According to a new analysis by Citizens for Responsibility and Ethics in Washington (CREW), the payday lending industry has been going gangbusters with its spending in Washington over the last few years. In addition to spending nearly $5 million lobbying last year — up from less than $1 million in 2005 — payday lenders are on pace to make more in campaign donations to federal candidates than they ever have before:
CREW’s research shows the payday loan industry is on course to donate more than ever to federal candidates this election cycle. Payday lenders’ political action committees (PACs), trade associations, and employees have contributed at least $1.32 million so far, according to campaign contributions tracked by Political Moneyline. That is already almost equal to the $1.5 million payday lenders contributed over the course of the entire 2010 election cycle. So how, exactly, are payday lenders expecting to collect interest on this investment?
As we’ve noted several times, the payday lending industry makes billions by fleecing low-income Americans. About 120 million payday loans are made annually in the U.S., with an average interest rate of 455 percent. The Center for Responsible Lending has found 76 percent of payday loan volume ($3.5 billion in annual fees) is due to “churning,” which is repeat borrowing by customers who paid off their loan, but because of the interest, require another loan before their next paycheck.
Payday lenders, many of which are financed by the nation’s biggest banks, have upped their lobbying and campaign donations in response to the creation of the Consumer Financial Protection Bureau, which has made predatory payday lending one of the areas that it hopes to more rigorously regulate.
And it’s telling that the three lawmakers collecting the most donations are Rep. Jeb Hensarling (R-TX), vice chair of the House Financial Services Committee, Sen. Richard Shelby (R-AL), the ranking member of the Senate Banking Committee, and Rep. Spencer Bachus (R-AL), chair of the House Financial Services Committee, all of whom vociferously oppose the CFPB. Yesterday, the House Financial Services Committee voted to gut the budget of the CFPB, showing that these donations could be a fantastic investment.