How payday industry won the battles but lost the war

Annie Lowery, our Washington Independent colleague, writes today on the efforts of the Payday loan industry to stop U.S. Sen. Kay Hagan (D-N.C.) in her effort on the federal level to rein in the worst of the payday abuses. Lowery’s story is chock full o’ gems, which will sound familiar to anyone who followed the battle to reform the industry in Colorado led by Denver Rep. Mark Ferrandino.

Payday lobbied hard, she writes, “as it had done against financial reform in both houses all year, spending $6.1 million on lobbying in 2009, more than double what it did in 2008.” The industry also tricked and bullied its clients into rallying against reform. David Lazarus of the LA Times got hold of an industry email to its workers. It’s pretty… sickening, even among the jaded.

The lobbying effort employed everyone from the grassroots — individual customers — to the highest-powered lawyers. David Lazarus of the Los Angeles Times reported that as Hagan’s amendment came up for a vote in Congress last week, one payday lender instructed his employees, “After a customer repays their loan, the customer then asks for a new loan. TELL YOUR CUSTOMER THAT YOU CAN’T LOAN TO THEM BECAUSE THE GOVERNMENT HAS PUT US OUT OF BUSINESS. That will get their attention. Then ask them to write letters or call their senator/congressman.” A flurry of letters written at check cashers or payday loan shops showed up in Congress.

Predictably, lawmakers– many of them on the dole from the industry– opposed reforms. For example:

On May 20, Hagan’s amendment came up in the Senate. Durbin stood up in support, calling payday lenders the “bottom feeders” of the financial industry. Then, as Dodd moved to proceed, Sen. Richard Shelby (R-Ala.) — who in 2009 received more campaign donations from payday lenders than any other Senator — blocked unanimous consent to vote on the popular provision. (Shelby’s office did not respond to repeated requests for comment.) It died on the floor.

Hagan’s was the last of many such payday-lender-specific provisions to come up in the regulatory reform process. And it was the last to fail. There are no interest-rate or rollover caps in the Senate bill. And there are none in the House either.

Yet, as Lowery puts it, payday spent and spent and won every battle only, perhaps, to lose the war.

“In the end, it doesn’t matter much that Congress didn’t specifically regulate payday lenders,” Ed Mierzwinski, the consumer program director at the U.S. Public Interest Research Group explains. “For the payday lenders to call the defeat of the Hagan a win for them is a Pyrrhic victory — because both both the House and Senate bills include a strong new consumer financial protection agency and it will regulate them.”

And payday will be regulated on the ground in Colorado, too, thanks to Ferrandino’s bill and despite the hard and defiant push against it by the industry here. Colorado’s new law puts in place the longer time to repay that many advocated for reform like Hagan were asking for in Washington and failed to get, at least specifically.

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