Deputy Director Robin Powers said the industry is a great example of how money influences politics on Capitol Hill.
“History shows us if you come to D.C. and spend a lot of money in campaign contributions and lobbying you’re often going to get what you want — not every time, but most of the time it’s the formula that wins,” Powers said.
Payday lending and the Ohio Senate race
The payday lending industry has given $170,000 this cycle to support Republican Senate hopeful Ohio Treasurer Josh Mandel who is running against Democratic Sen. Sherrod Brown, D-Ohio. Brown chairs a subcommittee with some oversight of the industry.
A Dayton Daily News analysis of campaign finance data shows about half the money Mandel raised from the industry went directly to his candidate committee and the other half to his PAC, the Mandel Senate Victory Committee. The PAC pays for Mandel fundraisers and sends money to his committee and Republican groups.
As a state representative, Mandel voted in favor of Ohio’s 2008 crackdown on payday loan businesses, which lend cash in exchange for a postdated check plus interest and fees.
In a bipartisan vote, lawmakers capped interest rates at 28 percent APR instead of 391 percent APR. Payday lenders spent $19 million to put the issue to referendum and Ohio voters supported the regulations nearly 2 to 1.
Mandel voted against a 2010 bipartisan proposal to close loopholes that allow lenders to offer short-term, high-interest loans through other types of lending licenses. Payday loan industry critics said Mandel also helped stall the proposal in the House Financial Institutions, Real Estate and Securities Committee for months.
A new bill took its place and was sent to a different committee, which proponents said didn’t have enough time to vet the proposal.
“It’s difficult not to look at (the contributions) as payday lenders saying, ‘thank you,’ ” said Uriah King of the North Carolina-based Center for Responsible Lending. King, formerly of the Miami Valley Fair Housing Center in Dayton, testified in favor of that bill.
Mandel campaign spokesman Travis Considine said contributions have “absolutely no impact on future public policy decisions he will make.”
Considine said Mandel’s stance on the issue is evident from his tenure in the Statehouse and declined to say how Mandel would address the issue at the federal level.
“Unlike the career politicians who want to find a Washington solution to every problem, Josh believes that the private sector, along with state and local governments, are the first places to look for solutions,” Considine said.
Brown has also received donations associated with payday lenders, but significantly less than Mandel. He has raised at least $22,000 from the industry, mostly from individual employees of Ohio-based businesses. Brown did receive one $5,000 donation from Cash America International PAC, headquartered in Texas.
New consumer protection bureau plays key role
The nationwide influx of cash into Republican accounts follows the Dodd-Frank Act of 2010, which imposed new regulations on the nation’s financial system and created the Consumer Financial Protection Bureau now headed by former Ohio Attorney General Richard Cordray.
The bureau has payday loan lenders under its supervision and Cordray has promised to step up oversight of small-loan providers. Democratic senators are drafting legislation to further regulate the industry.
Mandel attended a conference in the Bahamas sponsored by Community Financial Services of America, which advocates and lobbies for payday advance businesses, in March.
A spokesperson for the group did not respond to a Dayton Daily News request for an interview.
The biggest checks came from PACs run by small-loan lenders such as Advance America Cash Advance Centers, Cash America and Checksmart Financial, based in Dublin, near Columbus.
Others came from executives at those companies and companies that finance loans, including $30,000 from Lee Schear of Dayton, whose company NCP Finance services several companies that donated to Mandel.
Brown chairs the Senate subcommittee on Financial Institutions and Consumer Protection, which oversees the newly created consumer protection agency.
“Sen. Brown understands that most consumers of high-interest, short-term loans are individuals who are struggling to make ends meet and that these loans can help with unforeseen financial shortfalls,” Brown’s communication director Meghan Dubyak told the Dayton Daily News.
“However, he is concerned that too many users of these short-term, high-interest loans get trapped in an endless cycle of borrowing and increased debt,” Dubyak said.
Ohio is one of 17 states to enact double-digit caps on payday loan interest rates and Congress capped interest at 36 percent in 2006. The payday lending industry argued Ohio’s cap would lead to widespread store closings.
Indeed, many stores did close, according to the Ohio Department of Commerce. Others received licenses primarily under the Ohio Mortgage Loan Act or the Ohio Small Loan Act, which allowed them to continue offering short-term loans.
Licenses issued under those laws surged to 1,974 in 2009 but have since fallen to 1,574, according to Commerce Department records.
Contact this reporter at Jackie. Borchardt@coxinc.com.
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