As the coronavirus devastates the U.S. economy, seemingly every industry under the sun—from airlines and casinos to farmers and investment bankers—has sent its lobbyists to Congress to plead for relief from Washington.
Few among this hat-in-hand contingent, however, are as unpopular with the American public as small-dollar consumer lenders—chiefly the so-called “payday lenders”—who offer a kind of high-interest, short-term loan that has indebted millions of American borrowers.
Now, the industry is claiming financial distress of its own, and its representatives have spent months pressing the federal government for relief, including access to the newly-created Paycheck Protection Program, a $670 billion pot of loans for small businesses.
According to federal filings reviewed by The Daily Beast, a pair of major payday lending companies lobbied lawmakers on Congress’ small business lending and broader industry assistance provisions: Populus Financial Group—the parent company of ACE Cash Express—and online-based lender Enova.
The industry has received limited aid so far: the Small Business Administration, pointing to longstanding rules on lending to financial institutions, blocked payday lenders—as well as other short-term lenders who aren’t banks—from access to PPP funds. On April 25, the SBA denied a $644,000 forgivable loan from a California-based company called Payday Loan LLC on grounds that giving them access to the federal aid alongside hard-hit small businesses was not in the “public interest.” The company has filed a lawsuit in a D.C. federal court aiming to overturn SBA’s decision.
But the industry’s efforts to change that have found more sympathetic ears on Capitol Hill: on April 23, a bipartisan group of 28 lawmakers sent a letter to SBA and the Treasury Department asking for consumer lenders to get access to PPP funds. A lead author of the letter, Rep. Blaine Leutkemeyer (R-MO), confirmed to Politico that the group intended for payday lenders to be eligible for that relief.
The industry’s influence on Capitol Hill is evident in the list of lawmakers who signed off on the letter. That group includes some of the top recipients of the industry’s campaign cash in Congress, according to the Center for Responsive Politics, a money-in-politics watchdog. Rep. Alcee Hastings (D-FL), for example, has taken in more contributions from the industry—over $200,000—than any other sitting member of Congress. And Rep. Henry Cuellar (D-TX), another signer, is the top congressional recipient of the payday lending contributions for the 2020 cycle, having netted nearly $35,000. Cuellar narrowly beat back a primary challenge this year.
Those two Democrats, and Rep. Tom Graves (R-GA), are three of the top four recipients of industry money so far for the 2020 cycle. Others on the letter have reliably gotten support from the industry over time, including Leutkemeyer and Rep. Steve Stivers (R-OH), who each have received at least $160,000 for their campaigns over their careers. Other signers, like Rep. French Hill (R-AR)—the House GOP appointee to a bipartisan panel to oversee the economic relief funds appropriated by the CARES Act—have received five-figure sums from the industry.
The industry and its advocates simply say that these companies employ workers who deserve relief, just like workers at any other business. In order to be forgivable, PPP loans must be spent largely on employee payroll, rent, or other business expenses.
But the sector’s many critics, including some vocal ones on Capitol Hill, say that Washington shouldn’t lift a finger to aid the operation of businesses that they believe damage the economy simply by being open.
“It’s outrageous that payday lenders are asking Congress to subsidize their predatory loans that trap consumers in cycles of debt,” Sen. Sherrod Brown (D-OH), the top Democrat on the Senate’s Banking panel who is author of a bill to cap payday loan interest rates during the COVID-19 crisis, said in a statement to The Daily Beast. “We need to stand up for American families and not only keep payday lenders from accessing PPP funds but cap the interest rates they can charge at 36 percent.”
To industry watchdogs, the lobbying efforts offer yet another striking example of how advantaged, well-equipped business interests—including those with less-than-stellar public records—have been able to get an audience with the very people shaping the federal response to the coronavirus.
“It's not surprising to see members pushing assistance for payday lenders after being lobbied by payday lenders,” said Jordan Libowitz of the Center for Responsibility and Ethics in Washington, a nonpartisan government watchdog group. “Just as it's not surprising to see money going to other industries that either lobbied heavily for it or have close relationships with the administration or powerful members of Congress.”
While some of these sectors might have a good case for relief—even if they have a leg up in the influence game—financial industry watchdogs say that on paper, the policy argument for payday lenders to gain access to these funds is thin at best. “The payday lending industry, from our perspective, does not present a compelling case for changing the rules of the SBA,” said Brent Adams, senior vice president at the Woodstock Institute, a Chicago-based financial reform group.
“It would be different if their industry was devoted to the public service in some manner. but it’s not,” Adams told The Daily Beast. “From our standpoint, probably the worst thing that a consumer could do who is struggling with cash flow would be to get a payday loan.”
While it’s unclear exactly how demand for payday loans and other high-interest, short-term loans has changed amid COVID-19, demand for most forms of consumer credit has generally declined, according to a new report from the Consumer Financial Protection Bureau. The May 1 report from the federal industry watchdog found that applications for auto loans, mortgages, credit cards, and other credit streams fell between 30 and 50 percent nationwide in March, with particularly notable declines in areas hard-hit by the virus, like New York.
The payday industry is likely seeing similar declines, according to Adams. “Folks are keeping their dollars close. They’re hoarding their money, being extra conservative,” he said.
One of the companies that filings show lobbied on COVID-19 legislation, Populus Financial Group, specifically mentions the PPP as an issue it pressed lawmakers on in March. Its nearly 1,000 storefronts, which bear the ACE Financial name brand, are spread across 23 states and offer payday loans as well as other short-term loans and check-cashing services. The company has made settlement agreements with government regulators in the past over its lending practices, including a $10 million settlement with the CFPB over debt collection practices, which ACE denied were abusive.
As a privately held company, ACE’s parent, Populus, does not have to disclose much information about its performance, and there are not many signs of how it is weathering the economic crisis. The company has fought to keep its stores around the country open; in Saginaw, Michigan, it successfully overturned a city order that one of its stores was not an “essential business” under the state’s stay-at-home law.
Enova, is a Chicago-based public company that offers payday loans and other lines of credit under the brand name CashNetUSA has also lobbied for federal help. There is no evidence Enova, like some other publicly traded companies, applied for or received PPP loans. According to its most recent quarterly results announcement, Enova’s revenue is up by over one-third from the same period last year. The company told investors it is waiving late fees and offering more flexible repayment options to “support our hardworking customers.”
Both Populus and Enova did not respond to requests for comment on their lobbying activity.
But the industry’s appeals are echoed in the April 23 letter to the Treasury and SBA from the 28 lawmakers. They argue that the government’s rule that freezes out non-bank lending institutions from PPP funds hurts workers. They also charged that the SBA’s denial of loans to those institutions was inconsistently applied and gives the appearance that Washington was “picking winners and losers.”
“These businesses have been shut out completely from the PPP, which has forced many of them to lay off their highly trained employees who would have preferred to keep their jobs than seek government unemployment assistance," the letter read. “Keeping individuals who work at non-PPP financing providers employed during these difficult times will facilitate restoring America’s productivity as soon as the health crisis dissipates.”
The lawmakers are advocating for a broad section of lenders to get access to PPP—like auto title lenders—so their appeal would affect more than only payday lenders. But that sector specifically has come up short so far in securing specific aid during the COVID crisis, and industry opponents like Brown could find this an opportune moment to push new restrictions on lenders.
Critics, however, point to the industry’s strong foothold on Capitol Hill as a key reason why it has won concessions in the past and could again in the future.
On this issue, the Woodstock Center’s Adams says, “there’s a disconnection between what the public wants and what elected officials are willing to do.”
“Otherwise,” he says, “this issue would have been resolved a long time ago.”