Ohio Politicians Get Payday Loan Love
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UPDATED: Jun 13, 2012
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February might be long passed but love is still in the air. Politicians and the payday loan industry have begun a love affair of Hollywood proportions in Ohio, according to a story done by the Dayton Daily News.
The 2012 U.S. Senate race saw $200,000 donated by the payday loan lending industry to candidates in Ohio. Nationally, payday lenders contributed $1.32 million to Senate candidates during this election cycle.
When considering the country as a whole, the payday loan industry tends to lean Republican when it comes to lobbying and donations. According to the nonpartisan group Citizens for Responsibility and Ethics (CRE), which has been tracking the industry’s donations since 2004, this political leaning is a reversal from the trends seen in 2008 and 2010.
“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,” said Deputy Director Robin Powers, according to Dayton Daily News.
Payday Lenders Saying “Thank You”
Ohio Treasurer Josh Mandel, a Republican Senatorial candidate, has so far received $170,000 from the payday loan industry in this election cycle. He is running against incumbent Democratic Sen. Sherrod Brown who chairs a subcommittee that has limited oversight of the payday loan industry.
An analysis of Mandel’s campaign finance data by the Dayton Daily News showed that half of the funds raised for Mandel by the payday loan industry went to his candidate committee while the remaining half went to his PAC, the Mandel Senate Victory Committee. Like most PACs, the Mandel Senate Victory Committee is responsible for fundraisers and sending money to his committee and Republican organizations.
In 2008, Mandel voted in favor of his state’s crackdown on payday loan businesses. Payday loans operate by lending immediate cash for a postdated check along with service fees and of course interest.
As a result of this clampdown, interest rates were capped at 28 percent APR instead of the previous law’s restriction of 391 percent APR.
However, In 2010 Mandel appeared to reverse his opinion on the payday loan industry when he voted against a bipartisan proposal that would have closed loopholes that lenders used to offer short-term, high-interest loans through other types of lending licenses. Critics of the payday loan industry claim that Mandel helped stall the proposal for several months.
“It’s difficult not to look at [the contributions to Mandel’s campaign] as payday lenders saying, ‘thank you,’” said Uriah King of the North Carolina-based Center for Responsible Lending.
Mandel’s campaign spokesman Travis Considine stated that campaign contributions would have, “absolutely no impact on future public policy decisions he will make.”
“Unlike the career politicians who want to find a Washington solution to every problem, Josh [Mandel] believes that the private sector, along with state and local governments, are the first places to look for solutions,” Considine said.
The largest of Mandel’s donations have come from PACs that were funded by small-loan lenders such as Advance America Cash Advance Centers, Cash America and Checksmart Financial.
Additional large donations have come from individual company officers.
A New Bureau on the Block
This ongoing trend of politicians’ accounts filling with funds from the payday industry is a reaction to the industry-injuring Dodd-Frank Act of 2010. The Dodd-Frank Act added regulation to the nation’s financial system and created the Consumer Financial Protection Bureau (CFPB) under former Ohio Attorney General Richard Cordray.
Payday loan lenders are under the supervision of the Bureau, and Cordray has stated he will increase oversight of small-loan lenders. Continuing their efforts to control the payday loans industry, Democratic senators are drafting state legislation for additional short-term loan regulations.
Charged with overseeing Cordray and the CFPB, Brown chairs the Senate subcommittee on Financial Institutions and Consumer Protection.
“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,” said Meghan Dubyak, Brown’s communication director according to 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.”
Ohio is currently just one of 17 states that have enacted double-digit caps on the interest rates of payday loans while Congress capped interest at 36 percent in 2006.