Republicans Again Pay Day Loan Reform

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This story was reported in partnership with Type Investigations , with support from the Puffin Foundation.

Mike Hodges was nonetheless a modest fry among payday lenders when Donald Trump visited Hodges' hometown of Nashville in 2018. Hodges and his married woman, Tina, owned somewhere around 100 stores scattered across the country, giving out small-dollar loans for fees that piece of work out to annual interest rates as high as 450 percent. Their house, Advance Financial, was puny compared to the chains of 1,000 or more that rose from the industry's pioneers in the 1990s. But the Hodges quickly distinguished themselves every bit major donors to Trump, shelling out more than a million dollars to his campaign and main super-PAC. In Jan 2018, Hodges told a reporter for USA Today that he was amongst those granted a private audience with Trump when the president showed up in Nashville to requite a speech at the Gaylord Opryland. The following Oct, the couple co-sponsored a Nashville appearance past Vice President Mike Pence, where ticket prices ranged betwixt $ane,000 and $100,000.

By so, Mike Hodges had emerged as the industry'due south point person with the Trump White House—admission he openly boasted about purchasing.

"Every dollar corporeality, no matter how pocket-sized or large it is" is of import, Hodges said 2 weeks ahead of the Pence fundraiser, according to an audio recording from an industry webinar obtained by the Washington Post. Hodges mentioned the chair of the Republican National Committee: "For case, I've gone to Ronna McDaniel and said, 'Ronna, I need help on something.' She's been able to call over to the White House and say, 'Hey, nosotros have one of our large givers. They demand an audience.'"

America's payday lenders and others selling exploitative financial products to the working poor have enjoyed a string of victories since Trump took over as president. Enforcement deportment against the industry past the Consumer Financial Protection Bureau have fallen dramatically, and the country'due south peak banking regulators appear to exist readying a loophole that would let payday lenders operate even in jurisdictions where local governments have banned their product. A whistleblower inside the CFPB charged in August 2019 that his bosses had ordered staff economists to rig a study so that information technology downplayed impairment to consumers who repeatedly take out payday loans.

The biggest losers in this arrangement have been America's working poor—above all, Black and Latino workers, who are trapped disproportionately past payday lenders' exorbitant fees (typically $fifteen per $100 for a loan due back commonly in two weeks). The manufacture foremost sees green, and too operates in white low- and moderate-income communities. But a 2017 study by the Center for Responsible Lending showed that communities predominantly of people of color in Colorado were seven times more probable to have a payday lending store than predominantly white communities. A 2012 study past Pew Charitable Trusts found that Black people were three times equally likely as white people to have taken out a payday loan.

Hodges and his manufacture colleagues accept gone all-in on a president who claims to "beloved the Hispanics" and be the greatest for Black Americans since Abraham Lincoln, and who has paid substantially no federal income taxation for years by manipulating bank loans and the tax organization, quite possibly fraudulently. Even after the coronavirus pandemic hit, the payday moguls could count on Trump. Initially, these storefront lenders were barred from participating in the Paycheck Protection Program designed to bail out small businesses. All the same after an intense lobbying campaign, the administration obviously shifted class: Records of PPP recipients released in July revealed that dozens of payday lenders and similar businesses received at to the lowest degree $9 billion from the program. (Hodges' company, with more than 500 employees, the threshold for PPP, was not eligible for the program.) Presumably, none of these companies volition pay triple-digit interest rates on any money they might have to pay back under the PPP rules.

The industry's biggest win came in July, when the Consumer Financial Protection Bureau announced that payday lenders will not have to verify a borrower's ability to repay a loan before lending them money. The power-to-repay requirement was hatched (just not quite finalized) during the Obama administration. Nether that policy, payday lenders would take a selection: Do the necessary underwriting to decide a borrower'south ability to pay back a debt, or limit them to no more than than half dozen loans per year.

The Trump administration killed the rule earlier it could have effect, adding to the vulnerability of those hardest hit past the pandemic economy. "There is never a good time to enable predatory loans carrying 400 percent interest rates," says Michael Calhoun, president of the Eye for Responsible Lending. "But this is the worst possible fourth dimension."

I outset encountered Mike Hodges in 2008 while working on a volume about how the financial crunch was generating boom times for the land's payday lenders, check cashers, and other businesses equally office of what might be chosen Poverty, Inc. In Las Vegas, he and his wife were attending the 20th annual gathering of the what used to exist called the National Bank check Cashers Association, a grouping that later expanded to include pawnbrokers, auto title lenders (who charge sky-high rates from borrowers using their cars every bit loan collateral), and others peddling high-priced services to a struggling, downwardly-market clientele. The organization rebranded itself the Financial Service Centers of America, at once more respectable-sounding and opaque.

Hodges and his wife stuck out when I spotted them sitting alone at a big round luncheon tabular array at the Mandalay Bay Resort and Casino on the first twenty-four hour period of the FiSCA briefing. Similar nearly every other attendee, they were white, only also far younger and more than fit than their typical counterparts. In a sea of polyester and ill-fitting sport coats, they were dressed in polos and khakis, looking equally if they were attention a stockbroker's convention. Hodges welcomed the risk to share his views on the manufacture he was breaking his fashion into. While the bigger players then were focused on further national expansion, he wanted to convince the wider public that payday lenders were legitimate, not parasitic. "They've put much more effort into lobbying and not enough into public relations," he said of the industry'south onetime baby-sit. And so tainted was the term "payday loan," he added, that he called the transaction "greenbacks advance," both at his stores and on idiot box ads for Advance Financial. "The term 'payday' has go the black skull and cross bones of our industry," he said. Even so, business was good, not despite the deep recession that had overtaken much of the world in 2008, only because of it: "We're at tape loan volumes," he boasted then.

Today, as the Hodges operate storefronts across Tennessee and provide online payday loans in another dozen states, they accept expanded their political patronage. Hodges contributed more than $150,000 to the Trump campaign in 2016, according to the Federal Ballot Commission. In 2018, Mike and Tina Hodges gave $125,000 each to America Kickoff Action, Trump's main super-PAC, and Hodges himself chipped in another $250,000 in 2019. Whereas the Hodges and their employees contributed under $10,000 during the 2014 ballot bike, the Hodges and others at Accelerate Financial gave at least $410,000 in the 2016 cycle and at least another $i,045,000 in the lead-up to the 2018 midterm elections, according to the FEC. The vast majority of that money went into Republican campaign coffers, including the campaigns of individual House and Senate Republicans and various Republican entrada committees. (Hodges himself donated $125,000 to the RNC in 2019, according to the FEC, and another $60,000 to the National Republican Congressional and Senatorial Committees.) The Hodges and their employees had already contributed another $800,000-plus past the time the recording of Hodges boasting of his connections to the Trump White Firm emerged.

"It's hard for me to say this number considering if you told me this v years agone, I would have idea you lot were crazy," Hodges told the Post. "But we've donated well-nigh $i.25 million to [Trump's] campaign so far. So Tina and I have become, I would say, one of the larger donors to the campaign over the last couple of years." Since then, the Hodges and employees of Advance Financial have fabricated at least some other $528,000 in campaign contributions—again, near all of it to Republicans. Hodges declined to exist interviewed for this story, opting instead to send a quote from Hunter S. Thompson: "In a democracy, you accept to be a Actor."

By the fourth dimension Trump was elected, the country's payday lenders were used to being under regulatory siege. A sweeping fix of financial reforms President Barack Obama signed into law in 2010 created the Consumer Financial Protection Agency, which payday lenders saw every bit a potentially existential threat to their business. Phil Locke, who for five years served equally president of the pro-payday Michigan Fiscal Service Centers Association, recalled "constant" emails from FiSCA alarm nearly a new federal watchdog with the power to crack down on "unfair, deceptive, or abusive acts or practices." Six months after its inception, the CFPB announced its intention to investigate the payday lending industry. "People were petrified of the CFPB," Locke said at the fourth dimension.

The CFPB spent five years considering a new rule to govern what it dubbed "minor-denomination loans." Obama himself weighed in on the topic when, in a oral communication in 2015, he said, "As Americans, we don't mind seeing folks brand a profit…But if you're making that profit by trapping hardworking Americans into a fell cycle of debt, you got to find a new business model."

Researchers working for the CFPB discovered that 3 in every four payday loans go to borrowers who accept out more than 10 loans a year. Three out of every five were fabricated to borrowers who, by the time they had paid off a loan, had spent more in fees than the amount borrowed. A person who borrowed a typical sum of $400 needed to scrounge up $460 in two weeks to repay the loan. However more than half of payday customers, their researchers constitute, were refinancing their loans so many times in a row that they paid at least $400 on the original $400 loan. These were people living on the economic margins—and, one time again, they were unduly people of color.

The average payday borrower earns about $thirty,000 per yr, according to a 2016 Pew study, and 58 percent were already having problem meeting their monthly expenses without the boosted brunt of repaying a loftier-fee, short-term loan. The CFPB did non have the authority to cap the interest rates a company could charge, then instead it created the ability-to-repay policy.  If implemented, CFPB researchers said, the policy would save consumers  $7 billion a year.

With that highly assisting cycle of debt under threat since the Obama assistants, the donations to Trump began to flow. Allan Jones, the founder and CEO of payday lender Check Into Greenbacks, and other executives at his management company contributed more than than $65,000 to the 2016 Trump campaign, co-ordinate to the FEC, and his visitor gave $25,000 to the president's countdown committee. Advance America, the country's largest payday chain (i,500 stores), contributed at least $250,000 to Trump's 2017 inauguration. Rod Aycox, an early on champion of machine championship loans, gave $1 meg to the inaugural commission. In 2018 and 2019, the Customs Financial Services Association of America, a payday trade group, held its almanac meeting at the Trump National Doral hotel outside Miami, pouring roughly $1 million into the Trump Organization coffers, according to estimates past ProPublica.

Payday lenders were also spending more than $1 one thousand thousand a year on the services of dozens of Washington lobbyists. Hodges seemed to outdo anybody when in 2017 he hired lobbyist Al Simpson, who had until that yr served equally Mick Mulvaney's main of staff in Congress. Every bit a lawmaker, Mulvaney had dubbed the CFPB a "joke…in a sick, deplorable kind of way." He had since gone to the White House as Trump'south managing director of the Part of Management and Budget—and shortly took on a 2d role as the CFPB'due south interim manager. Simpson met repeatedly with Mulvaney, according to the Washington Post, while Mulvaney was doing that double duty. (Next, Mulvaney would become Trump'southward third primary of staff.) As of October, Advance Fiscal's parent company spent $450,000 on Simpson's services, according to the Center for Responsive Politics. (Simpson and Mulvaney did non respond to requests for comment.)

One of Mulvaney'southward first public acts every bit the CFPB's acting chief was to suspend the new power-to-repay standard that the bureau had crafted afterwards a five-year procedure, announcing the bureau'south intention to reconsider information technology. One month subsequently, Mulvaney requested a budget of nada dollars. "I've been bodacious," he wrote in the asking, that there was enough money already in hand "sufficient for the bureau to comport out its statutory mandates." The CFPB froze new investigations and announced information technology had dropped a lawsuit against four companies it had charged with running illegal payday lending operations using interest rates of upwards to 950 pct on an annual basis. Scores of other cases would also probable fade nether this new regime, according to a New York Times investigation. An analysis by the Consumer Federation of America showed that nether the previous (and first) CFPB managing director, Richard Cordray, consumers received $43 million a week in relief from the CFPB, but that the amount had fallen to under $500,000 a week under Mulvaney.

When Mulvaney was named Trump'south acting chief of staff in Dec 2018, his deputy at the Part of Direction and Budget, Kathy Kraninger, took over the captain of the Consumer Financial Protection Bureau. Her background was in homeland security. She had no feel working in the earth of financial services. Notwithstanding by a vote of 50–49, the Senate approved Kraninger as the CFPB'south permanent director. She appeared to be a lock for a five-year term that would stretch through the terminate of 2023, until the Supreme Court ruled in June that a president could fire the bureau's chief without cause (meaning a new president could replace whoever was running the bureau).

In February 2019, Kraninger announced her intention to gut the ability-to-repay dominion earlier it went into effect, claiming there was "bereft evidence and legal support" to justify it. Federal regulatory agencies didn't typically just toss a new dominion born of a five-year process; studies had be conducted and rationales offered. Only the Trump assistants plain had a solution for that process: rig it. In April, the New York Times revealed that CFPB economist Jonathan Lanning, on his last day on the job, had written a memo that defendant Trump appointees of pressuring career employees to manipulate the research. That included the apply of "statistical gimmicks to downplay the impairment consumers would suffer if the payday restrictions were repealed." Matt Leas, a spokesperson for the CFPB, said at the fourth dimension that the agency has "a fair, transparent and thorough" process for making rules.

Past June of last year, the bureau bought itself more time to bury the power-to-repay policy by issuing a 15-month filibuster of compliance.

These moves were "a slap in the confront to consumers—especially people of color—who have been victims of predatory business practices and abusive lenders," said civil rights advocate Vanita Gupta.

Since the pandemic began in March 2020, says Center for Responsible Lending annotator Graciela Aponte-Diaz, "we've seen an administration taking advantage while everyone's attention is on the coronavirus to pass all these rules that make information technology easier for corporations to impairment consumers." Indeed, the CFPB in July officially killed the power-to-repay dominion.

The Trump administration seems to have at least i more gift in mind for the industry. In contempo months, regulators at both the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency accept been laying the background for a policy known as "rent-a-bank," which would permit payday lenders to arrange loans through out-of-state banks, allowing them to bypass state laws imposing interest rate caps.

That latest "scheme," as Aponte-Diaz called information technology, is perchance the next payoff for a big investment in the current occupant of the White House. "You've got people suffering, simply this is another example of the Trump administration helping the payday lenders."

Research assistance by Mary Retta and Maha Ahmed.

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Source: https://www.motherjones.com/politics/2020/10/payday-lenders-gave-trump-millions-then-he-helped-them-cash-in-on-the-working-poor/

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