Are San Diego Lawmakers Indebted to the Payday Loan Lobby?
California’s payday lending laws are among the weakest in the country, and the financial services industry would like to keep it that way. There are more licensed payday lenders than McDonald's restaurants in the state.
Legislation coming before the State Senate next week could bring a halt to what can only be described as usury designed to trap working people in an endless cycle of debt. The industry is hoping for a last minute infusion of political contributions to legislative gatekeepers in the upper house will buy them a reprieve.
Two elected representatives from San Diego are on the list of those benefiting from these donations, and need to be reminded of their responsibility to serve all the people.
There is a call to action urging folks to contact State Senators Toni Atkins and Ben Hueso at the end of this post.
Here’s a little background.
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State law caps interest on installment loans below $2,500 at 36%.
Financial service companies avoid the cap by creating new products requiring people to borrow a minimum of $2,500 in order to qualify. Predatory lenders, like some payday loan outfits, impose outrageous interest rates on people who borrow between $2,500 and $10,000.
In 2016, more than 80% of the 11.5 million loans were issued to borrowers who weren’t able to repay previous loans. Lenders earned 70.5% percent of their fees from customers who took out seven or more loans during the year. According to a study by Pew Charitable Trusts, 5% of Californians take out payday loans annually with only identification and proof of income.
Cash Call, which ran radio ads saying they’ll make loans “because we trust you,” had a 40% default rate on their “product.”
Last year there were five attempts in California to craft legislation calling for additional regulations on the payday lending industry. All of them failed…. As happened the year before… And the year before….
This year’s legislation, drafted by Santa Barbara Assemblymember Monique Limon and co-sponsored by San Diego’s Lorena Gonzalez, seeks to cap interest rates on loans between $2,500 and $10,000 “at a rate not exceeding an annual simple interest rate of 38% plus the Federal Funds Rate.”
AB 539, the Fair Access to Credit Act passed the Assembly earlier this year with 60 Yes votes. Eight Republicans joined Democrats in supporting it.
Should it pass the Senate, Gov. Newsom has indicated that he’ll sign it. But getting this bill through the Senate Banking and Financial Institutions Committee will prove to be a challenge. On June 19 in Room 112 they’ll hear testimony.
Supporters of reform hope testimony about the triple digit interest rates and the pain they cause will move the bill onto the Senate floor. At a recent panel discussion on the topic in San Diego, Assemblymember Gonzalez made the case for reform.
"It's time to re-regulate this industry and to ensure that we're providing a situation by which individuals aren't getting themselves into a cycle of debt that they can never get out of,"
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The payday loan industry is on the move nationally, emboldened by the current administration’s willingness to abet greed.
From an op-ed in the Sacramento Bee:
The Obama Administration had moved to crack down on predatory loans nationally, but the industry is enjoying a resurgence under the Trump Administration – and for good reason. A recent ProPublica investigation revealed how payday lenders, seeking to curry favor with Trump, “have poured a total of $1 million into the Trump Organization’s coffers through the two annual conferences.”
In the meantime, the Trump Administration has moved to roll back the Obama Administration’s new rules for the lending companies – rules designed to protect consumers from predatory practices.
The cash infusions are a way of “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,” Americans for Financial Reform Executive Director Lisa Donner told ProPublica.
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A trade group representing the lenders — the California Financial Service Providers— claims the bill under consideration would effectively eliminate access to loans for people unable to who can’t get approved by banks and other lenders.
An outfit calling itself “Don’t Lock Me Out California” is emailing, advertising and calling on people to connect with their legislator to denounce AB 539.
Via Politico California:
Companies opposed to AB 539 and their industry groups spent more than $280,000 lobbying Sacramento in the first three months of the year, records show. Texas-based Elevate Financial Services kicked in the single biggest chunk, a $135,000 outlay that included retaining powerhouse firm Mercury and putting more than $100,000 into the ever-ambiguous “other payments to influence” category. None of that encompasses the last few months, when the bill actually got voted on.
Elevate also gave thousands to four senators who sit on the Senate Banking and Financial Institutions Committee, where AB 539 is scheduled to go up for a vote next week, including the chair and vice chair. The measure passed the Assembly with the help of Speaker Anthony Rendon, who has broken from his usual hands-off practice by identifying the issue as a priority. But the Senate could be a different story.
And CALMatters:
In the first quarter of this year, lenders opposed to the bill have outspent those in favor on lobbying by more than 3-to-1. But for now, the political odds may have tilted in the bill’s favor.
Assembly Speaker Anthony Rendon has called such loans “salt water in the desert —a thirsty person will drink it, but they will not be better off.”
With so much support in the Assembly, lobbyists on both sides are preparing for the real fight in the Senate, where moderate Democrats skeptical of the proposal are well represented in the Banking and Finance Committee. Tom Dresslar, a retired deputy commissioner at the Department of Business Oversight, called that committee “the industry’s last best hope to preserve this system of exploitation.
Over at the Nooner, Scott Lay noticed some serious cash being passed around in the wake of the bill’s Assembly passage:
A week after the Assembly passed a bill to cap the interest rate for short-term consumer loans with a surprising 60 "aye" votes, Community Loans of America spread $26,000 among twelve members of the State Senate. The company is a back-end lender for franchised storefronts, sort of like the insurance companies who back bail bonds.
Among the recipients of those contributions were five members of the --drum roll, please-- Senate Banking and Financial Institutions Committee.
Committee Chair Sen. Steven Bradford (D) received $3000. Vice Chair Sen. Ling Ling Chang ( R) took in $2000. San Diego Democrat Sen. Ben Hueso also collected $2000, as did Sens. Anna Caballero (D) and Mike Morell ( R).
Here’s Hueso, as quoted in the CALMatters article:
Here’s how state Sen. Ben Hueso, a moderate Democrat from San Diego County who opposes a rate cap, framed the dilemma:
“What do I prefer?” he said. “That we have people that are defaulting on loans? Or people that are getting their knees broken?”
President pro tempore of the California State Senate Toni Atkins also picked up $3000.
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Of course, I’m not saying contributions of the two and three thousand dollar persuasion actually can buy votes in Sacramento, but it wouldn’t hurt to make a few calls.
State Senator Ben Hueso
Capitol Office:
State Capitol, Room 4035
Sacramento, CA 95814
Phone: (916) 651-4040
Fax: (916) 651-4940
Chula Vista Office:
303 H Street., Suite 200
Chula Vista, CA 91910
Phone: (619) 409-7690
Fax: (619) 409-7688
El Centro
1224 State Street, Suite D
El Centro, CA 92243
Phone: (760) 335-3442
Fax: (760) 335-3444
Email: sd40@senate.ca.gov/contact/email
Twitter: @SenBenHueso
State Senator Steven Bradford (Committee Chair)
Capitol Office
State Capitol, Room 2059
Sacramento, CA 95814
Phone: (916) 651-4035
Fax: (916) 651-4935
Inglewood District Office
1 Manchester Blvd, Suite 600
Inglewood, CA 90301
Phone: (310) 412-6120
Fax: (310) 412-6125
San Pedro District Office
302 W. 5th, Suite 203
San Pedro, CA 90731
Phone: (310) 514-8573
Email: senator.bradford@senate.ca.gov
Twitter: @SteveBradford
State Senator Toni Atkins
Capitol Office
State Capitol, Room 205
Sacramento, CA 95814
Phone: (916) 651-4039
Fax: (916) 651-4939
San Diego District Office
1350 Front Street, Suite 4061
San Diego, CA 92101
Phone: (619) 645-3133
Fax: (619) 645-3144
Email: senator.atkins@senate.ca.gov
Twitter: @SenToniAtkins
Facebook: @SDToni
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The lead image for this post is a collage. There is to my knowledge, not a loan office with a Hueso sign in the window. But there could be.