Editor’s note: This story has been updated in our blog after a four-hour hearing in Denver today.
Attorney General John Suthers is not writing the new rules that will govern the payday loan industry in Colorado. That’s why he is playing down the $10,000 in campaign donations he has received from the industry, saying the cash won’t influence the final contours of the new state regulations. The person writing the rules, Laura Udis, has worked in the attorney general’s department of consumer protection for more than two decades. She told the Colorado Independent that Suthers has so far not been involved in her work on the path-breaking payday legislation that was passed in the spring and that she expects Suthers to remain uninvolved.
“I wrote the interpretation of the legislation and the revised interpretation and the proposed rules,” Udis said, “none of which have been submitted to the attorney general or anyone else. I don’t expect [Suthers] to be personally involved in the process. It’s so complex.”
Yet the money Suthers has received from the industry just as Udis is writing the rules for his office is hanging over the process and is drawing increased scrutiny to the rules.
In the last weeks, 11 payday lending companies have given $10,350 to Republican Suthers in his campaign against Boulder Democratic District Attorney Stan Garnett. Payday lenders have also donated $50,000 to Republican efforts to retake the state House and Senate.
Garnett has joined with groups like Colorado Ethics Watch and the Colorado Progressive Coalition to ask Suthers to return the payday donations.
Garnett told the Colorado Independent that it doesn’t matter that Udis is writing the rules and not Suthers. She is his deputy, his first assistant attorney general, he said.
“Look, people are disillusioned with incumbents and government because no one accepts accountability. For Suthers to simply shrug and say ‘I don’t know what [Udis] is doing,’ that’s what voters have come to expect of officeholders.
“One of the benefits of an election campaign, though, is that people are held accountable. For a longtime incumbent like Suthers to just shrug is unacceptable. I’ve worked in the private sector. In the private sector you learn that clients expect people at the top to take responsibility. Public perceptions matter, now as much as ever. It matters because his office is charged with regulating the payday industry. It maters that the lawyers in the A.G.’s office all work for him. The [payday industry] contributions matter.”
The complex rule-writing process Udis is navigating will witness one of its flashier chapters today, when stakeholders on all sides will offer testimony at the capitol in Denver, with industry representatives pressing on one side and consumer protection groups pressing on the other.
“In general, payday loan rule-making hearings have been well attended and quite lively,” Udis said, referring specifically to a hearing in 2000. “What’s new is the publicity surrounding this one. The timing is significant. It’s an election season and the media is interested.”
Udis characterizes her work as “filling in the gaps” of legislation, to reconcile sections of statute and make sure new laws work on the ground. She concedes that, although the work she’s doing right now is standard and in her experience not very notable, the new payday law she’s working on is fairly dramatic.
House Bill 1351 was sponsored by Denver Democratic Representative Mark Ferrandino and Denver Democratic Senator Chris Romer. It is designed to reduce short-term loan rollover practices that wrack up fees and interest and see debt soar for payday loan customers. Ferrandino and Romer are pushing the attorney general’s office to change the proposed rules to make them tougher on the payday loan industry. Specifically, they are asking for a portion of the origination fees be refunded to borrowers who repay their loans early.
Ferrandino’s bill was besieged as it worked its way through the legislature by payday industry lobbyists and opposed by lawmakers who said regulating the industry might cost jobs and cut off financial services to recession wracked consumers. Ferrandino and consumer protection groups said usury and gouging were not really consumer services they thought the law should protect.
Udis said she fully expects to make changes to the rules based on the testimony offered today and that she wouldn’t be surprised if the hearing lasts for more than a day.
“Due to the length of the rules and the many comments, for sure there will be changes. How substantive those changes will be remains a question.”
Udis said the heat surrounding the rules comes as a result of conflicting language in the legislation.
“Where there was one fee for consumers, now there are three. There is language concerning the origination fee and the interest and the monthly fee.
“Problem I think is that the bill was substantially rewritten at the end of the legislative session to get it passed,” she said, pointing to amendments added by Boulder Democratic Senator Rollie Heath. “Those fees, is one of them ‘fully earned’ by the loan companies, as it says in one part of the legislation, or are they ‘refundable’ to the borrowers? That’s where we’ll see a lot of debate.”
The new rules won’t go into effect until November. The five-member governor-appointed Council of Advisers on Consumer Credit– which includes two members of the industry, two members not from the industry and a member of the attorney general’s office– will review Udis’s rewritten rules and sign off on them before they take effect. Udis said Suthers can “change any of the work” she does on the rules but that he has delegated sign off for now to Jan Zavislan, head of the attorney general’s consumer protection division.[Image: Attorney General John Suthers ]