In March, Keith Epstein of the Huffington Post Investigative Fund blew me away with an in-depth look at the dollars the payday lending industry has poured into its lobbying efforts over the past decade. As much as the industry spent in the second half of the 1990s and early 2000s convincing state legislatures to exempt these two-week, short-term loans from existing usury laws, that pales compared to the dollars they are spilling to protect the franchise. Where the payday lenders spent $2.0 million on state and federal lobbyists in 2001-2002, that figure reached $5.7 million in 2007-2008, according to Epstein's terrific report. Proposed federal legislation that would effectively put the industry out of business spurred the industry to spend even more last year: $6.1 million in just Washington in 2009, Epstein found, or about what JPMorgan Chase spent on lobbyists that year.
And those figures don't include campaign contributions: $2.2 million in 2007-2008, and $1.3 million in the 2009-2010 election cycle through February, 2010.
This week provided an example of how those investments are paying dividends. Both the industry, which lives in fear of passage of a measure that will take a big bite out of their profits if not put them out of business altogether, and payday's critics had been watching with bated breath the fate of an amendment proposed by Sen. Kay Hagan (D-N.C.) to the financial reform package now making its way through the Senate.
Hagan's proposal: limit payday customers to no more than 6 payday loans per year. Seems to make sense for a loan that even payday's proponents talk about as an emergency product. The rub, though, is that the typical payday customer takes out between 9 and 13 loans per year, depending on whose numbers one believes. Hagan's measure could effectively cut the industry's revenues by one-third if not in half.
That's why it helps to have powerful friends like Sen. Richard Shelby (R-Ala.), who stood to block Hagan's proposal when finally the Senator was granted her turn at the podium this week (May 18th). “I am disappointed that today, Senate Republicans objected to even considering my common sense amendment to limit payday lending,” Hagan said in a statement released shortly after she was rebuffed.
My report in the Huffington Post. At this point, Hagan's amendment isn't dead but it may as well be. Hagan will keep pushing it as a standalone measure but with derivatives, the Volcker Rule, the fate of new consumer protection agency, and other higher profile issues crowding the debate, it seems the longest of long shots to gain traction, at least this round.