulvaney’s first actions as interim director was to announce that the agency would reconsider the small-dollar lending rule. The Trump appointees even manipulated the agency’s research to make payday lenders appear less harmful. When the CFPB announced its final rule in July of this year, it hammered a nail into the coffin of the Cordray-era rule-making that steadfastly sought justice for borrowers defrauded by lenders like Tucker.

The CFPB announced the rule’s final fate as eviction moratoriums and expanded unemployment benefitswere expiring— along with any remaining hope that America could rally the collective spirit needed to fight the coronavirus. Other federal regulators followed in lock step with the CFPB. The Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation subsequently announced proposed rules that would allow payday lenders to circumvent state interest rate caps. Moreover, Trump’s executive orders on payroll taxes and student loans defer payments instead of canceling them. By extending these payments into the future, Trump’s executive orders actually operate a lot like payday loans: taking advantage of people’s precarious conditions by offering immediate relief while their debts accumulate with no way of repaying them. Mutually reinforcing policy decisions effectively deploy predatory lenders and their 400-percent interest rates as first responders to the pandemic. Not willing to throw out life vests, Trump’s government encourages people to drown in debt.

Congress must act with urgency to protect borrowers from predatory lenders and to stave the flow of Black and brown income into white pockets, like Tucker’s. The Democrats’ HEROES Act, if passed, would initiate another round of economic stimulus payments that would likely reduce reliance on payday loans by giving people the money they need to live. Some states are stepping up in the CFPB’s absence. Policymakers in Virginia recently passed legislation to cap interest rates at 36 percent and ensure that borrowers can repay their loans. Wisconsin issued emergency guidance warning payday lenders not to raise interest rates and threatening to revoke licenses.

The House and Senate hearings provided a necessary public accounting of the CPFB. However, without federal intervention, people will have little choice but to rely on predatory lenders and their high-cost debt for surviving the pandemic. And they’ll have fewer protections, thanks to the CFPB’s final rule that promises to widen racial economic inequality during a pandemic instead of narrowing it.

https://www.alternet.org/2020/07/cfpb-director-facing-calls-to-resign-over-new-rule-exposing-consumers-to-predatory-debt-traps-in-middle-of-recession/

consumer Financial Protection Bureau director Kathy Kraninger is facing calls to resign after her agency finalized a rule Tuesday that critics say will further expose vulnerable people to “debt traps” set by payday and car-title lenders.

Kraninger, who was nominated by President Donald Trump and confirmed by the Senate in 2018, “just stamped an official seal of approval on one of the worst practices of payday lenders—and now there’s nothing stopping the industry from ruining families with 400% interest rates in the middle of a recession,” said Jeremy Funk, spokesperson for consumer watchdog group Allied Progress.

“For the sake of all U.S. consumers,” Funk added, “the director needs to step aside.”

The final rule—which has been in the works for more than a year—rolls back Obama-era regulations requiring payday and car-title lenders to verify that borrowers have the ability to repay before approving high-interest, short-term loans. Last June, Kraninger delayed implementation of the safeguards, which were previously set to take effect on August 19, 2019.

according to the Payday Loan Debt Trap Tracker, Kraninger’s decision to delay the regulations cost consumers nearly $6 billion in fees.

“A truly shameful thing that right in the middle of the economic distress from this pandemic, the current CFPB leadership would choose to roll back the heart of the payday lending reform rule,” tweeted former CFPB director Richard Cordray, who helped develop the Obama-era regulations. “Protecting consumers again takes a back seat to catering to the financial industry.”

The American Banker reported Tuesday that Kraninger’s rollback is “projected to save the payday lending industry more than $7 billion a year.”

BREAKING: In a direct attack on consumers,@CFPBDirector and Donald Trump just killed protections for payday loan borrowers in the middle of a global pandemic and economic downturn. Disgraceful.https://t.co/kGmCqiFqpE

— Allied Progress (@AlliedProgress) July 7, 2020

In an August 2019 memo obtained by the New York Times, then-CFPB staffer Jonathan Lanning accused President Donald Trump’s political appointees of manipulating the bureau’s payday lending research to justify gutting the Obama-era borrower protections. Lanning left the CFPB later that same month.

Mike Calhoun, president of the Center for Responsible Lending, said in a statement that “there is never a good time to enable predatory loans carrying 400% interest rates, but this is the worst possible time.”

“The pain caused by the CFPB gutting the payday rule will be felt most by those who can least afford it, including communities of color who are disproportionately targeted by payday lenders,” Calhoun added. “Payday and car-title lenders pull borrowers into financial quicksand. The CFPB’s own research shows that four out of every five payday loans are reborrowed within two weeks—because borrowers can’t afford to repay the initial loan.”

“Taking out a payday loan makes a person more likely to lose their bank account, rack up overdraft fees, and file for bankruptcy,” said Calhoun. “With today’s action, the politically appointed leadership of the Consumer Financial Protection Bureau is actively facilitating harm to consumers at a time of crisis and uncertainty.”

Advocacy group Americans for Financial Reform (AFR) urged Congress to pass legislation capping interest rates nationwide to stop payday lenders from taking advantage of the CFPB’s new rule.

“With regulators throwing open the doors to predatory lender, Congress must step in to prevent profiteering and stop payday and car-title lenders from burying people in high-interest debt,” AFR senior policy counsel Linda Jun said in a statement. “Predatory lenders will do nothing but prolong the human misery stemming from this crisis.”

320

https://www.fastcompany.com/90470701/how-silicon-valley-put-a-friendly-face-on-payday-lending

https://www.alternet.org/2019/12/they-loan-you-money-then-they-get-a-warrant-for-your-arrest/

They loan you money. Then they get a warrant for your arrest

Written by Anjali Tsui / ProPublica December 3, 2019

Cecila Avila was finishing a work shift at a Walmart. David Gordon was at church. Darrell Reese was watching his granddaughter at home. Jessica Albritton had pulled into the parking lot at her job, where she packed and shipped bike parts.

All four were arrested by an armed constable, handcuffed and booked into jail. They spent anywhere from a few hours to a couple of days behind bars before being released after paying a few hundred dollars in bail or promising to appear in court.

None of the four, who live in northern Utah and were detained last year, had committed a crime. They had each borrowed money at high interest rates from a local lender called Loans for Less and were sued for owing sums that ranged from $800 to $3,600. When they missed a court date, the company obtained a warrant for their arrest.

Avila was handcuffed and marched down the main aisle in the Walmart in front of customers and co-workers. “It was the most embarrassing thing,” said Avila, 30, who has worked at the store for eight years. At the time of the arrest, Loans for Less had applied to garnish her wages. “It just didn’t make any sense to me,” she said. “Why am I being arrested for it?”

It’s against the law to jail someone because of an unpaid debt. Congress banned debtors prisons in 1833. Yet, across the country, debtors are routinely threatened with arrest and sometimes jailed, and the practices are particularly aggressive in Utah. (ProPublica recently chronicled how medical debt collectors are wielding similar powers in Kansas.)

Technically, debtors are arrested for not responding to a court summons requested by the creditor. But for many low-income people, who are not familiar with court proceedings, lack access to transportation, child care options or time off, or move frequently and thus may not receive notifications, it’s a distinction without a difference.

Reese, a 70-year-old Vietnam veteran, said he missed a hearing because he couldn’t afford to put gas in his car. Gordon, 46, said he was never personally notified of the court date. Avila and Albritton, 32, said they couldn’t take time off work.

In Utah, payday lenders and similar companies that offer high-interest, small-dollar loans dominate small claims court. Loans for Less, for example, filed 95% of the small claims cases in South Ogden, a suburban city of 17,000 about a half-hour north of Salt Lake City on the interstate, in fiscal year 2018, according to state data.

Across Utah, high-interest lenders filed 66% of all small claims cases heard between September 2017 and September 2018, according to a new analysis of court records conducted by a team led by Christopher Peterson, a law professor at the University of Utah and the financial services director at the Consumer Federation of America, and David McNeill, a legal data consultant and CEO of Docket Reminder.

Companies can sue for up to $11,000 in Utah’s small claims courts, which are stripped of certain formalities: There are rarely lawyers, judges are not always legally trained and the rules of evidence don’t apply.

Lenders file thousands of cases every year. When defendants don’t show up — and they often don’t — the lenders win by default. Once a judgment is entered, companies can garnish borrowers’ paychecks and seize their property. If borrowers fail to attend a supplemental hearing to answer questions about their income and assets, companies can ask the court to issue a bench warrant for their arrest.

Arrest warrants were issued in an estimated 3,100 small claims cases during the period studied by Peterson’s team. Almost all of the warrants — 91% — were issued in cases filed by payday, auto title or other high-interest lenders. The number of people who are jailed appears to be small. The state does not track the information, but ProPublica examined a sampling of court records and identified at least 17 people who were jailed over the course of 12 months.

Most people scramble to meet bail to avoid being incarcerated. Others, like Avila, Gordon and Albritton, are booked into jail and held until they pay. They often borrow from friends, family, bail bonds companies and even take on new payday loans.

“Bail” has a different meaning in Utah than it does in other states — one that tilts the power even more in the direction of lenders and other creditors.In 2014, state legislators passed a law that made it possible for creditors to get access to bail money posted in civil cases. Prior to that, bail money would return to the defendant. Now, it is routinely transferred to high-interest lenders. The law has transformed the state’s power to incarcerate into a powerful tool to guarantee that loan companies get paid.

...

no lnx

https://www.washingtonpost.com/business/2019/10/29/payday-lenders-discussed-raising-money-trumps-campaign-fend-off-regulation-audio-reveals/

Democracy Dies in Darkness

Business

Payday lenders discussed raising money for Trump’s campaign to fend off regulation, audio reveals

To ensure Democrats don’t block weaker industry rules, payday lenders said they needed access to Trump.

Renae Merle

October 29, 2019 at 9:41 AM EDT

Billing himself as one of President Trump’s top fundraisers, Michael Hodges told fellow payday lenders recently that industry contributions to the president’s reelection campaign could be leveraged to gain access to the Trump administration.

“Every dollar amount, no matter how small or large it is” is important, Hodges, founder of Advance Financial, one of the country’s largest payday lenders, said during a 48-minute webcast, obtained by The Washington Post.

“For example, I’ve gone to Ronna McDaniel and said, ‘Ronna, I need help on something,’ ” Hodges said, referring to the chair of the Republican National Committee. “She’s been able to call over to the White House and say, ‘Hey, we have one of our large givers. They need an audience. … They need to be heard and you need to listen to them.’ So that’s why it’s important.”

The Sept. 24 webinar sponsored by Borrow Smart Compliance, an industry consultant, gives surprisingly frank insight into the payday lending industry’s strategy to push for weaker government regulations by forging a tight relationship with the Trump administration and the president’s campaign. The payday lending industry, made up of businesses that make short-term loans to consumers at high interest rates, is awaiting new rules that could weaken Obama administration requirements. Those rules include a requirement that the companies must ensure consumers can afford to repay the money they borrow.

Rep. Maxine Waters (D-Calif.), the chair of the Financial Services Committee, is an industry “hater,” and Sen. Elizabeth Warren (D-Mass.) would pose a big threat if elected president, Hodges and three other industry insiders said during the talk. They called Trump their “ultimate backstop” against attempts to defeat legislation the industry wants.

“When Trump was elected, the needle moved in our favor — finally,” Max Wood of Borrow Smart Compliance said during the webinar.

How Trump appointees curbed a consumer protection agency loathed by the GOP]

“If you need something and we may need something … then it would be good to be able to pick up the phone and call someone that could get the president’s attention,” Wood said during the webinar. Contributing to Trump’s campaign will help keep the president in office, he said, and “it will give [Hodges] access in the event that we need to have access to the president.”

In an interview, Wood acknowledged posting the YouTube video but then referred questions about fundraising to others who took part. The video, which had about 40 views as of Friday afternoon, was removed shortly after The Post asked Wood about it.

The major focus of the call appeared to be fundraising, which the industry insiders said would be critical to maintaining access to the Trump administration. Hodges encouraged others to donate to Trump’s campaign and referred to his efforts to bolster his standing with the administration.

“If I can show the campaign that Tina and I have brought in net new givers to the campaign, meaning whether it’s $100, $50, $25, $15,000 or $50,000 if they didn’t give last time, that is a boost to us as fundraisers,” Hodges said, referring to his wife.

Hodges said on the webinar that he has made more than $1 million in campaign contributions to help Trump since 2016. In an interview, Hodges said he is an “enthusiastic” supporter of the president but had never used his status to ask the administration for help.

Trump is systematically backing off of consumer protections, to the delight of corporations]

“When I am talking about access, I am not talking about the administration. I haven’t lobbied the administration,” he said in an interview. He said his support of the president is not connected to pushing any specific industry agenda. “I have not gone over to the White House because of Ronna McDaniel. … That just has not happened.”

But during the webinar, Hodges said it would give him a “boost” if he could show that he had brought in donors who had never given before, even if their contributions were small.

“That is important to the campaign, which means it’s important to the president, which means it’s important if you ever had to call on anyone for anything in the administration,” he said during the call. “That’s how those things work.”

The White House declined to comment for this report. Trump’s reelection committee did not return a call for comment.

In a statement, Mike Reed, a spokesman for the Republican National Committee, said: “Part of the RNC’s job is sharing what we hear from supporters across the country with party leaders. We often will connect our supporters with other Republican officials when they have a message they would like to pass along. Democrat policies would destroy millions of jobs, and that is not something our supporters and our organization will ever be shy about communicating.”

Elisha Brown of Speedee Cash, a payday lender based in Florida, and Ed D’Alessio, executive director of the Financial Service Centers of America, who also participated in the webinar, did not return repeated calls and emails seeking comment.

It’s unclear how many other people participated in the webinar.

The YouTube video was discovered by two advocacy groups, Allied Progress and Americans for Financial Reform.

“We have here a striking example of how money in American politics leads to the abuse of consumers in the financial services marketplace,” said Linda Jun, senior policy counsel at Americans for Financial Reform.

Derek Martin, director of Allied Progress, said: “This presentation reflects the worst of Washington, D.C. — wealthy executives buying off politicians so they can keep their predatory business model intact.”

Consumer advocates and the Obama administration have argued that new rules on the industry were necessary to end the “debt trap” in which, once taking out one payday loan, consumers are forced to take out another and another to keep up.

But payday lenders have said the rules were too complicated and would drive many of them out of business. The industry launched an aggressive counterattack, suing to block the rules, recruiting black pastors to speak out in their defense and commissioning academic research that bolstered their talking points. The Community Financial Services Association of America has held its annual meeting at the Trump National Doral Miami golf club for the past two years.

The debate about payday loans is unfolding in the pews of black churches

The industry’s outlook began to change under the Trump administration. In late 2017, the president appointed Mick Mulvaney, now acting White House chief of staff, to temporarily run the Consumer Financial Protection Bureau. As a South Carolina congressman, Mulvaney had called the bureau a “joke” and co-sponsored legislation to close its doors. While CFPB’s acting director, Mulvaney took several steps that helped dial back pressure on payday lenders, including calling for a review of wide-ranging rules finalized by the previous administration and dropping several lawsuits against payday lenders.

Now the CFPB, run by Kathy Kraninger, is considering whether to rescind the Obama administration’s rule requiring that payday lenders verify consumers can afford their loans, a potential major victory for the industry. Kraninger previously worked for Mulvaney at the Office of Management and Budget.

But the industry has grown concerned that House Democrats, led by Waters, could block efforts to roll back those regulations using the Congressional Review Act, known as the CRA. That law allows legislators to block new regulations before they go into effect and was used repeatedly by Republicans in the past few years to roll back Obama-era rules.

“I think if we were to say that she’s a hater of the industry, that would be an understatement,” D’Alessio, of the Financial Service Centers of America, said of Waters during the webinar.

The industry would be unlikely to be able to stop efforts in the Democrat-controlled House to scuttle the weaker rules that payday lenders hope the CFPB will adopt, D’Alessio said during the webinar. Finding enough Republicans to block such an attempt in the Senate, where some lawmakers are facing tough reelection campaigns, could also be difficult, he said.

“That puts us in a position where the ultimate backstop is the White House. And there we will be relying upon President Trump,” D’Alessio said.

During the webinar and in an interview, Hodges pitched himself as a family business owner who could help spread the industry’s message. Tennessee-based Advance Financial started with just a few storefronts but now has more than 100 in the state.

Supreme Court will decide constitutionality of consumer watchdog bureau

The company has grown significantly since Trump was elected, doubling its workforce to 1,300, increasing contributions to employees’ retirement accounts and distributing bonuses after the 2017 tax cut, Hodges said.

“Any chance I have to talk about the about the jobs he has helped me create, I” do, Hodges said in an interview. “There has been this economic resurgence.”

He has emerged as a top Trump fundraiser. During the 2016 election cycle, the company’s owners and employees spent $270,385 on campaigns, compared with $1,000 during the 2014 campaign cycle, according to Open Secrets. That jumped to $965,450 in 2018 and $672,956 so far for the 2020 cycle. Almost all of that money went to Republicans.

“It’s hard for me to say this number, because if you told me this five years ago, I would have thought you were crazy. But we’ve donated about $1.25 million to his campaign so far,” Hodges said.

“So Tina and I have become, I would say, one of the larger donors to the campaign over the last couple of years.”

So far this year, Hodges said, he has raised another $200,000. During the call, he encouraged other industry officials to contribute to or attend an Oct. 7 fundraiser featuring Vice President Pence in Tennessee. The tickets ranged from $1,000 to $100,000, according to a copy of the invitation obtained by the Nashville Post.

During the webinar, Hodges explained why such fundraisers were important. When money comes in that way “that raises the clout of that fundraiser so that when you go and speak to the administration through the campaign, they will listen.”

Hodges said in an interview that he is aiming to raise “as much money as possible” for Trump’s reelection campaign, potentially $1 million.

“The last administration and candidate [Hillary] Clinton … was working hard to end an industry that provides a lot of jobs for folks,” Hodges said in an interview. “Trump was running on pro-growth, pro-business [campaign]. … as an entrepreneur it was an easy choice.”

After the webinar, Michael Brown, a payday industry consultant, touted the group’s message on his website in a post that has since been removed. “If Warren wins you can bet on day 1 of her Presidency she will be focused on her baby, the CFPB. That is a doomsday scenario for the payday industry,” he said, echoing a talking point from the webinar. Warren conceived of the CFPB in the wake of the global financial crisis and has touted its success repeatedly during her presidential campaign.

“It is important for our industry to support the Trump Campaign financially and with votes.”

Toluse Olorunnipa and Magda Jean-Louis contributed to this report.

aha:

PO is a buffer; public insitution/asset built up over time; became a partner of amazon (presumably not long term? drones?]

long a target (WPA art] of RW; scam to over-fund pension; a bit of financialization would allow it to move money/electrons as well as atoms, complementary.

matthew effect, dark money lobby corruption and financialization funnels money to the top; thus low and Middle class ppl go into debt; everything is more expensive relatively if you're poor /working class (eg no bank acct means cash check at walmart they take a cut or payday loan that takes a big one); worse are predatory capitalist who prey/extract (pay phones on street but esp in prison).sol: post office as public bank

7/23/19

see Liz warren on howdebt (personal and banksters) creates systemic risk and instability.

related to inequality

===

https://www.alternet.org/2019/06/how-post-offices-can-beat-payday-lenders/

The fight to curb payday loans has reached one of America’s oldest institutions: the Postal Service. Democratic representativesBill Pascrell of New Jersey and Ayanna Pressley of Massachusetts recently introduced an amendment to the Financial Services and General Government Appropriations Act authorizing post offices to provide small loans, savings accounts, and other financial services. The amendment sets aside $1 million to cover any overhead. It passed the House of Representatives on June 25.

Pascrell is a longtime supporter of the Postal Service. In an April 2019 article for this magazine, he argued that the USPS is an essential institution that has been bogged down by privatization efforts. Rather than take away money from the agency, Pascrell said that Congress should expand its functions. Post offices, he noted, could bring loan and ATM access to unbanked Americans, many of whom rely on payday lenders that charge exorbitant interest rates. problem ... ;in the United States. In 2017, 6.5 percent of U.S. households were “unbanked” (no bank access), and 18.7 percent were “underbanked” (reliant on financial institutions that were not banks). Almost half of the country could not pull together $2,000 within thirty days in the event of an emergency (or at least they would struggle greatly to). Many of these people would have to take out payday loans to deal with such a shock.

“They turn to the unregulated predatory payday lenders, to check cashiers,” Pascrell told me. These lenders, he said, “keep families in poverty.”

Typical payday lenders charge interest rates of 390 percent per year, a figure so high that one out of five recipients default. A recent move by the Trump administration to slash regulation around payday loans risks making this problem even worse.

Pascrell’s solution is not wholly new. Several large countries—including China, India, Italy, and France—currently offer loans and savings accounts at post offices. American post offices offered loan and deposit services from 1911 to 1966, when millions of low-income individuals relied on them. In 1947, the post office managed $3.4 billion, the equivalent of $35 billion today, making it one of the largest financial institutions in the U.S.

But Lyndon Johnson cut the project in the 1960s as a part of a larger effort to trim government agencies. Afterwards, predatory lenders stepped in to fill the gap, offering small loans that commercial banks often avoid. To turn a profit, this new crop of lenders set sky-high interest rates that have left poorer Americans trapped in debt.

The postal service still offers one banking service: postal money orders. An inspector general report estimates that it provides roughly $21 billion of these orders—which operate like prepaid checks—to those who have no other place to store their money. The report also noted that “ZIP Codes with higher population, more poverty, and lower education levels sold more money orders.”

Pascrell and Pressley’s legislation—which also had the support of Nevada Republican Mark Amodei—would greatly expand this banking system, making post offices install new ATMs, set up deposit accounts, and hand out low-interest loans to customers. Its odds of passing the Senate are slim. But if the bill were implemented, it would offer low-income Americans inexpensive access to the U.S. financial system. A USPS inspector general study found that postal banking could provide loans at a 90 percent discount compared to what payday lenders charge.

Given its vast reach, Pascrell argued that the Postal Service was uniquely prepared to help solve America’s payday lender problem. “It’ll be a little push from us,” he said. “But they’re basically ready to do this.”

A huge red flag’: Mick Mulvaney ramps up his effort to destroy the CFPB from within — fires the entire advisory board

Alex Henderson

Acting White House Chief of Staff Mick Mulvaney, in his role as acting director of the Consumer Financial Protection Bureau (CFPB), has fired all 25 members of the watchdog group’s…

Acting White House Chief of Staff Mick Mulvaney, in his role as acting director of the Consumer Financial Protection Bureau (CFPB), has fired all 25 members of the watchdog group’s advisory board.They will be replaced with new members in the fall, the Washington Post is reporting — and Mulvaney’s critics are arguing that he is determined to undermine the CFPB as much as possible.

Mulvaney’s decision comes after some board members publicly criticized his leadership of the agency. Last week, all 25 board members were notified that they had been fired and were told they would be barred from applying for positions on the new board that Mulvaney plans to assemble.

The CFPB was founded in 2011 under President Barack Obama in response to the financial meltdown of 2008 and the Great Recession. Designed as a financial watchdog group, the CFPB has kept an eye on everything from banks to credit bureaus to debt collectors.

But some Democrats have been highly critical of the direction the CFPB has taken under the Trump Administration, especially Sen. Elizabeth Warren of Massachusetts and Sen. Sherrod Brown of Ohio. Warren, who played a key role in the agency’s formation eight years ago, has accused Mulvaney of going out of his way to undermine the CFPB; the Democratic presidential candidate officially stated, “Mick Mulvaney has no intention of putting consumers above financial firms that cheat them. This is what happens when you put someone in charge of an agency they think shouldn’t exist.”

Mulvaney, to be sure, has taken a dim view of the CFPB and has even dismissed it as a “joke.” And Brown has asserted that Mulvaney “has proven once again he would rathercozy up with payday lenders and industry insiders than listen to consumer advocates who want to make sure hard-working Americans are not cheated by financial scams.”

Chi Chi Wu, a National Consumer Law Center attorney, denounced Mulvaney’s firing of the entire CFPB board as “a huge red flag in this administration’s ongoing erosion of critical consumer financial protections that help average families.”

https://www.propublica.org/article/trump-inc-podcast-payday-lenders-spent-1-million-at-a-trump-resort-and-cashed-in

In mid-March, the payday lending industry held its annual convention at the Trump National Doral hotel outside Miami. Payday lenders offer loans on the order of a few hundred dollars, typically to low-income borrowers, who have to pay them back in a matter of weeks. The industry has long been reviled by critics for charging stratospheric interest rates — typically 400% on an annual basis — that leave customers trapped in cycles of debt.

The industry had felt under siege during the Obama administration, as the federal government moved to clamp down. A government study found that a majority of payday loans are made to people who pay more in interest and fees than they initially borrow. Google and Facebook refuse to take the industry’s ads.

On the edge of the Doral’s grounds, as the payday convention began, a group of ministers held a protest “pray-in,” denouncing the lenders for having a “feast” while their borrowers “suffer and starve.”

But inside the hotel, in a wood-paneled bar under golden chandeliers, the mood was celebratory. Payday lenders, many dressed in golf shirts and khakis, enjoyed an open bar and mingled over bites of steak and coconut shrimp.

They had plenty to be elated about. A month earlier, Kathleen Kraninger, who had just finished her second month as director of the federal Consumer Financial Protection Bureau, had delivered what the lenders consider an epochal victory: Kraninger announced a proposal to gut a crucial rule that had been passed under her Obama-era predecessor.

Payday lenders viewed that rule as a potential death sentence for many in their industry. It would require payday lenders and others to make sure borrowers could afford to pay back their loans while also covering basic living expenses. Banks and mortgage lenders view such a step as a basic prerequisite. But the notion struck terror in the payday lenders. Their business model relies on customers — 12 million Americans take out payday loans every year, according to Pew Charitable Trusts — getting stuck in a long-term cycle of debt, experts say. A CFPB study found that three out of four payday loans go to borrowers who take out 10 or more loans a year.

This year was the second in a row that the CFSA held its convention at the Doral. In the eight years before 2018 (the extent for which records could be found), the organization never held an event at a Trump property.Now, the industry was taking credit for the CFPB’s retreat. As salespeople, executives and vendors picked up lanyards and programs at the registration desk by the Doral’s lobby, they saw a message on the first page of the program from Dennis Shaul, CEO of the industry’s trade group, the Community Financial Services Association of America, which was hosting the convention. “We should not forget that we have had some good fortune through recent regulatory and legal developments,” Shaul wrote. “These events did not occur by accident, but rather are due in large part to the unity and participation of CFSA members and a commitment to fight back against regulatory overreach by the CFPB.”

Asked whether the choice of venue had anything to do with the fact that its owner is president of the United States and the man who appointed Kraninger as his organization’s chief regulator, Shaul assured ProPublica and WNYC that the answer was no. “We returned because the venue is popular with our members and meets our needs,” he said in a written statement. The statement noted that the CFSA held its first annual convention at the Doral hotel more than 16 years ago. Trump didn’t own the property at the time.

The CFSA and its members have poured a total of about $1 million into the Trump Organization’s coffers through the two annual conferences, according to detailed estimates prepared by a corporate event planner in Miami and an executive at a competing hotel that books similar events. Those estimates are consistent with the CFSA’s most recent available tax filing, which reveals that it spent $644,656 on its annual conference the year before the first gathering at the Trump property. (The Doral and the CFSA declined to comment.)

“It’s a way of keeping themselves on the list, reminding the president and the people close to him that they are among those who are generous to him with the profits that they earn from a business that’s in severe danger of regulation unless the Trump administration acts,” said Lisa Donner, executive director of consumer group Americans for Financial Reform.

The money the CFSA spent at the Doral is only part of the ante to lobby during the Trump administration. The payday lenders also did a bevy of things that interest groups have always done: They contributed to the president’s inauguration and earned face time with the president after donating to a Trump ally.

But it’s the payment to the president’s business that is a stark reminder that the Trump administration is like none before it. If the industry had written a $1 million check directly to the president’s campaign, both the CFSA and campaign could have faced fines or even criminal charges — and Trump couldn’t have used the money to enrich himself. But paying $1 million directly to the president’s business? That’s perfectly legal.

The inauguration of Donald Trump was a watershed for the payday lending industry. It had been feeling beleaguered since the launch of the CFPB in 2011. For the first time, the industry had come under federal supervision. Payday lending companies were suddenly subject to exams conducted by the bureau’s supervision division, which could, and sometimes did, lead to enforcement cases.

...

no lnx

efore the bureau was created, payday lenders had been overseen mostly by state authorities. That left a patchwork: 15 states in which payday loans were banned outright, a handful of states with strong enforcement — and large swaths of the country in which payday lending was mostly unregulated.

Then, almost as suddenly as an aggressive CFPB emerged, the Trump administration arrived with an agenda of undoing regulations. “There was a resurgence of hope in the industry, which seems to be justified, at this point,” said Jeremy Rosenblum, a partner at law firm Ballard Spahr, who represents payday lenders. Rosenblum spoke to ProPublica and WNYC in a conference room at the Doral — filled with notepads, pens and little bowls of candy marked with the Trump name and family crest — where he had just led a session on compliance with federal and state laws. “There was a profound sense of relief, or hope, for the first time.” (Ballard Spahr occasionally represents ProPublica in legal matters.)

In Mick Mulvaney, who Trump appointed as interim chief of the CFPB in 2017, the industry got exactly the kind of person it had hoped for. As a congressman, Mulvaney had famously derided the agency as a “sad, sick” joke.

If anything, that phrase undersold Mulvaney’s attempts to hamstring the agency as its chief. He froze new investigations, dropped enforcement actions en masse, requested a budget of $0 and seemed to mock the agency by attempting to officially re-order the words in the organization’s name.

Mick Mulvaney served as interim chief of the CFPB from November 2017 through 2018. (Mark Wilson/Getty Images)

But Mulvaney’s rhetoric sometimes exceeded his impact. His budget request was ignored, for example; the CFPB’s name change was only fleeting. And besides, Mulvaney was always a part-timer, fitting in a few days a week at the CFPB while also heading the Office of Management and Budget, and then moving to the White House as acting chief of staff.

It’s Mulvaney’s successor, Kraninger, whom the financial industry is now counting on — and the early signs suggest she’ll deliver. In addition to easing rules on payday lenders, she has continued Mulvaney’s policy of ending supervisory exams on outfits that specialize in lending to the members of the military, claiming that the CFPB can do so only if Congress passes a new law granting those powers (which isn’t likely to happen anytime soon). She has also proposed a new regulation that will allow debt collectors to text and email debtors an unlimited number of times as long as there’s an option to unsubscribe.

Enforcement activity at the bureau has plunged under Trump. The amount of monetary relief going to consumers has fallen from $43 million per week under Richard Cordray, the director appointed by Barack Obama, to $6.4 million per week under Mulvaney and is now $464,039, according to an updated analysis conducted by the Consumer Federation of America’s Christopher Peterson, a former special adviser to the bureau.

Kathleen Kraninger testifies during her confirmation hearing in July 2018. (Alex Wong/Getty Images)

Kraninger’s disposition seems almost the inverse of Mulvaney’s. If he’s the self-styled “right wing nutjob” willing to blow up the institution and everything near it, Kraninger offers positive rhetoric — she says she wants to “empower” consumers — and comes across as an amiable technocrat. At 44, she’s a former political science major — with degrees from Marquette University and Georgetown Law School — and has spent her career in the federal bureaucracy, with a series of jobs in the Transportation and Homeland Security departments and finally in OMB, where she worked under Mulvaney. (In an interview with her college alumni association, she hailed her Jesuit education and cited Pope Francis as her “dream dinner guest.”) In her previous jobs, Kraninger had extensive budgeting experience, but none in consumer finance. The CFPB declined multiple requests to make Kraninger available for an interview and directed ProPublica and WNYC to her public comments and speeches.

Kraninger is new to public testimony, but she already seems to have developed the politician’s skill of refusing to answer difficult questions. At a hearing in March just weeks before the Doral conference, Democratic Rep. Katie Porter repeatedly asked Kraninger to calculate the annual percentage rate on a hypothetical $200 two-week payday loan that costs $10 per $100 borrowed plus a $20 fee. The exchange went viral on Twitter. In a bit of congressional theater, Porter even had an aide deliver a calculator to Kraninger’s side to help her. But Kraninger would not engage. She emphasized that she wanted to conduct a policy discussion rather than a “math exercise.” The answer, by the way: That’s a 521% APR.

A while later, the session recessed and Kraninger and a handful of her aides repaired to the women’s room. A ProPublica reporter was there, too. The group lingered, seeming to relish what they considered a triumph in the hearing room. “I stole that calculator, Kathy,” one of the aides said. “It’s ours! It’s ours now!” Kraninger and her team laughed.

Triple-digit interest rates are no laughing matter for those who take out payday loans. A sum as little as $100, combined with such rates, can lead a borrower into long-term financial dependency.

That’s what happened to Maria Dichter. Now 73, retired from the insurance industry and living in Palm Beach County, Florida, Dichter first took out a payday loan in 2011. Both she and her husband had gotten knee replacements, and he was about to get a pacemaker. She needed $100 to cover the co-pay on their medication. As is required, Dichter brought identification and her Social Security number and gave the lender a postdated check to pay what she owed. (All of this is standard for payday loans; borrowers either postdate a check or grant the lender access to their bank account.) What nobody asked her to do was show that she had the means to repay the loan. Dichter got the $100 the same day.

The relief was only temporary. Dichter soon needed to pay for more doctors’ appointments and prescriptions. She went back and got a new loan for $300 to cover the first one and provide some more cash. A few months later, she paid that off with a new $500 loan.

Dichter collects a Social Security check each month, but she has never been able to catch up. For almost eight years now, she has renewed her $500 loan every month. Each time she is charged $54 in fees and interest. That means Dichter has paid about $5,000 in interest and fees since 2011 on what is effectively one loan for $500.

Today, Dichter said, she is “trapped.” She and her husband subsist on eggs and Special K cereal. “Now I’m worried,” Dichter said, “because if that pacemaker goes and he can’t replace the battery, he’s dead.”

Payday loans are marketed as a quick fix for people who are facing a financial emergency like a broken-down car or an unexpected medical bill. But studies show that most borrowers use the loans to cover everyday expenses. “We have a lot of clients who come regularly,” said Marco (he asked us to use only his first name), a clerk at one of Advance America’s 1,900 stores, this one in a suburban strip mall not far from the Doral hotel. “We have customers that come two times every month. We’ve had them consecutively for three years.”

These types of lenders rely on repeat borrowers. “The average store only has 500 unique customers a year, but they have the overhead of a conventional retail store,” said Alex Horowitz, a senior research officer at Pew Charitable Trusts, who has spent years studying payday lending. “If people just used one or two loans, then lenders wouldn’t be profitable.”

Whack-a-Mole: How Payday Lenders Bounce Back When States Crack Down

In state after state that has tried to ban payday and similar loans, the industry has found ways to continue to peddle them.

It was years of stories like Dichter’s that led the CFPB to draft a rule that would require that lenders ascertain the borrower’s ability to repay their loans. “We determined that these loans were very problematic for a large number of consumers who got stuck in what was supposed to be a short-term loan,” said Cordray, the first director of the CFPB, in an interview with ProPublica and WNYC. Finishing the ability-to-pay rule was one of the reasons he stayed on even after the Trump administration began. (Cordray left in November 2017 for what became an unsuccessful run for governor of Ohio.)

The ability-to-pay rule was announced in October 2017. The industry erupted in outrage. Here’s how CFSA’s chief, Shaul, described it in his statement to us: “The CFPB’s original rule, as written by unelected Washington bureaucrats, was motivated by a deeply paternalistic view that small-dollar loan customers cannot be trusted with the freedom to make their own financial decisions. The original rule stood to remove access to legal, licensed small-dollar loans for millions of Americans.” The statement cited an analysis that “found that the rule would push a staggering 82 percent of small storefront lenders to close.” The CFPB estimated that payday and auto title lenders — the latter allow people to borrow for short periods at ultra-high annual rates using their cars as collateral — would lose around $7.5 billion as a result of the rule.

The industry fought back. The charge was led by Advance America, the biggest brick-and-mortar payday lender in the United States. Its CEO until December, Patrick O’Shaughnessy, was the chairman of the CFSA’s board of directors and head of its federal affairs committee. The company had already been wooing the administration, starting with a $250,000 donation to the Trump inaugural committee. (Advance America contributes to both Democratic and Republican candidates, according to spokesperson Jamie Fulmer. He points out that, at the time of the $250,000 donation, the CFPB was still headed by Cordray, the Obama appointee.)

Payday and auto title lenders collectively donated $1.3 million to the inauguration. Rod and Leslie Aycox from Select Management Resources, a Georgia-based title lending company, attended the Chairman’s Global Dinner, an exclusive inauguration week event organized by Tom Barrack, the inaugural chairman, according to documents obtained by “Trump, Inc.” President-elect Trump spoke at the dinner.

In October 2017, Rod Aycox and O’Shaughnessy met with Trump when he traveled to Greenville, South Carolina, to speak at a fundraiser for the state’s governor, Henry McMaster. They were among 30 people who were invited to discuss economic development after donating to the campaign, according to the The Post and Courier. (“This event was only about 20 minutes long,” said the spokesperson for O’Shaughnessy’s company, and the group was large. “Any interaction with the President would have been brief.” The Aycoxes did not respond to requests for comment.)

In 2017, the CFSA spent $4.3 million advocating for its agenda at the federal and state level, according to its IRS filing. That included developing “strategies and policies,” providing a “link between the industry and regulatory decision makers” and efforts to “educate various state policy makers” and “support legislative efforts which are beneficial to the industry and the public.”

The ability-to-pay rule technically went into effect in January 2018, but the more meaningful date was August 2019. That’s when payday lenders could be penalized if they hadn’t implemented key parts of the rule.

Payday lenders looked to Mulvaney for help. He had historically been sympathetic to the industry and open to lobbyists who contribute money. (Jaws dropped in Washington, not about Mulvaney’s practices in this regard, but about his candor. “We had a hierarchy in my office in Congress,” he told bankers in 2018. “If you were a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.”)

The CFPB’s Declaration of Dependence

Born as a fiercely independent agency meant to protect citizens, the Consumer Financial Protection Bureau has quickly been subsumed into the Trump administration. Banks, student-loan agencies and payday lenders are the winners.

But Mulvaney couldn’t overturn the ability-to-pay rule. Since it had been finalized, he didn’t have the legal authority to reverse it on his own. Mulvaney announced that the bureau would begin reconsidering the rule, a complicated and potentially lengthy process. The CFPB, under Cordray, had spent five years researching and preparing it.

Meanwhile, the payday lenders turned to Congress. Under the Congressional Review Act, lawmakers can nix federal rules during their first 60 days in effect. In the House, a bipartisan group of representatives filed a joint resolution to abolish the ability-to-pay rule. Lindsey Graham, R-S.C., led the charge in the Senate. But supporters couldn’t muster a decisive vote in time, in part because opposition to payday lenders crosses party lines.

By April 2018, the CFSA members were growing impatient. But the Trump administration was willing to listen. The CFSA’s Shaul was granted access to a top Mulvaney lieutenant, according to “Mick Mulvaney’s Master Class in Destroying a Bureaucracy From Within” in The New York Times Magazine, which offers a detailed description of the behind-the scenes maneuvering. Shaul told the lieutenant that the CFSA had been preparing to sue the CFPB to stop the ability-to-pay rule “but now believed that it would be better to work with the bureau to write a new one.” Cautious about appearing to coordinate with industry, according to the article, the CFPB was non-committal.

Days later, the CFSA sued the bureau. The organization’s lawyers argued in court filings that the bureau’s rules “defied common sense and basic economic analysis.” The suit claimed the bureau was unconstitutional and lacked the authority to impose rules.

A month later, Mulvaney took a rare step, at least, for most administrations: He sided with the plaintiffs suing his agency. Mulvaney filed a joint motion asking the judge to delay the ability-to-pay rule until the lawsuit is resolved.

By February of this year, Kraninger had taken charge of the CFPB and proposed to rescind the ability-to-pay rule. Her official announcement asserted that there was “insufficient evidence and legal support” for the rule and expressed concern that it “would reduce access to credit and competition.”

Kraninger’s announcement sparked euphoria in the industry. One industry blog proclaimed, “It’s party time, baby!” with a GIF of President Trump bobbing his head.

Kraninger’s decision made the lawsuit largely moot. But the suit, which has been stayed, has still served a purpose: This spring, a federal judge agreed to freeze another provision of the regulation, one that limits the number of times a lender can debit a borrower’s bank account, until the fate of the overall rule is determined.

As the wrangling over the federal regulation plays out, payday lenders have continued to lobby statehouses across the country. For example, a company called Amscot pushed for a new state law in Florida last year. Amscot courted African American pastors and leaders located in the districts of dozens of Democratic lawmakers and chartered private jets to fly them to Florida’s capital to testify, according to the Tampa Bay Times. The lawmakers subsequently passed legislation creating a new type of payday loan, one that can be paid in installments, that lets consumers borrow a maximum $1,000 loan versus the $500 maximum for regular payday loans. Amscot CEO Ian MacKechnie asserts that the new loans reduce fees (consumer advocates disagree). He added, in an email to ProPublica and WNYC: “We have always worked with leaders in the communities that we serve: both to understand the experiences of their constituents with regard to financial products; and to be a resource to make sure everyone understands the law and consumer protections. Educated consumers are in everyone’s interest.” For their part, the leaders denied that Amscot’s contributions affected their opinions. As one of them told the Tampa Bay Times, the company is a “great community partner.”

Kraninger spent her first three months in office embarking on a “listening tour.” She traveled the country and met with more than 400 consumer groups, government officials and financial institutions. Finally, in mid-April, she gave her first public speech at the Bipartisan Policy Center in Washington, D.C. The CFPB billed it as the moment she would lay out her vision for the agency.

Kraninger said she hoped to use the CFPB’s enforcement powers “less often.” She alluded to a report by the Federal Reserve that 40% of Americans would not be able to cover an emergency expense of $400. Her suggestion for addressing that: educational videos and a booklet. “To promote effective approaches to savings and particularly emergency savings,” Kraninger explained, “the Bureau recently launched our Start Small, Save Up initiative. It offers tips, tools and information to help consumers build a basic savings cushion and develop a savings habit. Later this year, we will be launching a savings ‘boot camp,’ a series of videos, and a very readable, informative booklet that serves as a roadmap to a savings plan.”

Having laid out what sounded like a plan to hand out self-help brochures at an agency invented to pursue predatory financial institutions, she then said, “Let me be clear, however, the ultimate goal for the bureau is not to produce booklets and great content on our website. The ultimate goal is to move the needle on the number of Americans in this country who can cover a financial shock, like a $400 emergency.”

Back at the Doral the month before her speech, $400 might not have seemed like much of an emergency to the payday lenders. Some attendees seemed most upset by a torrential downpour on the second day that caused the cancellation of the conference’s golf tournament.

Inside the Donald J. Trump Ballroom, the conference buzzed with activity. The Bush-era political adviser Karl Rove was the celebrity speaker after the breakfast buffet. And the practical sessions continued apace. One was called “The Power of the Pen.” It was aimed at helping attendees submit comments on the ability-to-pay rule to the government. It was clearly a matter of importance to the CFSA. In his statement to ProPublica and WNYC, Shaul noted that “more than one million customers submitted comments opposing the CFPB’s original small-dollar loan rule — hundreds of thousands of whom sent handwritten letters telling personal stories of how small-dollar loans helped them and their families.”

A couple of months after the Doral conference, Allied Progress, a consumer advocacy group, analyzed the new round of comments that were submitted to the CFPB in response to Kraninger’s plans. In one sample of 26,000 comments, the group discovered that 27% of the statements submitted by purportedly independent individuals contained duplicative passages, all of which supported the industry’s position. For example, Allied Progress reported that 221 of the comments stated that “I have a long commute to work and it’s better for me financially to borrow from Cash Connection so that I can still make it to work than to not take care of my car and lose my job because of absences.” There were 201 asserting that “I now take care of my parents and my children” and I “want to be able to enjoy life and not feel burdened by the additional expenses that are piling up.” Allied Progress said it doesn’t know “if these are fake people, fake stories, or form letters intentionally designed to read as personal anecdotes.” (Cash Connection couldn’t be reached for comment.)

Taking account of public comments is the final task before Kraninger officially determines whether to put the ability-to-pay rule to death. Whatever she decides, it’s a likely bet that decision will be challenged in court, the CFSA will weigh in and the payday lenders will still be talking about it at next year’s annual conference. A spokesperson for the CFSA declined to say whether the event will be held at a Trump hotel.

https://www.huffpost.com/entry/payday-loan-industry_n_5637671ce4b0c66bae5ce89a

no lnx

11/02/2015 01:12 pm ET Updated Nov 02, 2015

Payday Loan Industry Admits ‘Very Few’ Borrowers Repay Their Loans

An email shows the industry knows its loans are unaffordable, but they won’t say so publicly.

By Ben Walsh and Ryan Grim

Payday lenders make money by giving people loans they can’t pay back.

That fact has been apparent for years. A 2009 study from the Center for Responsible Lending found that people taking out new loans to repay old ones make up 76 percent of the payday market. Despite this information, the payday loan industry has consistently argued in public that its high-cost loans with interest rates ranging from 391 to 521 percent do not trap borrowers in a cycle of debt.

In private, it’s a different story. According a newly released email, the payday lending industry knows that most people cannot pay back their loans. “In practice, consumers mostly either roll over or default; very few actually repay their loans in cash on the due date,” wrote Hilary Miller, a key figure in the industry’s fight against regulation, in an email to Arkansas Tech Professor Marc Fusaro.

HILARY MILLER / CAMPAIGN FOR ACCOUNTABILITY

Miller is chairman of the pro-industry group the Consumer Credit Research Foundation. The emails, obtained from Arkansas Tech University through an open records request by the watchdog group Campaign for Accountability and subsequently shared with The Huffington Post, show that Miller was actively involved in editing a study by Fusaro that investigated whether payday loans trap people in a cycle of debt. (The study said they did not, though a closer read of the data shows the loans actually do.) For his work, Fusaro was paid least $39,912, and Miller and the industry would later cite the research in letters to federal regulators.

Miller is also the president of the Payday Loan Bar Association, and has represented payday lending giant Dollar Financial.

The fact that most borrowers “roll over” — a term for when a person takes out another loan in order to pay back their first one — or default is not a new revelation. But it is remarkable to hear the payday lending industry speak about it as settled fact to an academic on their payroll, who subsequently arrived at the opposite conclusion.

“This confirms what we have been saying for a long time. Lenders market the loans as a short-term quick fix, but customers end up stuck in staggeringly high-cost debt for extended periods,” Ellen Harnick of the Center for Responsible Lending told HuffPost.

Miller told Huffpost in an email that “my comment is consistent with the findings of this paper itself and with those of other investigators, including the [Consumer Financial Protection Buruea] (in fact, about 55% of borrowers roll over only once or not at all).” The same CFPB report found that four out of five payday loans are rolled over or renewed and that only 15 percent of all payday loan borrowers repay on time.

Nick Bourke, a payday loan expert at Pew Charitable Trusts, told HuffPost that “anyone who actually knows this data and takes an objective look at it knows that the typical borrower does not repay right away when the loan is due. They do renew, roll over, borrow again for a consecutive period of time.” Snaring borrowers by turning a short-term lack of cash into a string of unaffordable loans “is the core of the payday loan business model,” Bourke said. “To any objective, fair-minded reviewer, that’s not in question.”

The payday loan industry can now be added to the list of people who saw the data and concluded that payday loans are a debt trap.

Payday Loan Industry Admits 'Very Few' Borrowers Repay ... - HuffPost

https://www.huffpost.com/entry/payday-loan-industry_n_5637671ce4b0c66bae5ce89a

:{:(style="border-color:#006621;;border-style:solid;border-width:5px 4px 0px;width:0px;height:0px;margin-left:3px;top:7.5px;margin-top:-4px;position:absolute;left:0px"):}:

:{Nov 2, 2015 - :{Payday lenders:(style="font-weight:bold"):}: make money by giving people loans they can't pay back. ... lending industry speak about it as settled fact to an :{academic:(style="font-weight:bold"):}: on ...:(style="overflow-wrap:break-word"):}:

Missing: officer ‎tilted

There's Finally A Legitimate Alternative To Payday Lending | HuffPost

https://www.huffpost.com/.../payday-loans-debt-alternative-bank-community-credit-u...

:{:(style="border-color:#006621;;border-style:solid;border-width:5px 4px 0px;width:0px;height:0px;margin-left:3px;top:7.5px;margin-top:-4px;position:absolute;left:0px"):}:

:{Apr 12, 2018 - Three years ago Cynthia Tucker relocated from South Carolina to Raytown, Missouri ― a suburb just outside Kansas City ― to be closer to her ...:(style="overflow-wrap:break-word"):}:

Missing: officer ‎tilted

This Democrat Is About To Give Payday Lenders A Big Boost | HuffPost

https://www.huffpost.com/.../payday-lenders-democrats_n_5a0a211ee4b0bc648a0d5...

:{:(style="border-color:#006621;;border-style:solid;border-width:5px 4px 0px;width:0px;height:0px;margin-left:3px;top:7.5px;margin-top:-4px;position:absolute;left:0px"):}:

:{Nov 14, 2017 - in July introduced a bill that would give :{payday lenders:(style="font-weight:bold"):}: a way to .... from accomplished :{academics:(style="font-weight:bold"):}: that the decision has reduced access to ...:(style="overflow-wrap:break-word"):}:

Missing: officer ‎tilted

Payday lending insider tilts academic research in industry's favor - The ...

https://www.bostonglobe.com/business/.../payday-lending...tilts-academic.../story.html

Feb 25, 2019 - The origins of the research shed new light on the extensive battle payday lenders have waged to influence and undermine federal regulations.

cf behind the bastards

motley fool

mark fusaro

hilary miller

jenifer priestly

https://www.latimes.com/business/la-fi-payday-loans-research-cfpb-20190225-story.html

2/19

Shortly after the Consumer Financial Protection Bureau began preparing what would become the first significant federal regulations for the multibillion-dollar payday-lending industry, Hilary Miller went to work.

Miller, an attorney who has worked closely with the industry for more than a decade, contacted a Georgia professor with a proposal: Would she like to test one of the chief criticisms of the industry, that its customers are harmed by repeatedly taking out loans?

Over the next year, Miller worked closely with Jennifer Lewis Priestley, a professor of statistics and data science at Kennesaw State University, suggesting research to cite, the type of data to use and even lecturing her on proofreading. “Punctuation and capitalization are somewhat random,” he said in a February 2014 email responding to a draft of the report. “You might want to have your maiden aunt who went to high school before 1960 read this.”

Priestley’s report ultimately sided with the industry, and according to the emails, Miller discussed the results with a CFPB economist. The report was also hand-delivered to a top bureau official in 2015. It’s unclear how it factored into bureau decisions — including a recent one to ease industry regulations — but it has been repeatedly touted by payday lending supporters.

Its origins shed new light on the extensive battle that payday lenders have waged to influence and undermine federal regulations. But there was probably little doubt about the report’s outcome.

In a December 2013 exchange, Miller told Priestley that he wanted to persuade her to change the way she analyzed data about borrowers’ credit scores. “I am here to serve,” Priestley responded. “I just want to make sure that what I am doing analytically is reflecting your thinking.” Her email ended with a smiley face.

On the front page of the report, Priestley states that Miller’s nonprofit organization, which provided an $30,000 grant, did not exercise any control “over the editorial content of this paper.” However, in an interview, Priestley said that she offered to share authorship of the report with Miller but that he declined.

“Not only is the payday-lending industry choosing professors to write studies on their behalf; in this case they are writing the studies themselves,” said Daniel Stevens, executive director of the Campaign for Accountability. “I have never seen anything like this.”

The Washington, D.C.-based nonprofit group obtained the emails after a three-year legal fight that reached the Georgia Supreme Court in 2018.

Miller declined to comment for this report.

The exchanges are among hundreds of pages of emails — reviewed by the Washington Post and being publicly disclosed for the first time — that illustrate the industry’s extensive efforts to influence federal rule making. In addition to commissioning studies, payday lenders extensively lobbied lawmakers, sought the support of black clergy members and even changed the location of an annual conference. The Community Financial Services Assn. of America held its 2018 meeting at the Trump National Doral Golf Club near Miami and plans to meet there again this year.

“The venue is popular with our members and it meets our needs,” the financial services group’s chief executive, Dennis Shaul, said in a statement. The group includes some of the industry’s biggest players, such as Advance America and MoneyTree.

Those efforts culminated in a significant recent win for the industry: This month, the CFPB backed down from new sweeping regulations, potentially saving short-term lenders $10 billion through 2020. On paydayloanindustryblog.com, a website run by an industry consultant, the news was welcomed with a GIF of President Trump’s head on the body of a dancing person and the phrase “It’s party time, baby!”

The CFPB says it was not influenced by the industry’s lobbying on the issue. The bureau re-examined all existing evidence, including research supportive and critical of payday lending, and determined the data collectively didn’t support the existing rule, said Marisol Garibay, a CFPB spokeswoman. The bureau did not discuss its proposal to rescind the rule with industry officials before making the announcement, Garibay said.

The bureau’s proposed reversal threatens broad Obama-era regulations, including a requirement that lenders verify borrowers’ incomes and make sure they can afford to repay the loans on time — demands the industry considers potentially disastrous. Headed by Trump appointee Kathy Kraninger, the CFPB now says it wants to drop those requirements, arguing that there wasn’t enough legal basis to justify such tough underwriting standards.

As part of its justification for the change, among other items, the CFPB also cited “two industry-sponsored surveys.” The surveys had limitations, the CFPB said, but showed that consumers understood how long it would take to repay their loans, a concern of many of the industry’s critics.

Democrats and consumer groups have lashed out at the CFPB decision, arguing that payday lenders are being let off the hook after decades of trapping millions of low-income Americans in cycles of debt.

The average payday loan is about $350 and comes with an interest rate above 300%.

Unable to pay off their loans, borrowers take out another loan and then another to keep up with the payments, consumer advocates say. A 2014 CFPB study found that the majority of borrowers renew their loans so many times that they end up paying more in fees than the amount they initially borrowed.

The industry “launched an enormous campaign against making payday-lending rules,” said Richard Cordray, the bureau’s former director, who led the development of the initial regulations. “They pulled out all the stops.”

The bureau did extensive research on the issue, he said, but the industry was “not forthcoming with data,” complicating the process.

Payday lenders say they provide a crucial service to customers ignored by traditional banks. Without these short-term loans, borrowers would go to loan sharks or take other risky or dangerous steps to cover emergency expenses, industry officials argue. Some federal standards are warranted, but the CFPB’s original rules would have put most payday lenders out of business, they say.

The study commissioned by Miller represented a little-known front in the payday lenders’ campaign.

Miller is a prominent industry figure and testified before the Senate in 2006 on behalf of the Community Financial Services Assn., the large industry group. He also served as president of the Payday Loan Bar Assn.

In a 2016 deposition, Miller said he established the Consumer Credit Research Foundation to fund industry research, but he declined to answer questions about where it gets its money. He fought the release of his email exchanges with Priestley because the nonprofit organization would suffer “irreparable injury,” according to his lawsuit.

In an interview, Priestley said she saw the project as an opportunity to have two graduate students do interesting work. Miller provided a “massive” amount of data about payday borrowers, she said. “It allowed them to develop skills related to data cleansing.”

The $30,000 grant went toward covering those students’ expenses and the university’s overhead costs — not to her, she said.

In soliciting Priestley for the work, Miller said in an email that he wanted to produce two “academic quality, peer-reviewable” papers. But from the beginning, he sought to influence the study, sending Priestley dozens of edits and helping craft the report’s language.

Miller, for example, helped steer the research away from industry hot buttons. In a March 2014 email, he asked Priestley not to use the term “cycle of debt,” a phrase employed by consumer advocates to describe borrowers who repeatedly take out new loans to cover the old ones.

“In general, we do not accept the notion that a ‘cycle of debt’ even exists, and I would appreciate it if you would delete all references to this term, unless you are rebutting its existence,” Miller told her in an email.

Priestley did use the term in her report, but only to describe the views of opponents of payday lenders. She also included a footnote saying that the term was selectively applied to short-term loans and not other forms of debt such as credit cards or mortgages. That is an argument often made by payday lenders.

Miller also offered Priestley guidance in anticipating potential critiques of the research. Opponents of payday lenders argue that loan defaults are harmful to borrowers, Miller said in a February 2014 email. “At least one possible counterfactual is that defaults are actually welfare-enhancing because the borrower gets to keep the loan principal and collection efforts are largely ineffective,” the email said.

When her research appeared to veer off topic, Miller redirected her: “As a reminder, we are not interested in predicting defaults [on loans], or in who defaults,” he said in a June 2014 email. “Rather, we are investigating whether the fact of having defaulted makes a difference in a consumer’s welfare after the default. We are making this because the CFPB has asserted that defaults are harmful to consumers.”

Priestley also repeatedly sought Miller’s input and approval, according to the emails. Referring to data on whether the length of a loan can predict whether a borrower would default, Priestley said in a January 2014 email: “If you think that this is a relevant finding, I can include this information in the results section.”

In an interview, Priestley said she relied on Miller’s industry expertise. She had spent more than a decade at various financial companies, including Visa and MasterCard, before becoming an academic but did not have a background in payday lending, Priestley said. While working on the paper with Miller, she was also researching homelessness and how to help doctors better use robots for hysterectomies, she said.

“If you had asked me what a payday loan was, I am not sure I could have explained it, but I do know a lot about math,” Priestley said.

Because she lacked a background in the subject, she said, Miller became an important sounding board. “There were outcomes and analytical results that I didn’t understand,” she said. In those cases, she sought Miller’s help in interpreting the data.

Although she started the research agnostic on the issue, Priestley said, by the end she had formed an opinion. “There is a role for payday loans because you have got people who literally can’t put their hands on $10,” she said.

As the publication of the study neared, Miller congratulated Priestley on her work. Priestley’s study found that payday-loan customers who repeatedly borrow money over a long period “have better financial outcomes” than those who borrow for a shorter time. These borrowers also benefited from living in states where payday lending wasn’t heavily restricted, the report found.

“This is a terrific paper,” he said in an April 2014 email. “When it is done, you are going to be famous and your phone will ring off the hook.” The group was developing a strategy for releasing the report, he said. “We want them to believe that the results are honest, verifiable and, most importantly, correct.”

Priestley said she offered to list Miller as an author on the report and did not find it unusual when he declined. Because Miller is an attorney, not an academic, the credit probably would not have meant much to him, she said. “I didn’t think anything of it,” she said.

The study, hand-delivered to a top CFPB official, according to Miller’s emails, was quoted by several industry supporters in opinion articles critical of the bureau’s rules. In a 2015 opinion piece for the Detroit News titled “Rules threaten payday loans for low-income borrowers,” Jeffrey Joseph, a George Washington University professor, cited the report. In a 2016 reportfor the Competitive Enterprise Institute titled “Ending Payday Lending Would Harm Consumers,” Miller repeatedly referred to Priestley’s report without noting his connection to it.

As they wrapped up the project, Miller offered Priestley a little more advice. The findings would subject her to intense scrutiny from industry opponents, he said in a 2014 email exchange.

“Should I hire a bodyguard?” she responded.

“I think steps less than a bodyguard (such as, for example, a guard dog or barbed wire at your residence) may suffice,” Miller said.

after Kathy Kraninger, the Consumer Financial Protection Bureau has focused on rolling back regulations on payday lenders and changing rules to allow debt collectors to send an unlimited number of texts and emails to consumers. (Andrew Harrer/Bloomberg)

By Renae Merle

May 7

Christopher Fultz peered at his phone during a break at his job as a paramedic and saw an unusual text displaying his name in all caps.

Click on the link, said the message, which was from a number he didn’t recognize.

Fultz, 36, initially ignored the text but eventually followed the link leading to a website asking for his Social Security number. Fultz said he then realized a debt collector who repeatedly called and left what Fultz considered threatening voice mails had found a new way into his life.

“I was appalled. They can’t send text messages if it’s a debt collector,” said Fultz, of Ohio. “It was just shocking that they would do that. It felt like a scam.” Fultz filed suit and the debt collection company paid him $3,500 as part of a settlement.

For decades, debt collectors have relied on a limited set of communication tools: landlines and the U.S. mail. Now they are finding increasingly personal ways to reach the millions of Americans regulators say have been contacted by debt collectors. Some debt collectors worry that these contacts fall into a legal gray area because the Fair Debt Collection Practices Act was written 40 years ago and doesn’t directly address digital communications.

The Consumer Financial Protection Bureau on Tuesday proposed rulesthat would give the industry the go-ahead to send consumers unlimited amounts of texts and emails, accelerating a trend the watchdog bureau says could be beneficial for everyone.

[How Trump appointees curbed a consumer protection agency loathed by the GOP]

The proposal is a victory for debt collectors such as San Francisco-based TrueAccord. Instead of making a barrage of phone calls, TrueAccord sends out millions of emails and texts every month. Next, it hopes to contact delinquent consumers through chat programs such as WhatsApp.

“When you have a good online digital presence, you don’t need to make those calls,” said Ohad Samet, the company’s co-founder and chief executive. “The only question here is why hasn’t everyone else moved to digital-first models yet.”

But this digital-first approach has alarmed consumer advocates who worry that the CFPB could give an industry known for high pressure tactics a new way to violate consumers’ privacy. While many Americans understand how to deal with a pesky creditor calling their landline, their texts, emails and social media are new and more personal territory.

“People are able to ignore phone calls, and that is the thing debt collectors don’t like,” said David Phillips, an Illinois attorney who has filed dozens of lawsuits against debt collectors. “It’s as if a debt collector is able to show up at your house and pound on the door. That is the effect of a text message.”

In addition to addressing the use of email and text communications, the bureau also proposed limiting the number times a debt collector could call someone to seven times in a week. After reaching the consumer, the debt collector wouldn’t be allowed to call again for a week. It would also update the disclosures the companies must provide in written communications.

[Democrats assail Trump administration rollbacks at consumer watchdog]

Consumers can still tell debt collectors to stop contacting them in any way, under the law.

The debt collection industry said it appreciates the CFPB proposal, but called the cap on the number of phone calls they can make “arbitrary.” It would “unnecessarily impede communications with consumers,” said a statement from Leah Dempsey, senior counsel for ACA International, a large industry lobbying group.

Consumer groups that had called for the CFPB to limit the industry to three calls a week were unhappy with the proposed rules.

The cap applies to individual debts owed by the consumer, said Linda Jun, senior policy counsel at Americans for Financial Reform. Someone with more than one bill in collections could quickly be inundated, Jun said. “It could add up quickly,” she said.

If the debt collectors emailed or texted too often it would be considered harassment and be illegal, according to the CFPB. But unlike with phone calls, the bureau is not proposing a specific cap on the number of contacts.

The proposal also asks debt collectors whether they anticipate using social media to contact consumers while prohibiting such contact if it could be viewed by a third party. Some debt collectors have already found ways to use social media.

Diandra Rivera of Brooklyn said she stopped posting to Facebook and closed her LinkedIn account after realizing debt collectors had started monitoring the sites. One combed through her LinkedIn page to find a former boss and even family members, who the debt collector then contacted, she said.

Another monitored her Facebook page. During phone calls with the debt collection agency, the representative would mention social outings she had posted on Facebook, Rivera said. The agent questioned why she was behind in repaying her student loan payments if she could afford to go to Applebee’s, Rivera said.

“It was really creepy,” she said.

[How a payday lending industry insider tilted academic research in its favor]

The proposed rules are likely to set up a battle between debt collectors and consumer advocates. The CFPB received about 81,500 complaintsabout debt collectors in 2018, according to a report released in March, making the industry one of the agency’s most common sources of consumer complaints.

Giving debt collectors such wide latitude to expand digital communication is unwarranted, said Christine Hines, legislative director for the National Association of Consumer Advocates.

“With the extreme examples of debt collectors’ harassment and invasion of consumers’ privacy that we’ve seen, it’s always a bad idea to exempt debt collectors from liability or grant them a safe harbor, in any circumstance,” she said. “Seems like an invitation to encourage more abuse not deter it.”

But some industry officials say the move into the digital space could be transformative. Debt collectors are already combing through social media to track consumers’ digital footprints and building models to determine whether they would be more likely to respond to male or female voices.

TrueAccord, launched in 2014, has been attempting to put a friendly face on the debt collection industry and rarely calls consumers, Samet said. The company he co-founded “crunches a lot of data” to build a profile of consumers, based on what kind of products they have purchased and on their previous responses to attempted contacts, he said. Ninety percent of the company’s communication with consumers does not involve a human, he said.

“There is machine learning at play here,” he said.

Samet said he believes consumers appreciate TrueAccord’s approach. Text messages and emails are a “channel you engage with more frequently but if you don’t like my email it’s a swipe of the finger to make me go away. You can set up filters. You can do a lot of things to manage your communications,” he said.

The CFPB has received more than 50 complaints about TrueAccord since 2015, according to the bureau’s database, which doesn’t identify complainants.

“This lady keeps emailing me constantly. She has even went so far as to tell me that she knows I am opening the emails. She is harassing me at this point,” according to acomplaint filed with the CFPBearlier this year. “This is not okay. Please help me.”

In 2017, a consumer told the CFPB that TrueAccord had been too aggressive. “This email was written in such a matter [as] to convince me that they will threaten me both physically and try to ruin my reputation. They stated they would use any means available to collect the money they say is owed,” according to the complaint.

Samet said the complaints are typical of the kind received by other service companies such as Comcast and a “fraction” of what competitors receive. “We never want people to complain,” he said.

To be sure, digital communications from creditors can sometimes be helpful to consumers. Emails and text messages create a footprint that can be used to track down debt collectors hiding behind post-office boxes and shell companies, said Ohio attorney Jonathan L. Hilton, who practices consumer law. In some cases, Hilton said he has subpoenaed Google or cellphone companies to find the names, addresses and even bank account information of debt collectors. “It’s very useful from the investigative side,” he said.

[Senate approves Trump nominee to lead polarizing consumer watchdog agency]

Vicki Chester, a retired nurse’s assistant, said she was being inundated with phone calls from a debt collector about an old $350 debt for months before she relented and made two $60 payments. “The calls were nasty,” said Chester, a client of Hilton’s. “I was tossing and turning every night wondering if I am going to be picked up.”

Finally, she asked the debt collector to send her an email with details about the debt. That is when Chester said she realized she was being hounded about money she didn’t owe. “I realized, this isn’t my debt,” said Chester, who received a $6,000 settlement against the debt collection agency. “They had the wrong Vicki.”

The 1977 Fair Debt Collection Practices Act was written before cellphones became the constant companion of millions of Americans. The law prohibits debt collectors from calling before 8 a.m. or after 9 p.m. and prohibits harassment. But it did not directly address most forms of digital communication.

The CFPB proposal would change that, which would be a relief for Elle Gusman.

Minnesota-based Direct Recovery Services has experimented with both text messages and emails, said Gusman, who founded the company in 2012. Emails were effective initially but then began getting flagged as spam by Google, especially when sent out in large batches, she said. The company even created a new domain name, but words included in the emails or their attachments -- such as debt, password, account, pay online -- would get flagged, she said.

“It won’t go through,” said Gusman.

Consumers also appeared to like receiving text messages about their delinquent bills, said Gusman. “Millennials just want to go online and pay” their bills, she said. “It would be crazy, within an hour of just sending our messages, we would get 20, 30 payments online.”

Sending the messages was expensive and it was difficult to include all of the required disclosures in a few characters, said Gusman.

One of the people Direct Recovery Services texted was Fultz, the Ohio paramedic, who said he found the messages intrusive.

The company has stopped the practice but Gusman said she is hoping the CFPB proposal will allow the company to try again.

ref wapo? -->

CHRONICLE SF

Payday lending insider tilts academic research in industry's favor

Renae Merle, The Washington Post Published 12:33 pm PST, Monday, February 25, 2019

A customer leaves a payday loan store in Gaithersburg, Md. The payday-lending industry has lobbied against rules that would require lenders to make sure borrowers can afford the loans they are seeking. Photo: Washington Post Photo By Michael S. Williamson / The Washington Post]

Photo: Washington Post Photo By Michael S. Williamson

Headlines and Links

Key Article Excerpts

International Business Times: Would Trump’s CFPB Pick Mulvaney Back Consumers Or Payday Lenders?

“One of industries the CFPB has sought to protect consumers from is the payday loan industry, whose members issue short term loans to consumers at exorbitant interest rates. Mulvaney’s record with the industry, including his comments at a 2014 Congressional hearing, shows a concern for lenders often described as predatory.

“As a Congressman, Mulvaney accepted $55,500 in contributions from payday lenders during his four successful runs for Congress, including $26,600 during the 2016 election cycle, according to the National Institute on Money in State Politics….

“In a 2014 hearing,…. [p]refacing a question to Cordray on ‘payday loans’ and ‘certain types of installment loans,’ Mulvaney’s comments suggest a deference to payday lenders.

“‘I share your understanding that small-dollar lending serves an important function for many borrowers, especially those who may not utilize traditional banking services, and hope the Bureau will work to ensure the continued viability and availability of these products,’ Mulvaney said.

“The comments came just two months before a CFPB report found four out of five payday loans are rolled over or renewed after two weeks, and that the the majority of payday loans are renewed so many times that borrowers pay more in fees than the loan was originally worth.

“The South Carolina congressional district he represented from 2011 to 2017 is located just a 30-minute drive from the national headquarters of Advance America, the ‘largest non-bank provider of cash advance services in the United States’ according to SEC filings.”

Washington Post: Trump’s swampiest move yet

“Already, Mulvaney says he’s freezing new hiring, new rules and payouts to consumers from a penalty fund.

“Even for this phony populist president, who instead of draining the swamp stocked his White House and Treasury Department with Goldman Sachs executives and sprinkled billionaires and lobbyists across the government, the move on the CFPB is brazen. That’s because Trump’s legal justification for taking control of the CFPB was written by a lawyer who until just a few months ago was defending a foreign payday lender against the agency’s attempts to punish it for lending abuses.

“As the Intercept’s David Dayen reported, Steven Engel, the Justice Department lawyer who wrote the memo justifying Trump’s takeover, was a lead counsel for Canadian payday lender NDG Financial, which the CFPB cited for misleading and overcharging U.S. customers. The Intercept reported that Engel was active in the case, which remains in court, until August — after he was nominated to serve in the administration.

“It’s difficult to imagine something swampier than a corporate lawyer joining the government and then orchestrating the disarming of a federal agency in litigation with his former client. NDG — and the lenders who had to give back some $12 billion to consumers because of shady practices caught by the CFPB — can celebrate.”

New York Post: Payday lenders have new hope with Trump's CFPB [Full Text]

The loan sharks smell blood.

A payday lender selling loans derided as “debt traps” by the Consumer Financial Protection Bureau is going public — and it’s banking on the Trump administration going easy on it.

Curo Group, a company that charges nearly 1 percent interest a day for some of its loans, is looking to raise $123 million in an initial public offering on the New York Stock Exchange — valuing the company at more than $700 million.

The IPO filing comes just days after Richard Cordray resigned from the CFPB, an agency that was hostile to the industry and just last month issued a rule to curb abusive loans.

The company, which does business under the Speedy Cash and Rapid Cash nameplates in the US, is betting that the next head of the consumer watchdog won’t go so hard on it.

“Even though the CFPB Rule has been approved as a final rule, it is possible that the CFPB Rule will not become effective in its current form,” the company wrote in its regulatory filing on Wednesday.

Payday loans, which are outlawed in 15 states, including New York, as well as in Washington DC, typically charge sky-high rates for short-term cash advances.

Last month, the CFPB issued a study that derided payday loans as “debt traps” that caused four out of five people to borrow higher amounts just to pay back what they originally owed.

The CFPB also recommended limits on the amounts that money lenders can extend to their cash-strapped borrowers.

The company, in its 215 US and 190 Canadian locations, offers unsecured installment loans and charges an average of 13.2 percent interest per month, it said in the filing.

On secured loans, the rate drops to an average of 10.6 percent a month.

Open-end loans, which act like lines of credit, carry interest rates of up to 0.99 percent per day, it said.

A fourth type of loan, which the company calls single-pay — usually for a small amount of cash after the borrower hands over a post-dated check — carries fees of up to 25 percent.

Single-pay loans made up 28 percent of Curo Group’s business in the nine months that ended on Sept. 30.

Despite the high interest rates and fees, Curo Group apparently has no trouble attracting business: Revenues increased 14.2 percent in the nine months ended Sept. 30 compared with the previous year.

Net income slipped 23.4 percent, to $42.7 million, in the period.

Whoever the next CFPB director is, Curo believes that its prospects are good under the current Congress.

The “CFPB Rule remains subject to potential override by disapproval under the Congressional Review Act,” the company said, noting that Congress had voted down an arbitration rule that was put forth by the CFPB.

“Moreover, the current CFPB Director announced his resignation, effective as of Nov. 24, 2017. His successor could suspend, delay, modify or withdraw the CFPB Rule.”

The Intercept: White House Memo Justifying CFPB Takeover Was Written By Payday Lender Attorney

“The lawyer who wrote the Office of Legal Counsel memo supporting the Trump administration’s viewpoint that the president can appoint Mick Mulvaney as acting director of the Consumer Financial Protection Bureau represented a payday lender in front of the CFPB last year.

“Steven A. Engel wrote the memo for OLC, which has been criticized by academics for seeking a conclusion and working backward to justify it….

“Engel was confirmed as an assistant attorney general earlier this month by a voice vote in the Senate.

“But in July 2015, Engel was one of two lead counsels for NDG Financial Corp., a Canadian payday lender that CFPB cited for running a nine-year scheme to use its foreign status to offer U.S. customers high-cost loans that were at odds with state and federal law. ‘We are taking action against the NDG Enterprise for collecting money it had no right to take from consumers,’ said CFPB Director Richard Cordray at the time. Engel was active in the case up until August of this year.

“The revelation underscores the extent of industry infiltration of the structure designed by Congress — a single permanent director who can only take office upon appointment by the president and confirmation by the Senate — to keep the consumer watchdog independent of the industry it is set up to regulate and buttresses the original intent of the lawmakers who established the agency.

“CFPB alleged that NDG, which issues and collects payday loans online, made ‘false threats’ to consumers that non-payment would result in wage garnishment, arrest, or imprisonment. The web of companies in the enterprise, situated in Canada and Malta, did not have the legal right to debit accounts to collect payday loans in the U.S., but they hid behind their foreign status to claim that they were exempt from various limitations and statutes. The case is still active in federal court in New York.

“Engel represented the defendants in the case against CFPB as recently as this August, when U.S. District Judge Colleen McMahon asked judges in Canada to compel testimony from Canadian banks. At the time, Engel was a partner at the law firm Dechert. He was nominated to become an assistant attorney general for OLC in February of this year.

“Having a former adversary to CFPB weigh in on who is the legal acting director of the agency raises questions over Engel’s independence and potential conflict of interest….

“The Justice Department did not respond to a request for comment about Engel and whether he should have recused himself from matters involving the CFPB.”

Credit Union Times: Mulvaney Pushed Plan to Kill CFPB, Now He Runs the Agency

“And as a candidate for Congress, Mulvaney accepted campaign contributions from groups with business before the CFPB, including credit union trade groups and the association representing payday lenders….

“During his tenure in the House, Mulvaney:

Sponsored legislation to repeal Title X of Dodd-Frank. That title created the CFPB.
Pushed legislation that would have repealed the agency’s power to take action in cases of Unfair, Deceptive or Abusive Acts or Practices. Agency critics have said that power gives the agency too much power.
Sponsored a bill that would have required the agency to verify consumer complaints before they were made public.
Pushed a plan that would have prohibited the CFPB from issuing rules on payday lending for two years. In addition, states and tribes could have opted out of the rule.

“As a member of Congress, Mulvaney also accepted thousands of dollars in campaign contributions from companies and associations with business before the CFPB.

“For instance, Mulvaney accepted $12,000 from Wells Fargo during the past three election cycles, according to the Center for Responsive Politics, which compiles campaign contribution reports.

“The agency has fined Wells Fargo $100 million for its widespread practice of opening bank accounts without customers’ knowledge.

“During the past three elections, Mulvaney also received $25,000 from CUNA and $2,000 from NAFCU.

“Both groups have complained that the CFPB, in its rulemaking, has failed to distinguish between large banks that caused the financial crisis and credit unions that have not.

“And he received $10,000 from the Community Financial Services Association, which represents the payday lending industry.

“That association has left open the possibility that it may file suit against the agency over final rules, which they say will unfairly inhibit their ability to make short-term rules….

“[Senator] Warren has raised questions about OMB staff serving on an interim basis at the CFPB and about other potential conflicts of interest.

“For instance, in a letter to Mulvaney and White House Counsel Don McGahn, Warren pointed out that CFPB rules prohibit employees from owning any security in any entity supervised by the bureau.

“The rules also require employees to confirm divestiture in writing within 30 days of employment, she said.”

2015, late settled

https://www.latimes.com/business/la-fi-payday-lawsuit-20150804-story.html

The Consumer Financial Protection Bureau has filed a lawsuit against a Canadian payday lending company, alleging that its web of subsidiaries collected money that consumers did not owe and falsely threatened borrowers with imprisonment or wage garnishment.

In the lawsuit, regulators say the British Columbia-based NDG Financial Corp. and its "maze" of nine interrelated companies made and collected payday loans that were either completely or partially void in 17 states.

The companies, collectively called the NDG Enterprise, made consumers believe that federal and state laws did not apply to them, according to the lawsuit.

All of the companies except two are Canadian. Two are incorporated in Malta.

NDG Financial Corp. could not be reached for comment.

"Companies making loans within the U.S. have to comply with federal law," bureau director Richard Cordray said in a statement. "The Consumer Bureau will work to ensure that American consumers receive the protections and fair treatment they deserve.”

The lawsuit, filed last week in U.S. District Court in New York, said that since 2011,NDG Financial has extended payday loans exclusively over the Internet through its subsidiaries to U.S. consumers.

The NDG Enterprise has made loans in all 50 states. Loans generally are 14 days, or short term, and range from $100 to $1,500. Finance charges for each $100 borrowed can be between $19.98 and $26.98.

Some loan agreements also had an illegal clause giving the NDG Enterprise the authority to collect outstanding loan amounts directly from a consumer's wages via their employers if the borrower defaulted on the payment.

According to the lawsuit, the NDG Enterprise received payment directly from the employers' payroll accounts "numerous" times.This type of action could result in "serious and detrimental interference with employment relationships" and negatively affect promotions, raises or even lead to job loss, according to the lawsuit.

In "numerous instances," the NDG Enterprise also told consumers that non-payment of debt would result in a lawsuit, arrest, imprisonment or wage garnishment, even though it did not have the legal authority to do so.

Regulators are seeking monetary damages and to prevent the NDG Enterprise from violating federal consumer financial protection laws.

https://www.alternet.org/2019/04/how-trumps-top-aide-unleashed-predatory-lenders-and-betrayed-the-working-class/

At the Washington Monthly, and here at Political Animal, we’ve written from time to time about the Trump administration’s efforts to defang the Consumer Financial Protection Bureau, but none of us has done as comprehensive a job of it as Nicholas Confessore. His new piece in the New York Times Magazine focuses on Mick Mulvaney’s time as the CFPB’s acting director.

I often hear liberals wonder aloud how so many low-to-moderate income Americans can support the Republican Party when it is clearly not in their financial interests to do so, and nowhere is that more clear than on the issues surrounding the CFPB. Confessore demonstrates this very ably by doing a deep-dive into the payday lending/short-terms loans industry.

In the following excerpt, he explains how the payday loan industry rose in influence and power during the Bush administration by making loans to people who (they hoped) would not be able to pay back the money. The CFPB was the brainchild of Elizabeth Warren, who was convinced of its necessity by her research into consumer debt.

[Elizabeth] Warren and other consumer advocates argued that payday lenders built their industry on a similar sleight of hand. They marketed themselves as lenders of last resort, offering emergency loans for a broken-down car or an unexpected medical bill. But according to Nick Bourke, a former financial-services consultant who now directs consumer-finance research at the Pew Charitable Trusts, what fed the industry’s growth were not emergency expenses but the increasingly unstable incomes of the working poor. As their hourly wages fluctuated at the whims of workplace-optimization software, payday-loan customers — typically white women earning around $30,000, according to Pew’s research — borrowed to pay their rent or electric bills. The average customer paid $55 in fees to borrow $375, due on their next payday. But most found that they couldn’t afford to repay the loan after two weeks. They took out another loan to cover the first, and usually another.

Consumer advocates called this cycle a “debt trap” and argued that payday lenders, much like credit-card companies, disguised the true costs of their products.Store clerks emphasized the small-seeming fees and pushed customers to roll their old loans into new ones, so that the fees snowballed, eventually exceeding the cost of the original loan. While most banks made money by finding customers who could repay their debts on time, payday lenders made money by finding customers who couldn’t. “If borrowers repaid loans in just two weeks and walked away as advertised, lenders would go out of business,” Bourke says.

What really distinguishes the short-term loan industry from regular banks is precisely the focus on finding customers who will default. They’ve also historically been unregulated by the federal government and free to charge grossly usurious rates. Several states decided to regulate the industry at the end of the last decade, and some like North Carolina banned payday loans outright.

Naturally, there are some consumers who have good experiences taking out emergency loans, and it can work for someone with poor credit who genuinely needs to borrow money for a very short period of time. These feel-good stories are what the industry relies on to rationalize their predatory business model. The overall effect of the industry is ruinous, however, as it sucks up billions of dollars from the people least able to part with their money.

The CFPB didn’t initially think that the payday loan industry would be a high priority for them. But that quickly changed once they opened their doors under their first director, Richard Cordray:

As the human and financial costs of the subprime-mortgage crash mounted, the new bureau was inundated with whistle-blower tips and consumer complaints. Cordray and his leadership team initially planned to focus on the biggest consumer-finance players, like mortgage lenders and credit-card companies; payday lenders were a relatively small industry compared with Wall Street. But it was growing quickly: The crisis had been good for business, pulling more middle-class families into the payday-loan market. And unlike banks, payday lenders were unregulated by the federal government. “It was affecting a lot of people at the margins who could least afford to run into trouble,” Cordray told me recently.

In 2012, the C.F.P.B. began conducting supervisory exams of payday lenders, a process that required them to open up their offices and books, and sometimes yielded evidence of predatory lending for the bureau’s enforcement team to take up. A company called Ace Cash Express, investigators found, harassed overdue borrowers by using phony legal threats. The investigation yielded a potent illustration of the debt trap: Ace Cash’s training manual, which instructed employees to pressure borrowers into paying off overdue loans by taking out new ones, illustrated its customer-service doctrine with a graphic resembling a recycling symbol, with one “short-term” loan fueling the next in an endless loop of debt.

At first, the CFPB went after the most egregious examples of exploitative behavior they could find, and they also put an emphasis on online lenders. In 2015, they began developing a new rule to apply to the industry that they hoped would end the practice of making deliberately bad loans. Lenders would be scrutinized, and they would be expected to examine a borrower’s ability to repay a loan before granting them one. Systemic abuse of the system could lead to hefty fine and even criminal charges. Before the new rule could be implemented, however, Donald Trump surprisingly won the 2016 election.

He then jammed Mick Mulvaney in as the interim replacement for Richard Cordray, and Mulvaney set about not only saving the payday lenders from oversight and regulation but cutting the teeth out of the entire bureau. He was so effective at this job that Trump was convinced to make him the White House chief of staff.

All is not lost, and if a Democrat wins the presidency in 2020 the bureau may be salvageable as an advocate for working people. I imagine a President Elizabeth Warren would be especially invested in that outcome. It seems to me that if people grasped that the Republican Party is on the side of predatory lenders and against protecting people from fine-print scams and debt traps, that a lot of them would be less inclined to take their side because of cultural issues.

The problem is getting them to understand this when there is not much effort going on to keep them focused on NFL players and scary immigrants and the War on Christmas.

ref

https://www.nytimes.com/2019/04/16/magazine/consumer-financial-protection-bureau-trump.html

Mick Mulvaney’s Master Class in Destroying a Bureaucracy From Within

The C.F.P.B. was created to protect Americans from predatory lenders after the financial crisis. President Trump’s new chief of staff took it apart on his way to White House.

By Nicholas Confessore

April 16, 2019

One rainy afternoon early in February 2018, a procession of consumer experts and activists made their way to the headquarters of the Consumer Financial Protection Bureau in Washington to meet Mick Mulvaney, then the bureau’s acting director. The building — an aging Brutalist layer cake, selected by the bureau’s founders for the aspirational symbolism of its proximity to the White House, one block away — was under renovation, and so each visitor in turn trudged around to a side entrance. Inside the building, Mulvaney had begun another kind of reconstruction, one that would shift the balance of power between the politically influential industries that lend money and the hundreds of millions of Americans who borrow it.

Three months earlier, President Trump installed Mulvaney, a former congressman from South Carolina, as the C.F.P.B.’s acting director. Elizabeth Warren, who helped create the agency in the wake of the 2008 financial crisis, envisioned it as a kind of economic equalizer for American consumers, a counter to the country’s rising structural inequality. Republicans had come to view her creation as a “rogue agency” with “dictatorial powers unique in the American republic,” as the party’s 2016 platform put it. In Congress, Mulvaney had established himself as an outspoken enemy of the bureau, describing it, memorably, as a “joke” in “a sick, sad kind of way” and sponsoring legislation to abolish it.

Some of those invited to the meeting in February had picketed outside the bureau’s headquarters on Mulvaney’s first day at work. Their unease had only grown as Mulvaney ordered a hiring freeze, put new enforcement cases on hold and sent the Federal Reserve, which funds the C.F.P.B., a budget request for zero dollars, saying the bureau could make do with the money it had on hand. Within weeks, Mulvaney announced that he would reconsider one of the bureau’s major long-term initiatives: rules to restrict payday loans, products that are marketed to the working poor as an emergency lifeline but frequently leave them buried in debt. “Anybody who thinks that a Trump-administration C.F.P.B. would be the same as an Obama-administration C.F.P.B. is simply being naïve,” Mulvaney told reporters. “Elections have consequences at every agency.”

Mulvaney was also aware that appearances have consequences. For agency heads, it is important to appear open to all points of view about their regulatory decisions, especially if they end up having to defend them in court. In February, he agreed to meet with his critics in person. Thirty or so people gathered around a conference table as rain lashed the windows. Mulvaney, who is 51, has close-cropped hair and a bulldog countenance that befits his manner. A founder of the House’s hard-line Freedom Caucus, he can be sarcastic, even withering, in hearings and speeches. But Mulvaney struck a placating tone with his guests. He kept his opening remarks brief, according to six people who attended the meeting. Important things at the bureau would not change, he reassured them. “I’m not here to burn the place down,” he insisted. Mulvaney said he did not intend to discuss his plans for the payday-loan rule with them but encouraged everyone to share their views.

Many of Mulvaney’s guests came from advocacy groups, like Americans for Financial Reform and the Center for Responsible Lending, that often did battle with Washington’s powerful financial-industry lobby. But the meeting also included a dozen religious leaders, among them officials from national evangelical and Baptist organizations, whose members tend to be among Trump’s most loyal supporters. These leaders viewed payday lending as not only unfair but also sinful, and they had fought against it across Trump country — in deep-red South Dakota, on the same day Trump won the presidency, voters overwhelmingly approved a ballot measure effectively banning payday loans. The ministers had planned carefully for their moment with Mulvaney, and for 20 minutes they took turns detailing the harm that payday lending had inflicted on their neighborhoods and congregations. Eventually they gave the floor to the Rev. Amiri B. Hooker, who led an African-American church near Mulvaney’s old congressional district.

“I told him I was from Kershaw County,” Hooker told me recently, recalling his exchange with Mulvaney. “He smiled and asked how were the good folks from Kershaw.” When Hooker pastored in Lake City, an hour away from Kershaw, a quarter of his congregation either had taken out payday loans themselves or knew someone who had. He told Mulvaney about an 84-year-old congregant in Lake City whom, during a week that she was so sick that she missed services, he saw hobbling toward him down the street. “She said, ‘I had to go pay my bill,’?” Hooker recalled. The woman had taken out a $250 loan almost three years earlier to cover her granddaughter’s heating bill. She was still paying it off, Hooker told Mulvaney, at a cost of $75 a month, rolling over the loan into a new one each time.

[How cities make money by fining the poor.]

Despite his earlier reticence, Mulvaney seemed eager to offer his own view of how the bureau ought to operate. It wasn’t up to the federal government to stop people from taking the kind of credit that suited them, he suggested: “There’s no reason people should be taking these loans — but they do.” He pointed out that there wasn’t anyone in the room from North Carolina, where payday lending was illegal. They should plead their case to state officials. “You have a place to go to address payday loans, and it’s not me,” he said, according to multiple attendees. As the C.F.P.B.’s acting director, he wouldn’t stop enforcing the law as written. He only wanted a more efficient bureau, he explained, one steeped in evidence-based decision-making, one that educated consumers to make good decisions on their own. Mulvaney provided few details about how it would all look, but he promised the pastors he would follow up to let them know which way he decided to go on payday-loan regulation. “I’ve never heard from him,” Hooker says.

In the months that followed, Mulvaney’s vision for the Consumer Financial Protection Bureau would become clearer.This account of Mulvaney’s tenure is based on interviews with more than 60 current or former bureau employees, current and former Mulvaney aides, consumer advocates and financial-industry executives and lobbyists, as well as hundreds of pages of internal bureau documents obtained by The New York Times and others. When Mulvaney took over, the fledgling C.F.P.B. was perhaps Washington’s most feared financial regulator: It announced dozens of cases annually against abusive debt collectors, sloppy credit agencies and predatory lenders, and it was poised to force sweeping changes on the $30 billion payday-loan industry, one of the few corners of the financial world that operates free of federal regulation. What he left behind is an agency whose very mission is now a matter of bitter dispute. “The bureau was constructed really deliberately to protect ordinary people,” says Lisa Donner, the head of Americans for Financial Reform. “He’s taken it apart — dismantled it, piece by piece, brick by brick.”

Mulvaney’s careful campaign of deconstruction offers a case study in the Trump administration’s approach to transforming Washington, one in which strategic neglect and bureaucratic self-sabotage create versions of agencies that seem to run contrary to their basic premises. According to one person who speaks with Mulvaney often, his smooth subdual of the C.F.P.B. was part of his pitch to Trump for his promotion to White House chief of staff — long one of the most powerful jobs in Washington. Mulvaney’s slow-rolling attack on the bureau’s enforcement and regulatory powers wasn’t just one of the Trump era’s most emblematic assaults on the so-called administrative state. It was also, in part, an audition.

The Consumer Financial Protection Bureau emerged from a liberal concern that the American political economy was increasingly defined by inequality and consumer debt.As a young academic in the 1980s, Warren began studying how and why some Americans ended up taking on more debt than they could handle. The act of borrowing money, she learned, was growing increasingly risky and complex. As the consumer-credit industry grew, credit-card companies and mortgage lenders began to design their products to appear cheaper than they actually were. Unlike most things people buy, financial products became defined by their ever-lengthening terms and conditions: mandatory arbitration, reverse amortization, interest-rate calculations that can change at a whim, cross-default clauses and two-cycle billing, mysterious credit scores that emanate from Equifax and Experian as if from the temples of an obscurantist cult. “The real money was in the fine print,” Warren told me recently.

Warren, who is now a senator from Massachusetts and a Democratic candidate for president, spoke to me by phone as she was making her way to New Hampshire for a campaign swing. On the trail and off, Warren depicts the rise of the consumer financial industry as part of an elemental structural shift in American life. Wealthy people and big corporations were not just eating up a growing share of the pie; they had rigged the marketplace to help them do it. All that fine print didn’t just shift billions upon billions of dollars into the hands of lenders, Warren argued. It shifted power. Lenders could more safely harvest a few dollars in fees from the checking account of each customer, even when doing so broke the law, when mandatory arbitration clauses in the fine print prohibit customers from joining together in a class action to get their money back. Brokers could more easily push a family to a higher-cost mortgage, even when they qualified for a cheaper one, if the family believed they were getting the best possible deal. The increase in debt-financed consumption helped paper over the stagnating wages of the middle class and the growing gap between the rich and everyone else. But it was also driving an epidemic of social misery: bankruptcy and lost homes, anxiety and shame.

In her research, Warren found that people got in over their heads not because they were greedy or lacked self-discipline, but because they were being outmatched by a sophisticated and often predatory industry of lenders. Warren recalled being struck by “the number of people who said, in our interviews, ‘I never understood my payment would go up on that’ or ‘I didn’t understand I owed more on my house than I paid for it,’?” she told me. “Even after they had seen a lawyer and declared bankruptcy, they still didn’t understand what had happened.” In a 2007 article titled “Unsafe at Any Rate,” Warren proposed the creation of a new regulatory agency to oversee consumer-credit products. When she lobbied lawmakers on Capitol Hill after the financial crisis, Warren would take them a selection of credit-card agreements. “I’d lay three of them down on the table, and I’d say, ‘Tell me which one is the cheapest credit card.’?” None could.

Warren and other consumer advocates argued that payday lenders built their industry on a similar sleight of hand. They marketed themselves as lenders of last resort, offering emergency loans for a broken-down car or an unexpected medical bill. But according to Nick Bourke, a former financial-services consultant who now directs consumer-finance research at the Pew Charitable Trusts, what fed the industry’s growth were not emergency expenses but the increasingly unstable incomes of the working poor. As their hourly wages fluctuated at the whims of workplace-optimization software, payday-loan customers — typically white women earning around $30,000, according to Pew’s research — borrowed to pay their rent or electric bills. The average customer paid $55 in fees to borrow $375, due on their next payday. But most found that they couldn’t afford to repay the loan after two weeks. They took out another loan to cover the first, and usually another.

Consumer advocates called this cycle a “debt trap” and argued that payday lenders, much like credit-card companies, disguised the true costs of their products. Store clerks emphasized the small-seeming fees and pushed customers to roll their old loans into new ones, so that the fees snowballed, eventually exceeding the cost of the original loan. While most banks made money by finding customers who could repay their debts on time, payday lenders made money by finding customers who couldn’t. “If borrowers repaid loans in just two weeks and walked away as advertised, lenders would go out of business,” Bourke says.

Improbably, the payday-loan industry earned a fortune from the working poor. The short loan terms and frequent rollovers pumped out profits faster than conventional lending, requiring less capital and yielding bigger profits. Beginning in the 1990s, federal and state deregulation set off a payday-loan gold rush. In states like Utah, North Carolina and Missouri, the number of storefront lenders tripled or even quintupled practically overnight. Lenders clustered around big military bases throughout the South, where they could target service members, most of them young, low-paid and living the kind of peripatetic lives that made them ideal payday-loan customers. “Anybody with $50,000 can get into payday lending in some states,” one former payday-loan executive told me. “The model is designed to print money.”

Some of the largest payday lenders built national franchises and took their companies public during the frothy 2000s, fueling further expansion. Silicon Valley venture capitalists stepped in, building lead-generation databases and online platforms to compete against traditional storefront lenders. So did Wall Street. In recent years, leading private-equity firms, including Golden Gate Capital and the Fortress Investment Group, have acquired or bought stakes in almost two dozen short-term lenders. Payday lenders, which once operated on the fringes of the financial world, are now in unlikely alignment with the titans of high finance: Each has benefited enormously from Trump’s deregulatory policies, which Trump has cast as populist and his likely 2020 opponents have assailed as plutocratic.

“When you think about structures that perpetuate racial and economic inequality — this is it,” says Diane Standaert, the director of state policy at the Center for Responsible Lending, which advocates tighter regulation on lenders. “These are entities that suck up billions of dollars a year from people making $25,000 a year. And it’s going into the pockets of the wealthiest people in the world.”

Mulvaney began his political career in the heart of payday-loan country, just as the industry’s headlong expansion began running into serious resistance. In South Carolina, short-term lending is not only a significant industry but also a political force. Payday lenders dole out more campaign money than traditional banks do,most of it to committees controlled by the Legislature’s powerful Republican leaders. The country’s biggest payday-loan chain, Advance America, is based in Spartanburg, where a local business school is named for a company founder, George Dean Johnson Jr., and the company’s chief spokesman, Jamie Fulmer, serves part time as a city councilman.

Mulvaney, who worked as a lawyer, restaurateur and real estate developer before entering politics, ran for a seat in the State House in 2006, when South Carolina had around a thousand payday lenders, one of the highest densities in the country. Two years later, Mulvaney won election to the State Senate, in a district that stretched along South Carolina’s border with North Carolina, which had outlawed payday lenders in 2001. Mulvaney, a junior lawmaker, received only a sprinkle of checks from the payday-loan industry during his time in the Legislature. But payday lenders did a brisk business in and around Mulvaney’s district, throwing up billboards along Interstate 77 and advertising in the Charlotte phone book to draw customers from across the border. For some constituents, particularly in rural areas of the district, payday lending served as a de facto line of credit. Emma Doyle, a close aide since Mulvaney’s time in Congress, told me that his views of the payday-loan industry were shaped, in part, by hearing from lower-income constituents who relied on payday lenders when they had nowhere else to go. “It was something he had worked on, something he had heard from a lot of people about,” Doyle told me. “Not everybody ends up in a debt trap. Not everyone ends up saying, ‘I wish I hadn’t taken this out’ or ‘I wish it hadn’t been available to me.’?”

North Carolina’s expulsion of payday lenders was the first in a series of setbacks for the industry that unfolded through the decade. In 2005, federal officials began cracking down on “rent-a-bank” schemes, in which payday-loan companies formed partnerships with banks in states that had loose lending regulations to export high-interest loans to customers in states that banned them. A year later, with tens of thousands of American soldiers deploying to Iraq and Afghanistan, Congress passed the Military Lending Act, imposing a rate cap on payday loans and auto-title loans to service members. Over Mulvaney’s first two years in the Legislature, several other states passed new restrictions on lenders, and proposals to follow suit were among the most hotly debated legislation in the Capitol.

At first, payday-loan supporters successfully bottled up the bills in committee. But in 2008, as the subprime-mortgage implosion set off a global financial crisis, the politics of financial regulation abruptly shifted. Public anger against lenders spread around the country, and amid the wreckage of lost homes and destroyed savings, the wave engulfed payday lenders too. In the November elections, Democrats in Washington began drafting the Dodd-Frank reform act, adopting Warren’s idea for a new consumer financial regulator. Even in South Carolina, there were calls to ban payday lending altogether. “You had a lot of horror stories out there about people carrying multiple loans and taking out one loan to pay off another loan,” recalls Wes Hayes, a Republican who served with Mulvaney in the State Senate.

Hayes began working with Advance America and other lenders on a compromise that would limit South Carolinians to taking out one payday loan at a time.“We were trying to break the cycle,” he told me. For payday lenders, Hayes’s bill was also a kind of breakwater, intended to absorb the anger building against the industry in South Carolina and elsewhere. Advance America pushed lawmakers to support the compromise. Johnson, the company’s co-founder, personally lobbied the state’s governor at the time, Mark Sanford, according to a former Sanford aide. “It strengthened the consumer protections that were in our state, but also allowed consumers access to the credit they needed,” Fulmer says.

But not everyone was convinced. In the Senate, Mulvaney belonged to a small group of young conservatives who called themselves the William Wallace Caucus, after the Scottish freedom fighter portrayed in “Braveheart.” Like a growing number of conservatives around the country, they viewed the Republican Party of the Bush years as adrift from small-government principles. In the depths of the recession, Mulvaney sided with Sanford against their fellow Republicans when Sanford tried to reject federal stimulus money — funds that Mulvaney cast as an ominous expansion of big-government power. Hayes’s payday-loan bill came to the floor a few weeks later. Sanford, the aide told me, was skeptical that borrowers were being misled by payday lenders and made clear he would veto the bill. Republicans in the Legislature laid plans to override him. In May 2009, Hayes’s compromise passed overwhelmingly.

Only four members of the State Senate voted against the legislation. One of them was Mulvaney. A few months after the vote, he announced that he would run for Congress, joining the Tea Party wave that was building around the country.

The C.F.P.B. that opened its doors in 2011 had been carefully constructed to survive the fight ahead. Warren and her colleagues wanted a bureau that could resist the political pressures that, in their view, had cowed and co-opted other financial regulators leading up to the crisis. The C.F.P.B. was funded directly by the Federal Reserve, insulating it from congressional appropriators. The sole political appointee was its director, who would serve a five-year term and could be fired only for wrongdoing. Facing stiff Republican congressional resistance to the prospect of Warren taking the job, Obama ultimately picked Richard Cordray, a cerebral former Ohio attorney general.

The new agency had the feel of a start-up. Cordray, a Democrat, made an effort to recruit broadly, bringing in financial-industry veterans and former prosecutors, but Warren’s creation inevitably attracted Warren acolytes and veterans of consumer-advocacy groups, many of whom landed in the enforcement division. As the human and financial costs of the subprime-mortgage crash mounted, the new bureau was inundated with whistle-blower tips and consumer complaints. Cordray and his leadership team initially planned to focus on the biggest consumer-finance players, like mortgage lenders and credit-card companies; payday lenders were a relatively small industry compared with Wall Street. But it was growing quickly: The crisis had been good for business, pulling more middle-class families into the payday-loan market. And unlike banks, payday lenders were unregulated by the federal government. “It was affecting a lot of people at the margins who could least afford to run into trouble,” Cordray told me recently.

Other investigations underscored the contempt that some lenders had for their new regulator. When the bureau informed Cash America, a major firm based in Texas, that it planned to conduct an examination, employees there shredded internal records and deleted recordings of phone calls with customers. Managers at the firm instructed employees to mislead the bureau’s examiners about its sales practices and stripped its call center of posters exhorting the employees to collect on debts. (The bureau later found that Cash America had illegally overcharged hundreds of service members and their families and ordered the company to pay a $5 million fine.)

The exams also provided an insider’s view of the historically insular industry, data that in turn guided the bureau’s enforcement lawyers and regulation writers. A bureau study of 15 million loans found that customers who kept rolling their loans over — taking out 10 or more a year — were the cream of the payday-loan industry, generating three-quarters of all loan fees. Advance America and other lenders disputed these findings, arguing that the bureau had undercounted one-time borrowers. But Cordray and his team saw evidence of a major regulatory failure: State-level reform efforts had largely failed to rein in the industry’s most abusive features, like debt traps. And lenders were devising ever-more-sophisticated tools to evade state regulation altogether: Some incorporated on Indian reservations or in offshore financial havens, selling loans online and claiming to be immune from state laws entirely.

A faction in the bureau advocated a strategy of hyperaggressive enforcement lawsuits to bring the industry to heel. Instead, Cordray settled on a two-pronged strategy, according to current and former bureau employees. Enforcement lawyers would begin prosecuting the industry’s worst scofflaws, especially the growing online lenders. But at the same time, the bureau would develop a package of tough rules that would apply to everyone.

In 2015, the agency outlined its core proposal, one that would eliminate debt traps: an ability-to-repay rule. Under such a rule, payday lenders would have to check whether borrowers could afford to pay back a loan before making it in the first place — a short-term loan would have to actually be short-term, not just bait for a debt trap. The rule would have real teeth: If companies lent money to people who couldn’t afford to pay it back, they could face prosecution and sizable fines. “We wanted to prompt reform in the industry,” Cordray says. “If they couldn’t reform their products, some of them would get out of the industry altogether.”

[Why jobs aren’t the solution to poverty.]

The backlash against the proposal was severe. Dennis Shaul, who leads the Community Financial Services Association of America, an industry trade group founded by Advance America and other payday lenders, told me that his group would have supported some limits on repeat borrowing. But the ability-to-repay rule, his members felt, was designed to shrink their industry. “We felt their solution was arbitrary,” Shaul says. The association worked with Jones Day, a powerhouse Washington law firm, to mount an all-fronts legal challenge. Advance America accused consumer-advocacy groups like the Center for Responsible Lending, whose alumni dotted the bureau and who had consulted closely with it on the proposed rules, of “infiltrating” the C.F.P.B. (The revolving door, of course, spun both ways: Shaul was recruited by the industry after working for Barney Frank, the Massachusetts Democrat who was an author of Dodd-Frank, and dozens of former bureau officials have gone on to work for the financial industry.) The industry mustered studies, including one by the bureau’s former assistant research director, finding that the bureau’s proposal would cut revenue so drastically as to put storefront companies out of business.

Not everyone in the industry agreed with this argument. The former payday-loan executive told me that most of his old industry would have survived under the ability-to-repay rule, but with a less lucrative business model. “You’d still make money,” the former executive says. “It would just be less money.” But payday lenders found a willing audience in Congress, where Republicans on the House Financial Services Committee — including Mulvaney, who joined the committee in 2013 — had worked aggressively to bring Washington’s new watchdog to heel. The committee was led by Jeb Hensarling, a Texas Republican who regarded the bureau as a constitutional abomination and Cordray as a “benevolent financial-product dictator,” as he put it in one hearing. Hensarling hammered Cordray with subpoenas and accused the bureau of mismanagement and waste. Mulvaney regarded Hensarling as a mentor and held similar views about the bureau’s structure and powers. “Some of us would like to get rid of it,” Mulvaney told a reporter in 2014. At oversight hearings, Mulvaney questioned Cordray relentlessly about the bureau’s budget and his payday-loan proposal, even introducing a bill that would allow states to opt out from the ability-to-repay rule for five years. Payday lenders, seeing Mulvaney as an ally, donated tens of thousands of dollars to his campaigns.

But as the 2016 election approached, aggressive enforcement by the C.F.P.B. and other federal regulators had cast a pall over the industry. Its money machine began to slow. That year alone, storefront-payday-loan fees plummeted by more than a quarter, according to an internal industry presentation that I obtained. The C.F.P.B. was “biased against our industry, our product and our customers,” Fulmer, the Advance America spokesman, told me. “We were in a very perilous position coming to the fall of 2016.”

Like almost every industry in America, payday lenders weren’t prepared for a Trump victory. But it quickly became clear that his election presented an opportunity. While Trump ran as a populist, promising to tear down a “rigged system” — language that echoed Warren’s own rhetoric — his anti-Wall Street rhetoric fused with a pro-Wall Street platform. Advance America and others from the industry flooded Trump’s inauguration committee with more than a million dollars in contributions.

Trump stocked his cabinet with billionaires and Wall Street veterans, including Gary Cohn, the former president of Goldman Sachs, who became his chief economic adviser. Trump, with Hensarling’s encouragement, tapped Mulvaney to run the Office of Management and Budget. The new administration immediately came under pressure to dismiss Cordray, who had almost 18 months left in his term as C.F.P.B. director. But Cohn and others in the White House were cautious, according to a person familiar with the discussions. The move would have plunged the administration into a risky legal battle against the bureau. They also believed — correctly, as it turned out — that Cordray would leave the bureau to run for governor of Ohio; a high-profile firing might actually help his campaign. Cohn persuaded Trump that the Cordray problem would soon take care of itself and began identifying candidates to replace him.

The list was short. To take over the agency immediately, without a time-consuming nomination fight, the White House needed someone who had already been confirmed by the Senate for another administration job. Trump settled on Mulvaney, asking him to continue as budget chief and also run the bureau until he could appoint a permanent successor there. Mulvaney, according to people close to him, did not campaign for the job but eagerly accepted it, drawn to the opportunity to remake the C.F.P.B. In November 2017, just weeks after finalizing the new ability-to-repay rule, Cordray announced his departure. Citing succession rules laid out in Dodd-Frank, Cordray tried to install a top aide, Leandra English, as the new acting director. The C.F.P.B.’s own general counsel sided with the White House, writing a memo backing Mulvaney’s appointment; English fought the appointment in court but ultimately quit. Mulvaney landed at the bureau just after Thanksgiving, bearing a bag full of doughnuts for his new colleagues.

Mulvaney had given some thought to taking control of a bureaucracy that didn’t necessarily want him there. He told reporters that he wanted his second agency to be more like his first, the Office of Management and Budget, where career employees are matched with appointees who serve at the president’s pleasure. “Maybe they didn’t think they needed to have any political people here because a lot of the people here were political anyway,” Mulvaney said. To become less political, Mulvaney decided, the bureau would first have to become more political. Each of the senior career officials in charge of the bureau’s divisions, who had the title of associate director, would get a Mulvaney-appointed twin, known as a policy associate director, or PAD. To lead the PADs, Mulvaney hired Brian Johnson, a senior Hensarling aide who had helped lead the inquisition of Cordray’s bureau. In his old job, Johnson helped draft a report — titled “Unsafe at Any Bureaucracy” — alleging that the bureau used shoddy statistics and legally questionable tactics to prosecute auto lenders accused of having racially discriminated against car buyers. In his new job, Johnson quoted Adam Smith and attacked what he called “paternalistic” policies. According to two former staff members, Johnson, citing an overlooked subsection of Dodd-Frank, soon revised a boilerplate description of the bureau’s mission that was appended to the bottom of news releases. It would henceforth include a reference to eliminating “unduly burdensome regulations.”

Emma Doyle, who went on to serve with Mulvaney at the bureau, told me that the PADs were intended to make life easier for career employees. “It’s helpful to be able to translate what the director’s vision is back down to staff and have the staff have an intermediary interceding on their behalf,” she said. But the appointments drew outrage inside and outside the C.F.P.B. Older agencies were accustomed to the ebb and flow of administrations, each with its own priorities. But many at the bureau believed in Warren’s idea of a regulator that permanently represented the interest of consumers — at least, as they defined it. Each side argued that the other wanted to politicize an otherwise pristine bureaucracy. “I originally designed the agency to be as nonpolitical as possible,” Warren told me. “When Mulvaney came in and brought in his own team of political hacks and put them in the agency, I was shocked.”

Mulvaney’s appointments were particularly alarming to the bureau’s supervision and enforcement staff, led by a former line attorney named Chris D’Angelo. When Mulvaney first arrived, D’Angelo urged his staff not to assume the worst, people who worked with him told me. But D’Angelo grew alarmed when Mulvaney named his PAD, a midlevel administration financial-services lawyer named Eric Blankenstein, who had little experience in consumer enforcement. D’Angelo took his case directly to Mulvaney. He argued that career enforcement officials at other financial regulatory agencies, like the Federal Deposit Insurance Corporation, reported directly to the appointed head of the agency, in order to create a clear line of accountability for enforcement decisions.

Mulvaney did not budge. (D’Angelo, who left the bureau in February, declined to comment.) After Blankenstein arrived, lawyers in the enforcement office were ordered to prepare summaries justifying every active enforcement matter — more than 100 open cases, most of them not yet public. Two days later, without warning, the bureau filed a one-sentence notice in federal court in Kansas announcing that it was withdrawing a high-profile lawsuit against a quartet of payday lenders, a case known as Golden Valley.

The Golden Valley lawsuit was a product of Cordray’s enforcement strategy against scofflaw lenders. According to the bureau’s complaint, Golden Valley and three other lenders were technically owned by the Habematolel Pomo of Upper Lake, a California tribe, but were largely run out of a call center in Kansas. The lenders made payday loans over the internet, claiming that tribal ownership allowed the firm to ignore usury laws in states where its triple-digit interest rates were illegal. Using a legal theory the bureau had successfully employed in earlier cases — that trying to collect on illegal loans is itself a deceptive business practice under Dodd-Frank — the bureau filed suit against Golden Valley and the other lenders in the spring of 2017. The sudden withdrawal mystified and worried other lawyers in the division, who wondered what implications it held for their own cases.

As the grumbling spread throughout his division, Blankenstein convened a staff conference call. According to two people who were on the call, Blankenstein told them that in a previous meeting Mulvaney asked several questions about the Golden Valley case, including whether the defendants had fair notice that the bureau would view their conduct as illegal under Dodd-Frank. One person on the call later described this “fair notice” argument to me as one that could, in practice, justify throwing out many of the bureau’s other payday-loan cases, which advanced much the same theory as the Golden Valley lawsuit. But strikingly, according to the two people on the call, Blankenstein claimed that he himself didn’t know exactly why Mulvaney pulled the case.

Some career employees saw a kind of strategic ambiguity at work, designed to muddle decision-making and insulate Mulvaney as he neutered the agency’s enforcement work. The bureau’s enforcement lawyers typically spent months or years developing cases from the bureau’s complaint database or from information garnered from supervisory exams. In a memo to the staff, Mulvaney pledged to prioritize enforcement according to the volume of consumer complaints the bureau received, nearly a third of which related to debt collection and only 2 percent of which concerned payday lending. But bureau employees told me it was difficult to discern which particular cases and legal theories Mulvaney might allow to go forward, casting a chill over the work. Where Cordray had allowed lower-ranking enforcement lawyers to present cases to him directly, Mulvaney required lawyers to present their cases through Blankenstein, and bureau employees told me they had little sense of whether Blankenstein was arguing for them or against them when he took cases to Mulvaney. Craig Cowie, a former bureau enforcement lawyer who supervised several major payday-loan cases, including the one against Golden Valley, worked under Mulvaney for six months. “I never met him,” Cowie told me. “I was never even in the same room as him.” (Cowie declined to discuss any specific case, citing confidentiality rules.) “And I don’t recall him ever visiting enforcement,” he added.

By February, Mulvaney had spread a kind of bureaucratic fog across his new agency. He moved the Office of Fair Lending and Equal Opportunity from Blankenstein’s enforcement division to his own director’s office, frustrating coordination between the bureau’s experts on discriminatory lending and the lawyers who enforced the law. He took responsibility for coordinating the bureau’s oversight of the Military Lending Act away from the bureau’s service member affairs chief — a revered retired Army colonel — and gave it to a young aide with little experience. Cordray sometimes wouldn’t end a meeting until everyone in the room had weighed in on the matter at hand. Mulvaney, by contrast, began restricting more meetings to senior officials. The move was not atypical of federal agencies. But, employees told me, the effect was that information flowed up the chain of command and rarely back down. The practice also provided protection: Mulvaney’s team faced a torrent of leaks from within the bureau and intense scrutiny from without, as consumer groups demanded Mulvaney and Johnson’s calendars and email correspondence. One group, Allied Progress, filed more than 250 public-records requests during Mulvaney’s tenure.

If secrecy served to protect Mulvaney, it also made the C.F.P.B. even less efficient, worsening just the kind of management problems Mulvaney had, in theory, set out to combat. Junior staff members played endless games of telephone as they tried to suss out Mulvaney’s marching orders. “You had to have a meeting after the meeting so that people would know what was decided,” one former employee told me. (Mulvaney and Johnson ultimately compromised, allowing junior staff members to dial into more meetings.) Cordray had allowed enforcement lawyers to send out a civil investigative demand — a kind of noncriminal subpoena — with the approval of a midlevel supervisor. Bureau lawyers told me that the practice allowed them to make narrower, less burdensome requests of lenders, because they had to jump through fewer hoops to ask for more. But Mulvaney viewed the requests as an onerous demand of the lenders who received them — to be used only by bureau lawyers as a last resort. All civil demands had to go through Blankenstein. Over the coming months, the pace of investigations would slow drastically.

Mulvaney presented his decisions as part of an earnest effort to fulfill the bureau’s stated mission. He was not trying to undermine the bureau, he argued, but operate it within the plain black letter of Dodd-Frank. “I intend to execute the statutory mandate of the bureau to protect consumers,” he wrote to the staff in one memo. “But we will no longer go beyond that mandate.” To career employees, however, Mulvaney’s crusade against statutory deviation increasingly felt like an ideological publicity stunt, one that came at the expense of the agency’s ostensible mission. Mulvaney commenced a lengthy effort to change the bureau’s name, reasoning that Dodd-Frank had technically created something called the Bureau of Consumer Financial Protection, not the Consumer Financial Protection Bureau. “C.F.P.B. doesn’t exist,” he told bankers at a conference in April. “C.F.P.B. has never existed.” A new working group was convened to execute Mulvaney’s decision, while staff members were prodded to begin using the new name on internal documents. Mulvaney appeared not to consider the vast costs of rewritten paperwork and compliance procedures that a renaming might place on the banks and on other businesses the bureau regulates: $300 million, according to an internal agency analysis later obtained by The Hill. (The name change was abandoned in December.)

Nor was Mulvaney reluctant to ignore the statute when it suited him, former employees told me. In a memo that spring, he announced the creation of new bureau offices dedicated to “cost-benefit analysis” and “innovation.” Technically, neither office was prescribed by Dodd-Frank. Almost as an afterthought, Mulvaney effectively dissolved the student-loan ombudsman’s office — a position that was mandated by Dodd-Frank. A Mulvaney spokesman told reporters that the reorganization was a “very modest organizational chart change.” But on the same day, Mulvaney signaled that the bureau would scale back a long-awaited overhaul of student-lending rules. Last August, the ombudsman, a Cordray veteran named Seth Frotman, quit in protest, accusing Mulvaney of ignoring Dodd-Frank’s intent. “It felt like we were in some Ayn Rand debate club,” Frotman told me recently.

As Trump appointees elsewhere around the government were learning, it takes a bureaucracy to deconstruct one, and in all the speed and confusion, some of Mulvaney’s own priorities began to suffer. By the spring, months after he announced that the bureau would reconsider Cordray’s ability-to-repay rule, little apparent progress had been made. One problem, according to two former lawyers with the agency, was that Mulvaney and Johnson had more experience interrogating regulatory agencies than running them. Mulvaney had first asked the head of the research, markets and regulations division, a former financial-industry lawyer named David Silberman, if he could simply delay the new payday-loan rule. “They thought they could come in and snap their fingers,” a former lawyer there told me. But the law lays out a lengthy, nuanced procedure for writing or revising federal rules. In a joint memo with the legal division, according to a former staff member, Silberman’s team warned Mulvaney that he had little basis on which to delay Cordray’s rule and that he would most likely lose in court. Mulvaney had good reason to listen to them. As Trump officials at other agencies tried to roll back environmental and other regulations, they were losing in court at an embarrassingly high rate; in many cases, judges slapped down the administration for failing to follow proper rule-making procedures.

Next, a team in Silberman’s division was asked to devise arguments in favor of replacing the Cordray rule with a new rule, one that would challenge the underpinnings of Cordray’s regulation. The work was inherently awkward: There were no new studies or industry data that might provide a basis to replace the rule, meaning they would have to attack their own analysis of the payday-loan industry. Most of the original authors were recused from the work, leaving a bare-bones team of about a half-dozen people to finish the job. “You would be arguing against yourself,” a former employee in Silberman’s division told me. “You’d be saying, ‘Everything I argued last year, I’d have to say I was wrong about.’?” By the spring, Silberman’s division had begun generating timelines and option memos for the bureau’s senior staff members, including proposals to get rid of the rule’s central feature, requiring payday lenders to make sure people can repay their loans.

Yet Mulvaney and his deputies provided little feedback or direction on the proposals, according to former Silberman staff members I spoke with. “It was radio silence from them on what direction they wanted to take,” the former staff member told me. The process stalled. Payday lenders, who had expected quick action from Mulvaney, began to panic. Cordray’s ability-to-repay rule would go into full effect in August 2019, in a little more than a year. Mulvaney’s team might come up with a new rule before August, but it might not, and in the meantime payday lenders would have no choice but to reconfigure their businesses — or shut them down — to prepare for the old one. Shaul, the leader of the Community Financial Services Association, told me that he had difficulty getting any sense of where the bureau was headed. “I was not able to get to see Mulvaney,” Shaul told me. “I was hoping we could convince Mulvaney to repeal that rule and craft a new rule.” What they needed was certainty, or at minimum some kind of delay. As months passed without any word, Shaul told me, his members were increasingly set on suing the agency.

What happened next underscores some of the absurdity and complexity of turning an agency inside out. In early April, Johnson granted Shaul an introductory meeting at the agency’s headquarters. At the last second, Shaul emailed to say he would be bringing Chris Vergonis, one of the association’s lawyers at Jones Day — and one of the people who would prepare any lawsuit against the agency. His presence was potentially dangerous for Mulvaney’s team; it could raise questions about whether the bureau was improperly coordinating with the industry. According to notes of the meeting, taken by a career bureau employee and obtained by the consumer group Public Citizen, Shaul told Johnson that the association had in fact been preparing to sue the C.F.P.B. to stop Cordray’s rule but now believed that it would be better to work with the bureau to write a new one. With the Cordray rule looming, Shaul stressed, they would need to move quickly.

A person familiar with the meeting, who asked for anonymity because of the legal sensitivities involved, told me that Shaul and Vergonis kept pushing for details of the new rule and at one point asked outright what reaction the bureau would have to a lawsuit. According to the staff notes, Johnson replied carefully, as a good lawyer would; it would be inappropriate for him to discuss either the rule or the lawsuit, he told them. Shaul gave me a similar account. “I found them so cautious as to preclude our having any real discussion,” he told me. “We came away from the meeting thinking that we were not going to get many answers.” Four days later, the Community Financial Services Association and another industry group filed suit against the bureau.

The C.F.P.B.’s response was atypical of a regulatory agency. In mid-May, the bureau’s lawyers called Vergonis with a proposal: They now wanted to in effect join forces with the industry, by asking a judge to stay both the compliance date of Cordray’s rule and the lawsuit. In a kind of regulatory jujitsu, the bureau would cite Mulvaney’s own decision to reconsider the Cordray rule as an excuse to stop the clock on the August 2019 implementation. There was just too much fog. “The bureau’s decision to initiate rule making to reconsider the payday rule creates inherent uncertainty,” the bureau lawyers and Vergonis’s team wrote in court papers filed later that month. “There is no way to know whether plaintiffs’ members will ultimately need to comply with the payday rule, a modified payday rule or no rule at all.”

The bureau still had not explained what kind of rule it planned to propose, much less implement, and in June, a Texas judge rejected the request for a stay of the compliance date. But that October, the C.F.P.B. announced that its new rule would indeed target the ability-to-repay requirement. Not long after, the judge agreed to grant the stay, in effect delaying the core of Cordray’s old rule. Inside the bureau, according to two former employees and an industry lawyer I spoke with, the regulation-writing team lurched into high gear, rushing to deliver what the bureau had promised. The industry had won what it needed most: time.

Almost from the moment Mulvaney arrived at the C.F.P.B., rumors ricocheted around Washington that Trump was eyeing him as a future White House chief of staff. Mulvaney denied these rumors with the studied self-deprecation of a man whose star was on the rise. But by the time the White House had settled on a nominee to succeed Mulvaney at the C.F.P.B. — Kathleen Kraninger, his deputy in the budget office — in June, Mulvaney was going into the bureau’s offices only twice a week. C.F.P.B. staff members were just as likely to catch a glimpse of him on television: Mulvaney’s dual agency hats made him an in-demand guest on cable shows, where he capably defended Trump against the day’s mini-scandal. The president reportedly enjoyed watching him butt heads with cable hosts, and despite a packed schedule, Mulvaney found time to polish his skills. In April, after a contentious morning Senate hearing where he made headlines sparring with Warren, he boarded an evening flight to Los Angeles. There, he spent most of two days in media training with Frank Luntz, the famed Republican messaging guru and a friend dating back to Mulvaney’s time in the South Carolina Legislature. (A spokesman for Mulvaney told me that Luntz donated his services.)

Mulvaney continued to give speeches at financial-industry conferences, issuing sweeping pronouncements of bureau policy and often taking aim at Warren, a favorite target of his boss. When Warren sent Mulvaney letters demanding information about his conversations with payday lenders or his decision to freeze the bureau’s data-collection efforts, a former employee told me, Mulvaney’s team would take special relish in devising confrontational replies. Mulvaney and his staff members, for their part, viewed their tussles with Warren as a way to deliver the senator an unpleasant taste of her own medicine — an object lesson in the unaccountable bureaucracy that she had birthed and that he was remaking according to a different vision. “The bureau is not going anywhere,” Mulvaney told a conference of mortgage bankers in October. “There is no appetite on Capitol Hill for getting rid of the bureau. We are here.”

But within the walls Warren had so carefully constructed, the bricks began to loosen. Over the last year, Mulvaney’s temporary hiring freeze has turned into an indefinite one, slowly shrinking the C.F.P.B.’s staff by attrition. Bureau news releases, once packed with colorful details about abusive lending practices, have been toned down to dry legalese. According to a report by Christopher Peterson, a senior fellow at the Consumer Federation of America, enforcement at the bureau appears to have dwindled radically. In 2018, the bureau announced just 11 lawsuits or settlements, less than a third of the number during Cordray’s last year. In the months since Mulvaney reorganized the Office of Fair Lending, the bureau has not brought a single case alleging illegal discrimination. While Mulvaney pledged data-driven enforcement, his bureau brought only one case against debt collectors, who account for more complaints to the C.F.P.B. than almost any other industry. Where Mulvaney or his successor have allowed cases to go forward, lenders have often settled with lowered fines or none at all. When the bureau settled a three-year prosecution of a group of payday lenders called NDG Enterprise — which found that thegroup had falsely threatened American customers with arrest and imprisonment if they failed to repay loans — NDG walked away without paying a cent.

After Trump announced in December that he was promoting Mulvaney to the top staff job in his administration, senior White House officials told reporters that he was the president’s “original Plan B.” As Trump’s acting White House chief of staff, Mulvaney sits — however temporarily — at Washington’s bureaucratic apex, with influence far beyond the C.F.P.B. In the months leading up to the announcement, Mulvaney sometimes brushed off questions about his ambitions by joking that he was busy enough running two agencies. Now, in a sense, he runs them all.

A version of this article appears in print on , on Page 32 of the Sunday Magazine with the headline: Make America Pay Again. Order Reprints | Today’s Paper | Subscribe

Related Coverage

Consumer Protection Bureau Cripples New Rules for Payday Loans

Feb. 6, 2019

Image

Payday Rules Relax on Trump’s Watch After Lobbying by Lenders

Feb. 2, 2018

Image

How Cities Make Money by Fining the Poor

Jan. 8, 2019

Opinions

Is the GOP the law and order party? Not so much.

Jeffrey Epstein appears in custody in West Palm Beach, Fla., in 2008. (Uma Sanghvi/AP)

By Catherine Rampell

Columnist

December 10, 2018

For a party that claims to be “tough on crime,” Republicans seem pretty confused by what it means to hold criminals to account.

Particularly when it comes to white-collar crimes, or really any crimes committed by rich people.

On Friday, for instance, Rep. Matt Gaetz (R-Fla.) argued that President Trump should pardon his former campaign chairman Paul Manafort, who has been convicted of eight felonies and pleaded guilty to another two.

“If Manafort was going to be prosecuted as a consequence of his tax crimes or lobbying crimes, that would have happened more than a decade ago,” Gaetz said on Fox News, adding on Twitter, “The only reason he was prosecuted is because of politics.”

Joseph diGenova, a former Reagan-appointed federal prosecutor and now frequent Trump surrogate, likewise has suggested that Manafort should not have been prosecuted because he had “no criminal record.”

By this logic, absent an extant criminal record, no one — not even pre-prosecution Al Capone — should ever get charged with a crime. Never having been in jail becomes a Get Out of Jail Free card.

In reality, the reason Manafort wasn’t prosecuted ages ago — despite the many red flags over the years — has little to do with politics and more to do with the fact that the United States has basically stopped prosecuting white-collar crimes. Adjusted for population, there were half as many white-collar prosecutions in fiscal 2018 as there were 30 years earlier, according to data from Syracuse University’s Transactional Records Access Clearinghouse.

Manafort is hardly the only wealthy white guy whom prominent Republicans — including GOP law enforcement officials — have sought to shield from the full weight of the law.

Consider the sweetheart plea deal given to Palm Beach billionaire Jeffrey Epstein,which the Miami Herald recently reported on in damning detail.

In a “cult-like sex pyramid scheme,” Epstein allegedly molested or sexually abused dozens of underage girls, some still in braces. One 15-year-old victim said she was recruited to be a “sex slave” out of the Mar-a-Lago locker room, where she worked as a towel girl.

The 53-page indictment prepared by law enforcement officials in 2007 could have landed Epstein in prison for life. Instead, Epstein, a longtime Democratic donor,hired a few well-connected Republican lawyers (including former independent counsel Kenneth W. Starr) and scored “one of the most lenient deals for a serial child sex offender in history,” according to the Herald.

The no-prosecution deal allowed him to serve just 13 months in the private wing of a local jail, from which he was granted “work release” 12 hours a day, six days a week. The agreement also effectively shut down an FBI investigation into others who might have been involved.

Which George W. Bush-appointed U.S. attorney decided to go so soft on sex crime? Why, Alexander Acosta, now Trump’s secretary of labor, a position with oversight over international child-labor laws and human trafficking.

Acosta effectively squelched an investigation into a real-life, Pizzagate-style child-sex ring. Yet law-and-order Republicans have remained mum on calls for his removal.

Other well-heeled, well-connected entities have also found the quality of Republican mercy unstrained.

Shortly after White House Budget Director Mick Mulvaney took over as acting director of the Consumer Financial Protection Bureau, the agency dropped an investigation into an installment lender that had donated to his congressional campaign. A ProPublica investigation had found that the company was charging annual interest rates that could exceed 200 percent.[advance am?]

...

2/19

rollback of payday loans regs ?! fox celebrates; kpfa had amazing stat, like 4/5 roll over?

https://thehill.com/opinion/finance/429349-cfpb-looking-out-for-financial-predators-not-main-street-americans

To protect Main Street Americans — consumers, investors, homeowners, students, soldiers, retirees and the elderly — from predatory financial behavior and financial instability that can lead to devastating financial crashes like 2008, the Dodd-Frank law created the Consumer Financial Protection Bureau (CFPB).

It was designed to be and has been a powerful, independent and effective consumer cop policing the Wall Street beat.

In its first five years, the CFPB established itself as one of the most successful consumer and financial protection agencies ever. In addition to implementing numerous rules to protect consumers and stop predatory financial behavior, it has required the industry to return more than $12 billion to 30 million Americans who have been ripped off, cheated or swindled by the financial industry.

Regrettably, that type of consumer protection dropped dramatically when the Trump administration’s anti-consumer appointees took over the CFPB. Director Kathy Kraninger’s recent first major rulemaking proves this by proposing to gut the payday lending rule.

This proposal is so egregious that is effectively changes the Consumer Financial Protection Bureau into the Financial Predator Protection Bureau.

The CFPB is proposing two indefensible changes to the payday lending rule:

eliminating the “ability to repay” underwriting requirements for extending a payday loan, essentially greenlighting lending to people who do not have the ability to repay a loan.

eliminating the “reborrowing limits” by any single borrower, allowing the payday lender to keep lending to the borrower who cannot repay so that they can repay the original loan that they can’t repay.

These changes will create a debtor’s prison without bars. They will put borrowers on an endless cycle of debt that they can never get out of while the payday lender keeps charging and collecting fees, penalties and interest from the loans rolled over and over again. Remember that many of these loans have interest rates of up to 400 percent.No wonder it is a $38.5 billion industry.

Compounding the economic harm, payday lenders typically if not always require direct access to a borrower’s checking, savings and/or debit accounts, which they automatically withdraw funds from to repay the loan or the fees, penalties and interest.

That means the borrower not only sinks further and further into debt to the payday lender but that the payday lender gets paid before anyone else, like the landlord, the grocer or the pharmacist.

Remarkably, the CFPB itself discloses the insanity of their proposed changes: It states that the ability to repay requirement would result in two-thirds of payday lender customers not qualifying for a first loan.

Put differently, today two-thirds of payday lender customers do not have the ability to repay the loan they are receiving, which makes reborrowing inevitable.

In real numbers, the CFPB “estimates that the number of loans made to approximately 12 million borrowers would be cut in half, and that loan volume would decrease by roughly 90 percent” because those borrowers could not repay the loan at the time of getting the loan.

Rather than being concerned that lenders were making loans to people who they know cannot pay back the loans, the CFPB is now worried that “roughly three out of four payday store fronts would close and as many as 9 out of 10 vehicle title storefronts would close.”

That’s not a consumer protection agency; it’s a predator protection agency.

The agency tries to justify the proposed changes by claiming to be concerned that borrowers would lose access to credit. That’s lunacy. Banks and lenders deny credit to people who can’t afford to pay them back. That’s exactly what they are supposed to do: You’re not supposed to get a loan that you cannot repay.

The CFPB also says that payday lenders would suffer “irreparable harm” due to “substantial decreases in revenue,” causing “many to exit the market.”

There should be no market for lenders knowingly making loans to people who cannot repay them unless they take out another loan that they also cannot repay to repay the first loan they never should have received.

These practices bear a striking resemblance to the subprime lending business model that led to the 2008 crash:

The subprime mortgage industry preyed on the most economically vulnerable people who lived on the edge, many of whom didn’t understand the terms of the loans or were outright defrauded.
At the core of the subprime industry was the “originate-to-distribute” model, where lenders took fees for the loans up front, had no skin in the game and passed along poorly underwritten (if underwritten at all) loans.
That industry only got away with its actions because there were no regulatory cops on the financial consumer protection beat to stop them.
Compounding the problem was the fact that when state regulators used state consumer protection laws to stop predatory subprime lending practices, federal regulators sued them, claiming federal preemption prohibited the states from enforcing their own laws. The irony is that this is precisely why the CFPB was created.

This is not to say that payday lenders will cause another crash, although consumer abuses and predatory practices are often the leading edge of industry developments that result in crashes. However, even if that’s not likely, that wasn’t the only reason the Dodd-Frank law was passed.

Protecting financial consumers was one of the primary reasons for that law, and these abusive lending payday practices are exactly why the CFPB needs to exist. This proposed rule should be withdrawn and the CFPB should get back in the business of protecting vulnerable consumers who desperately need a cop on the Wall Street beat.

Dennis M. Kelleher is president and CEO of Better Markets, a Washington-based organization that fights for a financial system that supports the productive economy, jobs and growth by promoting the public interest in financial reform, financial markets and the economy.

lewandowski

https://www.exposedbycmd.org/2018/05/02/alec-payday-loan-company-gets-reprieve-under-trump-administration

Corporate members of the American Legislative Exchange Council (ALEC) are benefiting from the deregulation frenzy of the Trump Administration. ALEC of course is the corporate bill mill that provides a library of lobbyist-drafted or approved “model legislation” to right-wing state lawmakers across the land.

Advance America is the largest payday loan lender in the United States, with 2,500 locations. The company did not return our call about its latest activities, but in 2014 Advance America was listed as a “trustee level” financial sponsor of ALEC.

The Trump administration’s treatment of Advance America and the predatory payday loan industry shows how the Trump teams “deconstruction of the administrative state” often pits the low income and working poor against giant companies, companies that enjoy the protection of the politicians who take their money.

CFPB CRACKS DOWN ON PAYDAY LENDING INDUSTRY

The Center for Media and Democracy has crunched the numbers and Advance America had over $40 million in class action lawsuit pay-outs, fines and restitution as a result of cases brought by state attorneys generals since 2009. The company was found to be cheating consumers by overcharging and ladling on the hidden fees. In some instances, when people authorize withdrawals from bank accounts to pay the loan, the banks will also charge fees.

This type of predatory lending prompted the Consumer Financial Protection Bureau (CFPB), the federal consumer agency championed by U.S. Senator Elizabeth Warren and President Obama, to crack down on the industry.

Among other things, the CFPB issued a rule in 2017, that would have forced the payday industry to “reasonably determine that the consumer has the ability to repay the loan,” and would have prevented lenders from attempting to collect payment from people’s bank accounts in ways that racks up excessive fees. The rule also would have made payday loan companies notify consumers before attempting to withdraw payments from their account.

But when President Trump put Mick Mulvaney in charge of the CFPB, he literally put the fox in charge of the hen house.

MULVANEY WREAKS HAVOC AT CFPB

Many consumer groups including Americans for Financial Reform and U.S. PIRG consider Trump’s appointment of Mulvaney to be illegal. Mulvaney already had a job as the director of the Office of Management and Budget. The CFBP already had an acting director as provided by statute, long-time CFPB deputy director Leandra English. Now the issue is in courtand a federal judge is expected to rule soon. But Mulvaney did not sit around waiting for the courts to rule, he got right to work.

Advance America, owned by the Mexican conglomerate Grupo Salinas, has its U.S. headquarters in Spartanburg, South Carolina. Mulvaney’s old House district includes parts of Spartanburg.

As a Republican U.S. House member from South Carolina, Mulvaney took over $62,000 from payday lenders. This week he gave a speech to the American Bankers Association and told them how his office operated.

“We had a hierarchy in my office in Congress,” said Mulvaney. “If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.”

Well, Mulvaney appears to have carried that policy, right into the nation’s most important consumer protection agency. In December 2017, Mulvaney abnegated his responsibility to protect consumers by deciding to indefinitely postpone the new payday lender rule.

By putting the rule on ice, Mulvaney helps Advance America and other payday lenders by allowing them to continue to lend short term money without any real credit check of borrowers.

Next he dropped the CFPB lawsuit against four predatory lenders who were unlawfully making loans with interest rates of an astounding 950 percent APR in at least 17 states. Mulvaney even wants to deep-six the critically important, public data base where consumers can register complaints against abusive financial firms, reports NPR this week.

There is a need for short term lending in times of economic distress for consumers and especially for those who are “unbanked”–do not have access to affordable community banks or credit unions in their neighborhoods–but the industry has a long history of charging excessive fees and interest rates, as much as 500% per year in some states, and then suing borrowers and garnishing wages for repayment.

Payday loans “trap borrowers in an unaffordable cycle of debt, causing severe financial harm such as bank penalty fees, delinquency on other bills, or even bankruptcy.” Mulvaney’s action “shows disdain for consumer protection and low-income communities that are targeted by these debt trap loans,” says the public interest group Stop the Debt Trap.

The history of state attorneys general lawsuits and class action claims against Advance America, summarized below, as well as the fact that almost all payday lenders do business in multiple states clearly shows the need for federal legislation, not just state oversight, which might be spotty in some states.

2018: Advance America forced to pay $160,000 to state of California and refund $88,000 to customers for charging above legal interest rates, and for using lead generators to find borrowers, a practice prohibited by California law.

2015: Advance America agrees to refund $8 million in loan fees and interest to Pennsylvania customers and write-off $12 million in loans, for exceeding state interest rate limits by charging excessive fees to get around the state interest rate cap. “We maintain that this company disguised its outrageous interest rates as fees, misleading consumers and violating the law,” former state Attorney General Kathleen Kane said. “Payday lending practices adversely impact vulnerable consumers and often force them into a cycle of debt from which many cannot recover.”

2010: Advance America settles a class action lawsuit in North Carolina by paying 140,000 customers $18.75 million in restitution. In both the class, the largest of its kind against a payday lender and the state Attorney General accused Advance America of charging excessive fees and fines.

2009: Advance America agrees to pay a minimum of $2 million to Georgia borrowers to settle all class action claims in the state. The average borrower would receive up to $90 to settle lawsuits that claimed the company violated state law by charging excessive fees to get around interest rate caps.

http://preydaylenders.org

http://preydaylenders.org/predator/aycox/

inauguration

157 466 IND AYCOX, RODERICK $500,000 12/15/2016 3455 PEACHTREE ROAD, NE ATLANTA GA 30326 This guy is a PayDay Lender with ties to the mob, specifically a guy named Alvin Malnik. Title-Lending business owner with history of giving to Republican party (http://www.huffingtonpost.com/2012/03/15/roderick-aycox-auto-title-loans-romney-super-pac_n_1348215.html). However address listed is not his. Lives in Alpharetta (https://www.mylife.com/roderick-aycox/roderickaycox) and business is there too.

319 954 IND AYCOX, LESLIE $500,000 12/15/2016 3455 PEACHTREE ROAD, NE ATLANTA GA 30326 Wife of Roderick Aycox, see row 467 - Address is for a Morgan Stanley branch.

LEC AG

https://www.opensecrets.org/news/2016/02/lawmaker-who-recited-words-of-payday-lenders-lobbyist-also-took-their-donations/

https://www.propublica.org/article/company-that-sued-soldiers-settles-colorado-lawsuit

In 2014, ProPublica published an investigation of :{USA Discounters:(style="background-color:#ffff66;"):}:, a subprime lender that, contrary to its name, specialized in enticing military service members into overpaying for furniture, electronics and appliances. When they fell behind on the high-interest loans, the company often took them to court in Virginia — a few miles from the company’s headquarters, but often nowhere near where the service members were based. With court judgments in hand, the company gained the power to seize money from soldiers’ paychecks or bank accounts.

Since our story ran, USA Discounters has gone out of business and declared bankruptcy, but still has faced legal challenges over its practices. This summer the company settled with the attorney general of Colorado over a suit filed last year.

The state’s suit focused on the company’s collection techniques, but it also alleged that USA Discounters had charged interest rates above what is allowed in Colorado. The deal involves a penalty of $1 million and breaks for thousands of customers on outstanding debt. Although the company has shut down its stores, it continues to collect on outstanding loans.

As part of the deal, USA Discounters did not admit or deny wrongdoing. The company disclosed in a filing in its bankruptcy case that other regulatory investigations are ongoing.

In addition to settling with USA Discounters, Colorado’s attorney general also settled a separate suit with two other retailers, Freedom Furniture and Electronics and Military Credit Services. These businesses, owned by a pair of brothers, used practices similar to those of USA Discounters. As we reported in 2014, these three companies had filed more than 35,000 collection suits in Virginia courts since 2006. And like USA Discounters, Freedom has also been hit with other investigations: In late 2014, Freedom settled similar lawsuits brought by two other states and the federal Consumer Financial Protection Bureau. It closed its stores last year.

Colorado’s attorney general said that, together, the settlements with USA Discounters and Freedom would net $3.9 million in redress for harmed consumers. Freedom also did not admit wrongdoing as part of the settlement with Colorado.

A single unaffordable payday loan is one loan too many. The proposed rule gives a “free pass” to payday lenders to make six bad loans, allowing lenders to sink people into a dangerous debt trap before the rule kicks in. The CFPB was right to base their proposal on the standard that borrowers should be able to repay their loan, but that standard must be on every loan, from the first loan. The CFPB should also enact protections to prevent lenders from stringing people along by ensuring a 60 day break between loans and limiting ‘short term’ loans to 90 total days of indebtedness per year.

https://www.opensecrets.org/usearch/?q=advance+america&cx=010677907462955562473%3Anlldkv0jvam&cof=FORID%3A11

Right To Rise USA	$25,000	$25,000	$0
Fighting For Ohio Fund	$10,000	$0	$10,000
Scott, Tim	$7,300	$7,300	$0
Bush, Jeb	$6,400	$6,400	$0
Shelby, Richard C	$5,000	$5,000	$0
Clinton, Hillary	$2,700	$2,700	$0
Issa, Darrell	$2,500	$2,500	$0
Democratic Senatorial Campaign Cmte	$1,000	$1,000	$0
Gowdy, Trey	$1,000	$1,000	$0
Toomey, Pat	$1,000	$1,000	$1,000

Scott, Tim (R-SC)	$7,300
Bush, Jeb (R)	$6,400
Shelby, Richard C (R-AL)	$5,000
Clinton, Hillary (D)	$2,700
Issa, Darrell (R-CA)	$2,500

NC https://www.opensecrets.org/races/contrib.php?cycle=2012&id=NC11

steele sclc:

Some of the deals Steele made between SCLC and business interests proved controversial. In 2008, for example, an op-ed bearing Steele's byline appeared in a number of Southern U.S. newspapers criticizing federal legislation to reduce credit card fees by arguing that it would boost the profits of major retailers including Wal-Mart. But it turned out Steele didn't write the editorial and was angry the P.R. firm that did put his name on it because, as the Washington Post reported, Wal-Mart "is listed on the SCLC's Web site as a sponsor of the organization. No one at the SCLC would want to insult a large benefactor."

That same year, Steele had an op-ed published in the Washington Post that noted the devastating effect the subprime mortgage crisis was having on minority homeowners. But rather than supporting proposals to better regulate credit markets, Steele attacked them -- while defending companies that issued high-interest credit cards to people with bad credit. As Mother Jones observed at the time, that's not altogether surprising when you consider that a year earlier "the SCLC formed a partnership withCompuCredit, a subprime credit card issuer and payday lending company."}:

The Federal Trade Commission eventually sued CompuCredit for unfair and deceptive trade practices and for violating the Fair Debt Collection Practices Act, charging that it cheated consumers out of more than $200 million through a scheme in which they paid so much in fees that they had little credit available.

But Steele defended the company even then, saying that it "has been a true friend to the SCLC."

Finally, lower costs make it relatively easy for dark and gray money to flood state and local elections with unaccountable messages. Entities with deceptively community-minded names — Californians for Good Schools and Good Jobs, shielding a Texas oil company;

https://www.brennancenter.org/blog/see-how-citizens-united-hurting-democracy-look-local-elections

Proper Role of Government Education Association, shielding payday lenders — can invest relatively modest amounts but still saturate the airwaves and mailboxes.

http://www.democracynow.org/2016/6/28/headlines/report_finds_surge_in_dark_money_at_state_and_local_level

A new report has found a surge in the use of dark money donations at the state and local levels. The Brennan Center finds secret spending at the local level increased in recent years, in part because of so-called gray money from organizations funneling money through other groups in order to conceal where it’s coming from. Examples of local spending on races include "Mining companies secretly targeting a legislator who opposed permits. Food companies battling a ballot measure to add labeling requirements. Payday lenders supporting an attorney general who promised to shield them from regulation." Because of the lower cost of state and local elections, such donations can have an even bigger impact.

http://www.alternet.org/economy/six-billion-dollar-industries-make-their-profits-exploiting-poor

Many see families in poverty and seek to help. Others see families in poverty and see opportunities for profit.

Here are six examples of billion dollar industries which are built on separating poor people, especially people of color, from their money, the reverse Robin Hood.

Check Cashing Businesses

Check cashing businesses. Cash a $100 check? At Walmart that will be $3. At TD bank non-customers pay $5 to cash a check from their bank.

Nearly 10 million households containing 25 million people do not have any bank account according to the FDIC. Most because they did not have enough money to keep a minimum balance in their account.

Check cashing business are part of a $100 billion industry of more than 6,500 check cashing businesses in the US, many which also provide money orders, utility bill payments and the like, according to testimony provided to Congress by the industry.

Pawn Shops

More than 30 million people use pawn shop lending services for an average loan of $150. One company, Cash America, has 84 check cashing centers and 859 lending locations in the US, over 260 in Texas alone, extending over $1 billion in pawn loans. In their 2014 annual report they disclose that 30 percent of people never return to redeem the item they pawned and the sale of those items makes up over half of the company revenues. The company paid millions in penalties in 2013 for overcharging members of the armed services and filing inaccurate court pleadings in thousands of cases. The CEO was given$6 million in 2014.

Overdraft Fees

Overdraft fees, when there is not enough money in the checking account or credit card to cover all purchases, is an $11 billion industry for banks, according to the Consumer Financial Protection Bureau. A recent New York Times article explains how banks sometimes charge overdraft fees even when the customer has enough money in their accounts to cover the purchase and were forced to pay more than a billion dollars for manipulating the order of purchases to maximize the chances that their customers will have to pay extra fees.

Payday Loans

Payday loans are used by people over 15 million times a year and can lead to deep debt problems and usually involve incredible percentages of up to 391 percent according to the Consumer Financial Protection Bureau. Pew Charitable Trusts reported pay day loans are a $7 billion dollar a year industry. The Federal Trade Commission won a $300 million case against two payday lenders who were deceiving borrowers, who, for example, took out a $300 loan thinking it could be repaid for $390 when in fact the lender was charging $975 to pay off the $300 loan. The US Department of Justice indicted former race car driver Scott Tucker on criminal charges for operating a $2 billion nationwide payday loan operation which routinely charged interest on loans for over 4.5 million people of 400 to 700 % per year. The nation’s largest pay day loan company, Advance America, charged nearly 140,000 people in North Carolina annual percentage ratesexceeding 450 percent until it was stopped by the state.

Car Title Loans

More than 2 million people use auto title loans every year, paying about $3 billion in fees each year, with typical annual percentage rates of 300 percent, according to the Pew Charitable Trusts. The Center for Responsible Lending estimates there are over 7000 businesses which loan money to people based on holding the title to their cars, usually charging up to 300 percent annual interest, which they advertise as 25 percent per month. The average borrower gets a loan of $951 and pays off $3,093.

Debt collection

Debt collection is a $13 billion dollar a year industry employing more than 140,000 workers in 6,000 companies, according to the federal Consumer Financial Protection Bureau.

Debt collectors make more than 1 billion (yes with a b!) contacts with consumers each year, according to their own industry newsletter. Twelve million people (5.3 percent of consumers) are at least 30 days behind on their payments, according to the Urban Institute. Thirty-five percent of all adults with credit files, 77 million people, have debt in collection reported in their files. Pro Publica reviewed five years of court judgments and found the rate of judgements was twice as high in mostly black neighborhoods as it was in white ones.

The Consumer Financial Protection Bureau has over 74,000 complaints about improper debt collection, its number one complaint, according to a recent report of the Alliance for A Just Society.

These are not just small companies but big names like Citigroup, Capital One, JPMorgan Chase, Bank of America and Wells Fargo, in fact the Alliance for Just Society reported the big companies in debt collections have made nearly $100 million in contributions to federal candidates and parties since 2001 and another $280 million on federal lobbyists.

Citibank was sued twice by the federal CFPB over falsified documents and providing inaccurate information in debt collections and agreed to settle the case.

The debt collector with the largest number of complaints, Encore Capital Group, specializes in buying up debts from other creditors and then filing hundreds of thousands of lawsuits was forced to cancel more than 4,500 court judgments against borrowers in New York after it was charged with filing shoddy lawsuits.

JPMorgan Chase paid over $130 million to settle a case against it brought by attorney generals from 47 states for improperly collecting debts under what is called robo-signing, where legal documents are approved and filed without proper review. JPMorgan earlier paid $389 million in fines and refunds to credit-card consumers for problems with debt collections.

Conclusion

These businesses target families with incomes below $35,000 and people of color are three times more likely to receive abusive loans than whites. People with blemished credit are often passed over when seeking jobs.

There is some good news. Democrats created and passed into law theConsumer Financial Protection Bureau which is now beginning to gain some traction in monitoring and regulating these predatory practices. Bad news is that Republicans like Ted Cruz are trying to kill it and some Democrats are trying to hobble it. There are also good groups like the Center for Responsible Lending which provide excellent information on the abuses. But in the meantime making money off poor people remains a booming business.

Bill Quigley is a human rights lawyer and professor at Loyola University New Orleans College of Law. He is also a member of the legal collective of School of Americas Watch, and can be reached at quigley77@gmail.com.

http://thinkprogress.org/economy/2015/03/27/3639947/payday-loan-supporters-opponents-clash-in-richmond-2/

merica’s path to the first-ever federal regulations of payday and auto-title loans began Thursday in Richmond, as the Consumer Financial Protection Bureau (CFPB) unveiled a rough outline of how it will regulate high-cost credit products targeted at low-income Americans before a divided crowd.

One attendee told the hearing that her loans “were gonna be two weeks but ended up being two years.” Another described overhearing a payday lending store employee “proactively calling a borrower to say your loan is due in two days, but you are eligible for a rollover, you may want to come in,’” illustrating the businesses’ reliance on the exact sort of repeat borrowing that traps so many people in debt for far longer than the advertisements suggest.

While they don’t advertise this way, payday lenders end up charging more than 300 percent annual interest on average. Thursday’s initial rules proposal specifically identifies common present-day business practices that transform “short-term, emergency loans…into an unaffordable, long-term debt trap.”

But one industry representative disputed the “debt trap” depiction and accused the agency of treating borrowers like “they are not sufficiently intelligent to avoid pitfalls.”

“Our customers are intelligent and responsible, and make hard financial decisions every single day based on their own judgment of what is right for them,” saidEd D’Alessio, head of the national trade association for storefront lenders.

While D’Alessio portrayed the regulatory push as an obnoxious sort of babysitting for low-income borrowers, the regulations being proposed are far more moderate. They would require lenders to tie their charges to the borrower’s actual ability to make payments. D’Alessio’s people would continue to profit by lending where banks won’t — they just wouldn’t be able to set repayment terms that ignore the borrower’s financial reality and too often end up destroying their lives.

While many of Thursday’s speakers jumped in on D’Alessio’s side, several relayed lending horror stories and pointed out gaps in the industry narrative. “I drove here at my own expense to testify on behalf of the poor and vulnerable,” said John Copenhaver, a methodist minister from Winchester, Virginia’s northernmost town. “I wonder how many people speaking and clapping for these loans are employed by the lending institutions.”

Indeed, many speakers were on the payroll. “We are not a trap. We are a bridge to security and financial peace of mind,” said one lending shop worker with a bright yellow “CREDIT FOR ALL” sticker on his lapel. But it wasn’t solely industry people making that argument. Multiple sticker-wearing speakers recounted how a payday or auto-title lender had been their only financial lifeline amid personal hardship. Their stories illustrate the difficulty of what the CFPB is trying to do, while simultaneously misportraying the agency’s proposal.

The industry’s current profitability depends on trapping about half of all borrowers in extensive, expensive cycles of re-borrowing. But rather than accuse the industry of being willfully predatory, the CFPB leans on the data it has gathered about how customers actually experience payday and auto title lending cycles to identify areas that it will regulate. They include some ideas that have been tried with varying success by state legislatures, like rate caps for certain categories of lending and cooling-off periods that prohibit a borrower from getting more loans for a certain time once they have taken out three consecutive loans.

It’s a moderate opening bid, and many changes are likely over the next several months. The agency doesn’t want to put the D’Alessio’s of the world out of business, no matter how much progressive observers might wish to wipe payday lenders off the map. Erasing these businesses would not erase the demand for their services, and for people in dire circumstances, it might even do more harm than good. But the industry’s current way of operating is not sustainable. Hard data illustrate that payday lending profits come almost entirely from customers who get trapped in lengthy lending and re-lending cycles, no matter how intelligent they are when they first visit one of D’Alessio’s clients. The data seem to justify more aggressive reforms, such as Sen. Elizabeth Warren’s proposal toreplace private lenders with the postal service. But the CFPB can use existing regulatory authority to curb the worst lender excesses now, without waiting for legislation.

Even under the most aggressive vision suggested by CFPB’s rules preview, these loans would still be very expensive. The most any regulator can do is attempt to blunt the knives these lenders use to gouge their vulnerable customers. To put a real stop to that gouging, you’ve got to address the circumstances that put people under the knife in the first place. Rapacious forms of credit won’t go away until the country finds the wherewithal and political will to lift tens of millions of people out of the kinds of poverty that lead desperate people to believe the too-good-to-be-true neon promises that payday lenders put in the shop window.

John Copenhaver sees the effect of those promises every day thanks to Winchester’s location on the state line. Desperate people are “attracted from states with laws protecting them from predatory practices by the lure, the honey of quick cash, and they’re trapped like flies on flypaper,” Copenhaver told the crowd in Richmond. He later told ThinkProgress that there are more than 20 total lending storefronts in town, popping up in real estate vacated by fast food joints.

Some industry supporters warned of job losses from the regulations, but that claim is contradicted by what little hard data there is on the net economic impacts of payday lending stores. One of the only quantitative studies there is on the jobs and economic growth impacts of the industry found that the stores depress growth and put a net drag on the job market.

Besides, the rules CFPB is weighing would not put these companies out of business. In fact, the proposal includes one significant loophole. The outline’s provisions for short-term loans would still allow balloon payment loans where the entire sum and all fees must be paid all at once at the end of the loan period, Pew Charitable Trusts research officer Alex Horowitz told ThinkProgress. “Those loans consistently fail consumers, so they shouldn’t be on the market. They’re dysfunctional products.” Horowitz said. “Lenders and borrowers cannot succeed at the same time under that section of the rule.”

They also propose real underwriting standards — requirements for lenders to look into the financial background of borrowers and document evidence that the person they’re loaning to will likely be able to pay the loan back more or less on time, rather than walking into a debt trap — that would go a long way toward discouraging the worst predators in the industry. If the final rules have the same shape as the proposal that the agency is seeking comment on now, they would allow lenders to choose between two sets of rules dubbed “protection” and “prevention” that use different types of regulation to tie what lenders can charge to what borrowers can afford based on their earnings and bills.

The bulk of the proposal reflects the best practices of states like Colorado, where moderate regulations have allowed lenders to continue to profit while slashing the average interest rates that borrowers face and eliminating many of the trap-like features of such loans.

Not every industry representative was out to submarine the new federal rulemaking process. “We look forward to working with the CFPB,” said Native American Financial Services Association head Lance Gumbs, signaling that the tribal lending organizationshe represents are determined to keep the lights on and the cash moving. “There are more than 17 million people in this country who are unbanked or underbanked, and we intend to serve that need.”

Tags:

http://jimhightower.com/node/8472#.VFz7QfnF_Qw

citigp

10/14

Petition to members of Congress:

"Tossing out bipartisan rules to crack down on illegal money-laundering in order to protect the worst of the payday loan industry is dangerous and wrong. I strongly urge you to oppose Rep. Luetkemeyer’s HR 4986and any other proposals to undermine regulators on behalf of predatory lenders."

Only House Republicans would be OK with making illegal money-laundering easier in order to bail out a predatory loan industry, but that’s exactly what they will do if we don’t speak up.

For decades, both parties have supported current laws that force banks to keep their customers from moving illegal cash through the system. But ever since the Obama administration started using this power to crack down on outright fraud by payday lenders, the predatory lending industry has been in an uproar – and its supporters in the House Republican caucus are springing into action.

A new GOP bill would “completely whitewash fraud,” according to the National Consumer Law Center, by undermining regulators’ authority.1 As you can imagine, predatory lenders are supporting it in a big way. But so are Tea Party activists who believe the Obama administration is engaging in political persecution, not fraud-fighting. It may seem crazy, but this is exactly the type of bill that can fly beneath the radar, propelled by special-interest cash and right-wing energy, so we need to to loudly declare our opposition.

Tell Congress: Oppose the Republican handout to payday lenders. Click here to sign the petition.

The payday lending industry has been under fire for years for outrageous and predatory practices. For the millions of “unbanked” Americans who don’t live near a bank or whose financial situation prevents them from opening a bank account, payday lenders can be the only option. But too often, these payday loans come with sky-high interest rates and misleading terms and conditions that trap desperate people into a cycle of debt. That’s whypayday lending is banned in 15 states and regulated in far more.

And amazing as it is, online payday lenders are even worse – going from predatory to outright fraud. Online lenders have been allegedly caught depositing money in customers bank accounts without asking then charging them for the “loan,”2 jacking up rates, and inventing new fees. In one case currently under federal prosecution, the lender is charged with illegally withdrawing money from customers’ bank accounts.3 Because these companies operate online and through shell companies that are sometimes overseas, they are a nightmare for financial cops on the beat.

Federal law puts banks on the hook for preventing this kind of fraud, as well as massive illegal money laundering by shady enterprises. During the financial crisis, Wachovia – now part of Wells Fargo – was caught facilitating petty scams. Both Wachovia and HSBC were previously punished for drug money that was laundered through their banks. And just last year, the Justice Department filed a lawsuit against a North Carolina bank, Four Oaks, claiming that it had received more than $850,000 in fees by allowing payday lenders and others to process unauthorized transactions on customers account.

While the Department of Justice is responsible for criminal charges, bank regulators are the first line of defense against wrong-doing like this -- and the GOP’s new bill would render them toothless.

**A Campaign Inquiry in Utah Is the Watchdog's Worst Case**, The New York Times, March 2014

John Swallow used to work as a lobbyist for a Utah payday-lending company. So when he decided to run for state attorney general, he turned to payday lenders to help finance his campaign. But Swallow was wary of the industry's sketchy reputation, Times reporter Nick Confessore wrote. "The solution: Hide the payday money behind a string of PACs and nonprofits, making it difficult to trace donations from payday lenders to Mr. Swallow's campaign." Swallow's tactics eventually triggered investigations by the Internal Revenue Service and the state, and Swallow resigned less than a year after his election.

kat steyer bank pgm?

Company That Sues Soldiers Pledges Reform, Changes Name

by Paul Kiel | @paulkiel

More coverage: }:Unforgiven: The Long Life of DebtUSA Discounters, promising to change how it pursues military debtors, will now be known as USA Living.

http://www.propublica.org/article/thank-you-for-your-service-how-one-company-sues-soldiers-worldwide debt

http://www.propublica.org/series/debt-inc

http://www.propublica.org/article/when-lenders-sue-quick-cash-can-turn-into-a-lifetime-of-debt

...Five years ago, Naya Burks of St. Louis borrowed $1,000 from AmeriCash Loans. The money came at a steep price: She had topay back $1,737 over six months.

“I really needed the cash, and that was the only thing that I could think of doing at the time,” she said. The decision has hung over her life ever since.

A single mother who works unpredictable hours at a chiropractor’s office, she made payments for a couple of months, then she defaulted.

So AmeriCash sued her, a step that high-cost lenders – makers of payday, auto-title andinstallment loans – take against their customers tens of thousands of times each year. In just Missouri and Oklahoma, which have court databases that allow statewide searches, such lenders file more than 29,000 suits annually, according to a ProPublica analysis.

ProPublica’s examination shows that the court system is often tipped in lenders’ favor, making lawsuits profitable for them while often dramatically increasing the cost of loans for borrowers.

High-cost loans already come with annual interest rates ranging from about 30 percent to 400 percent or more. In some states, if a suit results in a judgment – the typical outcome – the debt can then continue to accrue at a high interest rate. In Missouri, there are no limits on such rates.

Many states also allow lenders to charge borrowers for the cost of suing them, adding legal fees on top of the principal and interest they owe. One major lender routinely charges legal fees equal to one-third of the debt, even though it uses an in-house lawyer and such cases usually consist of filing routine paperwork. Borrowers, meanwhile, are rarely represented by an attorney.

After a judgment, lenders can garnish borrowers’ wages or bank accounts in most states. Only four states prohibit wage garnishment for most debts, according to the National Consumer Law Center; in 20, lenders can seize up to one-quarter of borrowers’ paychecks. Since the average borrower who takes out a high-cost loan is already stretched to the limit, with annual income typically below $30,000, losing such a large portion of their pay “starts the whole downward spiral,” said Laura Frossard of Legal Aid Services of Oklahoma.

Takeaways

How does a $1,000 loan turn into a $40,000 debt? It’s what can happen when high-cost lenders use the courts to collect.
High-cost lenders frequently sue their customers. Since the beginning of 2009, high-cost lenders have filed more than 47,000 suits in Missouri and more than 95,000 suits in Oklahoma.
When high-cost lenders sue, some states allow them to pile on extra costs – like charging borrowers for the cost of suing them. One major lender routinely charges legal fees equal to one-third of the debt, even though it uses an in-house lawyer.
High-cost loans already come with steep interest rates. But in some states, small debts can continue to accrue interest even after a lawsuit is resolved. In Missouri,there are no limits on such rates – and that’s how a $1,000 loan turns into a $40,000 debt.

Link

The peril is not just financial. In Missouri and other states, debtors who don’t appear in court also risk arrest.

As ProPublica has previously reported, the growth of high-cost lending has sparked battles across the country. In response to efforts to limit interest rates or otherwise prevent a cycle of debt, lenders have fought back with campaigns of their own and bytransforming their products.

Lenders argue their high rates are necessary if they are to be profitable and that the demand for their products is proof they provide a valuable service. When they file suit against their customers, they do so only as a last resort and always in compliance with state law, lenders contacted for this article said.

After AmeriCash sued Burks in September 2008, she found her debt had grown to more than $4,000. She agreed to pay it back, bit by bit. If she didn’t, AmeriCash won the right to seize a portion of her pay.

Ultimately, AmeriCash took more than $5,300 from Burks’ paychecks. Typically $25 per week, the payments made it harder to cover basic living expenses, Burks said. “Add it up: As a single parent, that takes away a lot.”

But those years of payments brought Burks no closer to resolving her debt. Missouri law allowed it to continue growing at the original interest rate of 240 percent – a tide that overwhelmed her small payments. So even as she paid, she plunged deeper and deeper into debt.

By this year, that $1,000 loan Burks took out in 2008 had grown to a $40,000 debt, almost all of which was interest. After ProPublica submitted questions to AmeriCash about Burks’ case, however, the company quietly and without explanation filed a court declaration that Burks had completely repaid her debt.

Had it not done so, Burks would have faced a stark choice: declare bankruptcy or make payments for the rest of her life.

A Judge’s Dismay

Appointed to Missouri’s associate circuit court in St. Louis last year by Gov. Jay Nixon, Judge Christopher McGraugh came to the bench with 25 years’ experience as an attorney in civil and criminal law. But, he said, “I was shocked” at the world of debt collection.

As in Burks’ case, high-cost lenders in Missouri routinely ask courts to hand down judgments that allow loans to continue growing at the original interest rate. Initially, he refused, McGraugh said, because he feared that would doom debtors to years, if not a lifetime, of debt.

“It’s really an indentured servitude,” he said. “I just don’t see how these people can get out from underneath [these debts].”

But he got an earful from the creditors’ attorneys, he said, who argued that Missouri law was clear: The lender has an unambiguous right to obtain a post-judgment interest rate equal to that in the original contract. McGraugh studied the law and agreed: His hands were tied.

Now, in situations where he sees a debt continuing to build despite years of payments by the debtor, the best he can do is urge the creditor to work with the debtor. “It’s extremely frustrating,” he said.

Since the beginning of 2009, high-cost lenders have filed more than 47,000 suits in Missouri, according to a ProPublica analysis of state court records. In 2012, the suits amounted to 7 percent of all collections suits in the state. Missouri law allows lenders to charge unlimited interest rates, both when originating loans and after winning judgments.

High-Cost Lenders That Sue the Most

ProPublica analyzed court records in Missouri and Oklahoma to determine how many suits high-cost lenders filed from Jan. 1, 2009 through Sep. 30, 2013. We identified high-cost lenders who were licensed by the state and focused our analysis on companies that had two or more locations there. You can download our databases of court records by clicking on the state names below.

Here are the top 5 filers for each state:

Missouri

Company Name	Suits Filed	Store locations statewide, as of 2013
Speedy Cash	9,382	6
Tower Loan of Missouri, LLC	4,834	38
Noble Finance Corporation	4,275	10
World Acceptance Corporation of Missouri	3,739	76
Heights Finance Corporation	2,912	19
Others	21,915
Total	47,057

Oklahoma

Company Name	Case Count	Store locations statewide, as of 2013
Royal Finance, Noble Finance, etc.	16,834	32
Langley Management	11,791	35
World Acceptance Corp.	7,317	82
Ponca Finance Co.	5,039	10
Tide Finance Corporation	4,895	17
Others	49,640
Total	95,516

Note: In Oklahoma, all of the listed lenders operate under various business names. Langley primarily operates as Courtesy Loans and Tower Loans (not affiliated with Tower Loan); World primarily operates as World Finance and Midwestern Loans; Ponca Finance operates as Yes Finance and Sure Finance, among others; and Tide Finance operates as Advance Loan Service and under several other names.

Borrowers such as Burks often do not know how much they have paid on their debt or how much they owe. When creditors seek to garnish wages, the court orders are sent to debtors’ employers, which are responsible for deducting the required amount, but not to the debtors themselves.

AmeriCash, for instance, was not required to send Burks any sort of statement after the garnishment began. She learned from a reporter how much she had paid – and how much she still owed.

After AmeriCash’s deduction and another garnishment related to a student loan, Burks said she took home around $460 each week from her job.

No court oversees the interest that creditors such as AmeriCash charge on post-judgment debts. For instance, the judgment that Burks and an attorney for AmeriCash signed says that her debt will accrue at 9 percent interest annually. Instead, AmeriCash appears to have applied her contractual rate of 240 percent a year.

That seems unjustified, McGraugh said. “I would believe you’re bound by the agreement you made in court.”

In the past five years, AmeriCash has filed more than 500 suits in Missouri. The suits often result in cases like Burks’, with exploding debts. One borrower took out a $400 loan in late 2005 and by 2012 had paid $3,573 – but that didn’t stop the interest due on the loan from ballooning to more than $16,000. (As in Burks’ case, AmeriCashrelieved that debtor of his obligation after ProPublica submitted a list of questions to the company.)

AmeriCash, a private company based in a Chicago suburb, has five stores in Missouri, as well as 60 more across four other states. The company did not respond to repeated phone calls and emails about its practices. The firm’s attorney, Wally Pankowski of the Evans & Dixon law firm, declined to comment.

Cases in which lawsuits led to exploding debts abound in Missouri, and ProPublica found examples involving several different lenders.

Erica Hollins of St. Louis took out a $100 loan from Loan Express just before Christmas 2006. She soon fell behind on the payments, but instead of suing immediately, the company waited, the debt growing at 200 percent interest all the while. When the company sued two and a half years later, it received a judgment to collect on $913, including interest.

crypto:

...Just as in Ohio, Texas lenders started defining themselves as credit repair organizations, which, under Texas law, can charge steep fees. Texas now has nearly 3,500 of such businesses, almost all of which are, effectively, high-cost lenders. And the industry has successfully fought off all efforts to cap their rates.

Seeing the lenders’ statehouse clout, a number of cities, including Dallas, San Antonio and Austin, have passed local ordinances that aim to break the cycle of payday debt by limiting the number of times a borrower can take out a loan. Speaking to analysts early this year, EZCorp’sRothamel said the ordinances had cut his company’s profit in Austin and Dallas by 90 percent.

But the company had a three-pronged counterattack plan, he said. The company had tweaked the product it offered in its brick-and-mortar outlets, and it had also begun to aggressively market online loans to customers in those cities. And the industry was pushing a statewide law to pre-empt the local rules, he said, so payday companies could stop “playing cat and mouse with the cities.”

Jerry Allen, the Dallas councilman who sponsored the city’s payday lending ordinance in 2011, said he wasn’t surprised by the industry’s response.“I’m just a lil’ ol’ local guy in Dallas, Texas,” he said. “I can only punch them the way I can punch them.”

But Allen, a political independent, said he hoped to persuade still more cities to join the effort. Eventually, he hopes the cities will force the state legislature’s hand, but he expects a fight: “Texas is a prime state for these folks. It’s a battleground. There’s a lot of money on the table.”...http://www.propublica.org/article/how-payday-lenders-bounce-back-when-states-crack-down

Alarmed by the explosion of high-cost lending in the state, cities across Texas have passed ordinances to prevent the cycle of debt that short-term, high-cost loans can create.

But some big lenders are finding clever waysaround the laws – like giving away cash for free.

TitleMax promises to “make getting cash easy!” To get a loan, borrowers with “good credit, bad credit, or no credit” need only turn over the title to their car.

In Dallas, San Antonio, and Austin – which have all passed lending laws – those loans have come with zero percent interest.

What’s the catch? After 30 days, the loan is due in full. If the borrower cannot pay –TitleMax’s average loan is for $1,300 – the borrower is sent to another TitleMax location outside of the city, where he or she can receive a new, unrestricted loan. That loan, states a contract given to one borrower, could have an annual rate as high as 310 percent.

Of course, the borro

kpfa 6/11/13 CA no law (vs NY and NC capped at 36 and 25%)

SJ cap at 39 locations, 1/4 mi from poor ppl and each other. Has any land use been overturned for corp personhood/ sewer sluge?

WF and USAbank? has own version

other banks lend to payday storefronts (going online too)

big data, chase manhattan Liquid card

http://blogs.reuters.com/felix-salmon/2013/06/10/why-payday-loans-wont-get-cheaper/

http://www.propublica.org/article/how-high-cost-lenders-fight-to-stay-legal

As the Rev. Susan McCann stood outside a public library in Springfield, Mo., last year, she did her best to persuade passers-by to sign an initiative to ban high-cost payday loans. But it was difficult to keep her composure, she remembers. A man was shouting in her face.

He and several others had been paid to try to prevent people from signing. "Every time I tried to speak to somebody," she recalls, "they would scream, ‘Liar! Liar! Liar! Don’t listen to her!’"

Such confrontations, repeated across the state, exposed something that rarely comes into view so vividly: the high-cost lending industry’s ferocious effort to stay legal and stay in business.

Outrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.

Last year, activists in Missouri launched a ballot initiative to cap the rate for loans at 36 percent. The story of the ensuing fight illuminates the industry’s tactics, which included lobbying state legislators and contributing lavishly to their campaigns; a vigorous and, opponents charge, underhanded campaign to derail the ballot initiative; and a sophisticated and well-funded outreach effort designed to convince African-Americans to support high-cost lending.

Industry representatives say they are compelled to oppose initiatives like the one in Missouri. Such efforts, they say, would deny consumers what may be their best or even only option for a loan.

Quick Cash and Kwik Kash

Missouri is fertile soil for high-cost lenders. Together, payday, installment and auto-title lenders have more than 1,400 locations in the state — about one store for every 4,100 Missourians. The average two-week payday loan, which is secured by the borrower’s next paycheck, carries an annual percentage rate of 455 percent in Missouri. That’s more than 100 percentage points higher than the national average, according to a recent survey by the Consumer Financial Protection Bureau. The annual percentage rate, or APR, accounts for both interest and fees.

The Cost of Payday Loans

Payday loans, usually two-week loans with annual percentage rates above 300 percent, trap millions of Americans in debt. Payday loans do not typically charge "interest" but rather "fees."

Calculate what a payday loan costs below.

Or see the average loan in Missouri or the U.S.

Borrowed Amount: $100

Fee Charged: $15

Loan Period: 14 days

Loan Has Been Renewed: 2 times

To renew a loan, borrowers pay only the fees due, not any principal.

Result:

To borrow $100 today, you will ultimately owe:

$145

in total

391.1%

annual percentage rate

The average APR is 23.64 percent on credit cards for consumers with bad credit.

Note: The annual percentage rate accounts for both interest and fees. Sources:Consumer Financial Protection Bureau, Missouri State Department of Finance, CreditCards.com. Graphic by Sisi Wei.

The issue caught the attention of Democrat Mary Still, who won a seat in the state House of Representatives in 2008 and immediately sponsored a bill to limit high-cost loans. She had reason for optimism: The new governor, Jay Nixon, a Democrat, supported reform.

The problem was the legislature. During the 2010 election cycle alone, payday lenders contributed $371,000 to lawmakersand political committees, according to a report by the nonpartisan and nonprofit Public Campaign, which focuses on campaign reform. The lenders hired high-profile lobbyists, and Still became accustomed to their visits. But they hardly needed to worry about the House Financial Institutions Committee, through which a reform bill would need to pass. One of the lawmakers leading the committee, Don Wells, owned a payday loan store, Kwik Kash. He could not be reached for comment.

Eventually, after two years of frustration, Still and others were ready to try another route. "Absolutely, it was going to have to take a vote of the people," she said. "The legislature had been bought and paid for."

A coalition of faith groups, community organizations and labor unions decided to put forward the ballot initiative to cap rates at 36 percent. The main hurdle was collecting the required total of a little more than 95,000 signatures. If the initiative’s supporters could do that, they felt confident the lending initiative would pass.

But even before the signature drive began, the lending industry girded for battle.

In the summer of 2011, a new organization, Missourians for Equal Credit Opportunity (MECO), appeared. Although it was devoted to defeating the payday measure, the group kept its backers secret. The sole donor was another organization, Missourians for Responsible Government, headed by a conservative consultant, Patrick Tuohey. Because Missourians for Responsible Government is organized**under the 501(c)(4) section of the tax code**, it does not have to report its donors. Tuohey did not respond to requests for comment.

Still, there are strong clues about the source of the $2.8 million Missourians for Responsible Government delivered to MECO over the course of the battle.

Payday lender QC Holdings declared in a 2012 filing that it had spent "substantial amounts" to defeat the Missouri initiative. QC, which mostly does business as Quik Cash (not to be confused with Kwik Kash), has 101 outlets in Missouri. In 2012, one-third of the company’s profits came from the state, twice as much as from California, its second-most profitable state. If the initiative got to voters, the company was afraid of the outcome: "ballot initiatives are more susceptible to emotion" than lawmakers’ deliberations, it said in an annual filing. And if the initiative passed, it would be catastrophic, likely forcing the company to default on its loans and halt dividend payments on its common stock, the company declared.

In late 2012, QC and other major payday lenders, including Cash America and Check into Cash, contributed $88,000 to a group called Freedom PAC. MECO and Freedom PAC shared the same treasurer and received funds from the same 501(c)(4). Freedom PAC spent $79,000 on ads against Still in her 2012 losing bid for a state senate seat, state records show.

MECO’s first major step was to back three lawsuits against the ballot initiative. If any one of the suits were successful, the initiative would be kept off the ballot regardless of how many citizens had signed petitions in support.

Threatening letters and decoy initiatives

Meanwhile, supporters of the ballot initiative focused on amassing volunteers to gather signatures. The push started with umbrella organizations such as Metropolitan Congregations United of St. Louis, which ultimately drafted more than 50 congregations to the effort, said the Rev. David Gerth, the group’s executive director. In the Kansas City area, more than 80 churches and organizations joined up, according to the local nonprofit Communities Creating Opportunity.

Predominantly African-American congregations in Kansas City and St. Louis made up a major part of the coalition, but the issue crossed racial lines and extended into suburbs and small towns. Within one mile of Grace Episcopal Church in Liberty, a mostly white suburb of Kansas City, there are eight high-cost lenders. "We think it’s a significant problem and that it was important for people of faith to respond to this issue," said McCann, who leads the church.

Volunteers collected signatures at Catholic fish fries during Lent and a community-wide Holy Week celebration. They went door to door and stood on street corners.

In early January 2012, a number of clergy opened their mail to find a "Legal Notice" from a Texas law firm and sent on MECO’s behalf. "It has come to our attention that you, your church, or members of your church may be gathering signatures or otherwise promising to take directions from the proponents’ political operatives, who tell churchgoers that their political plan is a ‘Covenant for Faith and Families,’" said the letter.

"Please be advised that strict statutes carrying criminal penalties apply to the collection of signatures for an initiative petition," it said in bold type. Another sentence warned that churches could lose their tax-exempt status by venturing into politics. The letter concluded by saying MECO would be watching for violations and would "promptly report" any.

Soon after the Rev. Wallace Hartsfield of Metropolitan Missionary Baptist Church in Kansas City received the letter, a lawyer called. Had he received the letter? Hartsfield remembers being asked. He responded, "If you feel like we’re doing something illegal, you need to try to sue, all right?" he recalls. Ultimately, no suits or other actions appear to have been filed against any faith groups involved in the initiative fight.

MECO did not respond to requests for comment. The law firm behind the letter, Anthony & Middlebrook of Grapevine, Texas, referred comment to the lawyer who had handled the matter, who has left the firm. He did not respond to requests for comment.

Payday lenders and their allies took other steps as well. A Republican lobbyist submitted what appears to have been a decoy initiative to the Missouri Secretary of State that, to the casual reader, closely resembled the original measure to cap loans at 36 percent. It proposed to cap loans at 14 percent, but stated that the limit would be void if the borrower signed a contract to pay a higher rate — in other words, it wouldn’t change anything. A second initiative submitted by the same lobbyist, Jewell Patek, would have made any measure to cap loan interest rates unlawful. Patek declined to comment.

MECO spent at least $800,000 pushing the rival initiatives with its own crew of signature gatherers, according to the group’s state filings. It was an effective tactic, said Gerth, of the St. Louis congregations group. People became confused about which was the "real" petition or assumed they had signed the 36 percent cap petition when they had not, he and others who worked on the effort said.

MECO’s efforts sowed confusion in other ways. In April 2012, a local court sided with MECO in one of its lawsuits against the initiative, throwing the ballot proposition into serious jeopardy for several months until the state Supreme Court overturned the lower court’s ruling. During those months, according to video shot by the rate cap’s supporters, MECO’s employees out on the streets warned voters who were considering signing the petition that it had been deemed "illegal."

MECO's television ad warned about "Washington, DC special interests invading our neighborhoods."

MECO also took to the airways. "Here they come again," intones the narrator during a television ad that ran in Springfield, "Washington, DC special interests invading our neighborhoods." Dark figures in suits and sunglasses can be seen descending from a plane. "An army of outsiders approaching us at our stores and in our streets," says the voice. "But together we can stop them: If someone asks you to sign a voter petition, just decline to sign."

Although the ad discloses that it was paid for by MECO, it does not mention payday lending or capping interest rates.

Installment lenders join the fray

Installment lenders launched a separate group, Stand Up Missouri, to fight the rate-cap initiative — and to differentiate themselves from payday lenders.

As the group’s website put it, "special interest groups masquerading as grass-roots, faith-based alliances" were not only targeting payday loans but also "safe" forms of credit such as installment loans. "Stand Up Missouri does not represent payday lending or payday interests," the group said in its press releases.

Unlike payday loans, which are typically due in full after two weeks, installment loans are paid down over time. And while many payday lenders also offer such loans, they usually charge higher annual rates (from about 300 to 800 percent). The highest annual rate charged by World Finance, among the largest installment lenders in the country and the biggest backer of Stand Up Missouri, is 204 percent, according to its last annual filing.

Still, like payday lenders, installment lenders such as World profit by keeping borrowers in a cycle of debt. Installment and payday lenders are also similar in the customers they target. In neighboring Illinois, 56 percent of payday borrowers and 72 percent of installment loan borrowers in 2012 had incomes of $30,000 or less, according to state data.

World was the subject of an investigation by ProPublica and Marketplace in May. The company has 76 locations in Missouri: Of all high-cost lenders, only payday lenders QC and Advance America have more locations in the state.

Members of Stand Up Missouri gather at the Missouri State Capitol to protest a ballot initiative that would cap the rates charged on payday and similar loans. (Progress Missouri)

Stand Up Missouri raised $443,000 from installment lenders and associated businesses to oppose the rate-cap ballot initiative, according to state filings.

To broadcast their message in Missouri, the installment lenders arranged a letter-writing campaign to local newspapers, placed ads, distributed video testimonials by satisfied customers, and held a rally at the capitol. Like MECO, Stand Up Missouri also filed suit with their own team of lawyers to block the initiative.

Tom Hudgins, the chairman of Stand Up Missouri as well as the president and chief operating officer of installment lender Western Shamrock, declined to be interviewed but responded to questions with an emailed statement. Stand Up Missouri acknowledges that "some financial sectors" may require reform, he wrote, but the initiative backers didn’t want to work with lenders.

"Due to their intense lack of interest in cooperatively developing market-based reforms, we have and will continue to meet with Missourians in all corners of the state to discuss the financial market and opportunities to reform the same."

"Put a good face on this"

In February 2012, the Rev. Starsky Wilson of St. Louis sat down at a table in the Four Seasons Hotel. The floor-to-ceiling windows reveal vistas of the city’s famous arch and skyline. Lined up in front of him were two lobbyists and Hudgins, he remembers.

The lenders had targeted a community that was both important to their profits and crucial to the petition drive: African-Americans. Wilson, like the majority of his flock, is black.

So were the two lobbyists. Kelvin Simmons had just a few weeks before been in charge of the state budget and was a veteran of Missouri politics. His new employer was the international law firm Dentons, then called SNR Denton, and he was representing his first client, Stand Up Missouri.

Next to Simmons was Rodney Boyd, for the past decade the chief lobbyist for the city of St. Louis. He, too, worked for SNR Denton.

The lobbyists and Hudgins urged Wilson to rethink his commitment to the rate-cap ballot initiative.

Wilson was not swayed, but he was only one target among many. At the Four Seasons, Wilson says, he bumped into two other leaders of community organizations who had been summoned to hear Stand Up Missouri’s message. He said he also knew of more than a dozen African-American clergy who met with the lobbyists. Their message, that installment loans were a vital credit resource for middle-class African-Americans, was persuasive for some. As a result, Wilson found himself mounting a counter-lobbying effort. A spokesperson for Simmons and Boyd’s firm declined to comment.

In Kansas City, Rev. Hartsfield also received an invitation from the lobbyists — but that was not the only case, as Hartsfield puts it, of an African-American being "sent into the community to try to put a good face on this."

Willie Green spent eight seasons as a wide receiver in the NFL and won two Super Bowls with the Denver Broncos. After he retired in 1999, he opened several payday loan stores of his own and went on to hold a series of positions serving as a spokesman for payday lending, especially to minority communities.

Left: Willie Green's current photo on LinkedIn. Green is Vice President of External Affairs & Government Relations at World Finance, an installment lender. Right: Willie Green (86) in 1995, while playing for the Carolina Panthers as a wide receiver. (Nelson Kepley/AP Photo)

While African-Americans comprise 13 percent of the U.S. population, they account for 23 percent of payday loan borrowers, according to a Pew Charitable Trusts survey. Green was "Senior Advisor of Minority Affairs" for the Community Financial Services Association, the payday lenders’ national trade group, then director of "community outreach" for Advance America, one of the largest payday lenders. Finally, in 2012, he opened his own consultancy, The Partnership Alliance Co., which, according to his LinkedIn profile, focused on "community relations." Over the past decade, he has popped up during legislative fights all over the country — North Carolina; Georgia; Washington, D.C.; Arkansas; Colorado.

It is unclear who hired Green in 2012 — he declined to comment, and MECO did not report paying him or his company. But to Hartsfield, it was clear he was there to advocate on behalf of payday lending.

Green once penned an open letter to the Georgia’s legislative black caucus arguing that government regulation on payday loans was unneeded and paternalistic: Opponents of payday lending "believe that people unlike them are just po’ chillin’ who must be parented by those who know better than they do what’s in their best interest," he wrote, according to the Chattanooga Times Free Press.

During their private meeting, Hartsfield said, Green made a similar argument but also discussed church issues unrelated to the ballot initiative. The payday lending industry might be able to help with those, Hartsfield recalled Green saying. The message the minister received from the offer, he said, was "we’ll help you with this over there if you stop this over here."

Green referred all questions to his new employer, the installment lender World Finance. In a statement, World did not address specific questions but said the company was "pleased to have Mr. Green as a member of its team to enhance World’s outreach to the communities that it serves and to provide him the opportunity to continue his many years of being personally involved in and giving back to those communities."

Hartsfield did not take Green up on his offer, but the former athlete has served as a gateway to the industry’s generosity before. In 2009 in Colorado, where payday loan reform was a hot topic (a bill ultimately passed in 2010), Green presented the Urban League of Metro Denver with a $10,000 check on behalf of Advance America. Landri Taylor, president and chief executive of the organization, recalled that Green had approached him with the offer and that he was glad for the support. He also said that lending was not a core issue for his organization and that, even if it were, the contribution couldn’t have bought its allegiance.

In Georgia in 2007, Green, then a registered lobbyist, gave a state lawmaker $80,000 a few weeks before the legislature voted on a bill to legalize payday lending. The lawmaker, who subsequently pleaded guilty to unrelated federal charges of money laundering, was one of 11 Democrats to vote for the bill.

After the Atlanta Journal-Constitution broke news of the transfer, Green produced documents showing that it had been a loan for a real estate investment: The lawmaker had promised to repay the loan plus $40,000, but had never done so, Green said. The state ethics commission subsequently found Green had broken no state laws, because lobbyists are allowed to engage in private business transactions with lawmakers.

The case of the missing petitions

By the spring of 2012, supporters of the initiative were in high gear. Volunteers, together with some paid employees, were collecting hundreds of signatures each day. They were increasingly confident they would hit their mark.

In some areas, such as Springfield, the work resembled hand-to-hand combat. Through intermediaries, such as ProActive Signature Solutions, the initiative’s opponents hired people to oppose it.

"It was a well-funded effort," said Oscar Houser of ProActive. He declined to say which company had retained ProActive. However, only MECO reported spending funds on what it said were signature gatherers. Those employees, according to Houser, eventually focused solely on trying to prevent people from signing the initiative.

Marla Marantz, a Springfield resident and retired schoolteacher, was hired to gather signatures for the 36 percent cap initiative. Just about every day, she could expect to be joined by at least one, and often several, of ProActive’s employees, she says. Wherever she went — the public library, the DMV — they would soon follow. It was a tactic both she and her adversaries (with whom she became very familiar, if not friendly) called "blocking."

One ProActive employee describes how "blocking" works, in a a video shot by a Missouri State University journalism student. (Posted by Matthew Barnes, Springfield Report)

"What we’re doing is preventing them from being able to get signatures," one ProActive employee says on a video shot by a Missouri State University journalism student. Asked to describe how "blocking" works, the employee says, "Usually, we get a larger group than they have. We pretty much use the power of numbers." In the video, as Marantz stands outside a public building, she is surrounded by three ProActive employees.

ProActive’s employees did not identify themselves to voters as affiliated with payday lending, Marantz says. They sometimes wore T-shirts reading "Volunteer Petition Official" or held signs urging citizens to "Stand up for Equal Opportunity."

Marantz shared various photos and videos of her experiences. In one video, a library employee tells a group of ProActive employees they will be asked to leave if they continue to make patrons uncomfortable. At other times, Marantz says, exasperated public employees or the police simply asked anyone collecting signatures to leave the area.

McCann also gathered signatures for the initiative and experienced "blocking." "I had on my clerical collar, and they seemed to address a lot of their vitriol at me," she remembers.

In May 2012, Missourians for Responsible Lending, the organization formed by supporters of the initiative, filed suit in county court in Springfield, alleging that MECO, through ProActive, was illegally harassing and assaulting its signature gatherers. The suit included sworn declarations by Marantz and three others who had said they had endured similar treatment. It called for a temporary restraining order that would keep MECO’s employees at least 15 feet away.

MECO, via its lawyers, fired back. The suit was an unconstitutional attempt by supporters of the initiative to silence their political opponents based on alleged "sporadic petty offenses," MECO argued. Even if the initiative’s detractors "engaged in profanity-laced insults all of the time," they said, such behavior would still be protected by the First Amendment.

Houser called the suit "frivolous" and said he was happy to let MECO’s lawyers handle it. The suit stalled.

"Blocking" wasn’t the only problem initiative supporters encountered. Matthew Patterson ran a nonprofit, ProVote, that coordinated signature gathering in the Springfield area. On the night of April 25, 2012, Patterson put a box of petitions in his car. Then, realizing he had forgotten his phone in his office, he locked his car and went back inside.

When he returned, his passenger side window was broken and the box of petitions was gone, according to Patterson and the police report he filed. The box had contained about 5,000 voter signatures, about half of which were for the 36 percent cap initiative, Patterson said.

No arrest was ever made. Volunteers from Kansas City and St. Louis converged on the area to recoup the lost signatures. The final deadline to submit signatures to the secretary of state’s office was less than two weeks away.

23,000 over, 270 under

In August, the Missouri Secretary of State announced that supporters of the initiative had submitted more than 118,000 valid signatures, about 23,000 more than needed.

But the state’s rules required that they collect signatures from at least 5 percent of voters in six of the state’s nine congressional districts. They had met that threshold in five districts — but in the First District, which includes North St. Louis, they were 270 signatures short.

A week later, initiative supporters filed a challenge in court, arguing that local election authorities had improperly disqualified far more than 270 signatures. MECO and Stand Up Missouri joined the fray, arguing not only that signatures had been properly excluded, but also that far more should have been tossed out.

Eventually, with only a couple of weeks before the deadline to finalize the November ballot, backers of the initiative decided they could not match the lenders’ ability to check thousands of signatures. They withdrew their challenge.

"It was so frustrating, disappointing," McCann said. "People had spent hours and hours and hours on this initiative."

Looking to 2014

The initiative’s supporters now have their eye on 2014, and they have made the necessary preparation by filing the same petition again with the secretary of state.

The industry has also made preparations. MECO has reported adding $331,000 to its war chest since December. Stand Up Missouri has raised another $151,000.

Last May, Jewell Patek, the same Republican lobbyist who filed the industry’s initiatives in 2011, filed a new petition. It caps annual rates at 400 percent.

The installment lenders have continued their effort to woo African-Americans. In December, Stand Up Missouri was a sponsor of a Christmas celebration for Baptist ministers in St. Louis, and in June, it paid for a $20,000 sponsorship of the National Baptist Convention, hosted this year in St. Louis. It’s retained the same high-powered African-American lobbyists and added one more: Cheryl Dozier, a lobbyist who serves as executive director of the Missouri Legislative Black Caucus. Lastly, Willie Green, according to initiative supporters who have spoken with the ministers, has made overtures to African-American clergy on behalf of World Finance.

A payday loan — that is, a cash advance secured by a personal check or paid by electronic transfer is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115, with $15 the fee to borrow the money. The check casher or payday lender agrees to hold your check until your next payday. When that day comes around, either the lender deposits the check and you redeem it by paying the $115 in cash, or you roll-over the loan and are charged $15 more to extend the financing for 14 more days. If you agree to electronic payments instead of a check, here’s what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15. The cost of the initial $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

(frankieleon)The state of Missouri has about one payday or car-title lender for every 4,100 residents. The interest rate on short-term loans has an average APR of 455% statewide, when the national average is a still-horrific 391%. When a coalition of churches, unions, and community groups tried to cut the maximum interest rate to 36%, the effort failed miserably. Here’s why.

The crusading investigative reporters over at ProPublica traced what happened to the 2012 attempt to put the issue in front of voters. There wasn’t much hope for a bill introduced in the state legislature: one of the leaders of the House Financial Institutions Committee actually owns a payday lender. A ballot initiative made more sense: put the question before the people who are actually paying those astronomical interest rates.

That’s when a mysterious group aiming to protect the right of people with bad credit to borrow money showed up on the scene. The group is called Missourians for Equal Credit Opportunity (MECO) and is very well-funded.

The trail of clues led ProPublica to conclude that all of that money came from the payday lending industry. Gasp!

In order to get a ballot initiative before voters, you need signatures. Lots of signatures.

Churches took charge of this, setting up on street corners and gathering signatures at events like lenten fish dinners. Religious leaders received a vaguely threatening letter from a Texas law firm warning them that being involved in politics could affect the tax-exempt status of their churches.

Then things got kind of evil. The group spent $800,000 gathering signatures for decoy ballot initiatives: actual initiatives that were proposed, but that don’t actually reform anything.

One decoy initiative capped the interest rate of payday loans at 14%, unless the customer agreed to pay a higher rate and signed a contract. Such a law would be completely useless.

It wasn’t enough to just propose these initiatives: nope, MECO then dispatched signature gatherers to compete with the pro-reform coalition’s signature gatherers. If someone had already signed a petition for a decoy initiative, they assumed that it was the same thing.

A person can’t sign the same petition twice, after all.

MECO also filed lawsuits against the ballot initiative. One local court sided with the group, but supporters of the reform initiative kept gathering signatures while the decision was appealed to the state supreme court. MECO sent employees out to these signature drives to “warn” people that the initiative had been found illegal.

Rate-cap opponents also went out to signature drives and blocked voters from approaching the real petition gatherers. They filed suit, seeking a restraining order to keep their opponents away, but the court decided that the MECO-funded “blockers” were well within their First Amendment rights to harass signature-gatherers.

In the end, the ballot initiative failed. They needed the signatures of 5% of the eligible voters in each of the state’s Congressional districts. They plan to try again in 2014, and the lending industry will surely be ready.

The Payday Playbook: How High Cost Lenders Fight to Stay Legal [ProPublica]