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Executive Summary Momentum to federally regulate so-called “payday loans” -- short-term consumer lending products that can

often lock borrowers in a cycle of high interest rates and increasing debt -recently has increased. As a result, the industry has stepped up its lobbying and public relations efforts as well as its campaign contributions to federal candidates. Citizens for Responsibility and Ethics in Washington (“CREW”) has examined those campaign donations, which demonstrate how an industry with a low federal profile seeks to influence members of Congress to achieve a particular policy outcome. Background Historically, small loans have been regulated mainly by state law.1 In 2008, the payday loan industry fought ballot initiatives in two states2 -- Arizona and Ohio -- and state legislators introduced payday reform initiatives in several others.3 In Arizona, the industry spent $14.5 million on a failed effort to kill a sunset provision on a law that allowed payday lenders to operate in the state.4 In Ohio, lenders spent $14.6 million in a losing effort to try to convince voters to repeal a 28% interest cap.5 With one exception,6 the payday industry has largely avoided federal regulation,7 but the election of President Barack Obama has put the issue before Congress. During his campaign, President Obama called for a cap on payday loan interest rates,8 a position he has maintained

Sue Kirchhoff, Some Consumers Run Into Big Problems With Auto Title Lending, USA Today, December 27, 2006. Gabriela Rico, Payday Lending Industry Down, But Not Out, Arizona Daily Star (Tucson), November 12, 2008; Thomas Suddes, Payday Lenders’ Stealth Campaign, Plain Dealer (Cleveland), November 2, 2008. Consumer Federation of America, 2008 Payday Loan Legislative Update, November 21, 2008.
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Rico, Arizona Daily Star, Nov. 12, 2008. Suddes, Plain Dealer, Nov. 2, 2008.

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William Welch, Law Caps Interest On “Payday Advances” To Service Members, USA Today, October 10, 2006.
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Matthew Murray, Payday’s Day of Reckoning, Roll Call, March 18, 2009. http://www.barackobama.com/issues/economy/.

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since his election.9 This issue has resonated with the president since his days in the Illinois State Senate, when he spoke out against payday lending abuses.10 As a direct result of the increased federal attention, payday lenders have increased their lobbying, PR efforts, and campaign donations. Current Legislative Landscape Payday loans had long been a problem for enlisted service members, who often fell victim to predatory lenders set up outside of military bases.11 In 2006, the payday loan industry suffered a major federal setback when Congress passed a law capping the rate that members of the military could be charged for “consumer loans” at 36%.12 Momentum for expanded regulation picked up last year when Senator Richard Durbin (D-IL) introduced S. 3287, which would apply the 36% military interest rate cap across the board, but the measure died.13 Although other bills regulating the industry were also introduced in the 110th Congress, none ever reached the floor for a vote.14 In 2009, Sen. Durbin re-introduced the 36% interest cap as S. 500.15 He also introduced a bill to create a Financial Product Safety Commission to protect the public from “inappropriate” financial products.16 In addition, Rep. Luis Gutierrez (D-IL) recently introduced the Payday

http://www.barackobama.com/issues/economy/; http://www.whitehouse.gov/agenda/urban_policy/. Melissa Allison, State Takes On Predatory Lending, Chicago Tribune, December 15, 2000; http://www.barackobama.com/issues/economy/.
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Id. Welch, USA Today, Oct. 10, 2006.

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http://thomas.loc.gov/cgi-bin/bdquery/D?d110:17:./temp/~bdX3QZ:@@@D&summ2=m&|/bss/ d110query.html.
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http://thomas.loc.gov/cgi-bin/bdquery/D?d110:1:./temp/~bdkBPG:@@@D&summ2=m&|/bss/d 110query.html; http://thomas.loc.gov/cgi-bin/bdquery/D?d110:1:./temp/~bdxDNu:@@@D&summ2=m&|/bss/d 110query.html.
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http://thomas.loc.gov/cgi-bin/query/z?c111:S.500:.

http://thomas.loc.gov/cgi-bin/bdquery/z?d111:s.00566:; http://thomas.loc.gov/cgi-bin/query/F?c111:1:./temp/~c111yqbbXz:e1991:.

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Loan Reform Act (H.R. 1214), on which a hearing was held on April 2nd.17 According to Rep. Gutierrez, his bill would create a “federal floor” for consumer protection related to payday loans.18 The legislation has been criticized both by lenders for potentially driving them out of business and by consumer advocates for not going far enough.19 No further action on the bill is currently scheduled.20 Methodology and Terminology CREW used public records on OpenSecrets.org and CQ Moneyline to research campaign donations, the House Clerk’s website for lobbying information, and internet research for the public relations section. Bills and legislation were compiled based on media reports and searches on thomas.gov and govtrack.us. The payday loan industry is broken down into two main groups: “monoline” companies, which mainly sell payday loans,21 and “multiproduct” companies, which have other revenue streams, including check cashing, pawnshops, and rent-to-own, and are generally larger and more financially stable.22 In addition, the industry is represented mainly by two groups: Community Financial Services Association (“CFSA”), and Financial Service Centers of America (“FiSCA”);23 both operate PACs and employ lobbyists.24

Press Release, Rep. Luis Gutierrez, Financial Institutions Chair Emphasizes Urgency for Payday Lending Reforms That Protect Consumers, March 11, 2009.
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Id. Murray, Roll Call, Mar. 18, 2009.

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Telephone conversation between CREW staff member and House Financial Services Committee staff member, April 10, 2009.
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http://www.responsiblelending.org/issues/payday/briefs/page.jsp?itemID=29557924#six; Stephens Inc., Payday Loan Industry Report, (Dennis Telzrow, Managing Director & David Burtzlass, Associate) April 17, 2008.
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Id.

http://www.cfsa.net/; Press Release, Financial Service Centers of America, FiSCA Awards Scholarships to Twenty-Seven Outstanding College Bound Students, October 19, 2008. Financial Service Centers of America, FEC Form 1, Statement of Organization, May, 13, 2003; Community Financial Services Association of America, FEC Form 1, Statement of Organization, February 26, 2007; Sellery Associates, 4th Quarter Lobbying Report, Client: Financial Service Centers of America, 2008; The Kate Moss Company, 4th Quarter Lobbying Report, Client: Community Financial Services Association, 2008.
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In this report, CREW studied the five largest monoline companies, the five largest multiproduct companies, and the two main industry groups. CREW defined “largest” as those companies with the greatest number of storefront locations operated.25 CREW analyzed the contributions of Advance America, Check ‘n Go, Check into Cash, QC Holdings, Allied Cash Advance, ACE Cash Express, Cash America, EZCorp, CompuCredit, and Dollar Financial as well as the industry trade associations: CFSA and FiSCA. All the statistics in this report refer to the aggregate of these twelve entities, which are collectively referred to as the “payday loan industry” throughout the report. The “key members” referred to in the “campaign donations” section of the report are defined as the chairmen and ranking members serving on committees and subcommittees with jurisdiction over the payday lending industry:26 House Financial Services Committee, House Subcommittee on Financial Intuitions, Senate Banking Committee, and Senate Subcommittee on Financial Institutions.27 Lobbying The payday loan industry has increased its lobbying expenditures steadily over the last several years, spending at least $730,000 in 2005 to over $2.1 million in 2008.28 Lobbying expenditures more than doubled from $2,045,000 in the 109th Congress to $4,182,550 in the 110th Congress. Lobbying Year Amount Firms 109th Congress 2005 $730,000 8 2006 $1,315,000 9 110th Congress 2007 $2,041,300 12 2008 $2,141,250 16

Stephens Inc., Payday Loan Industry Report, (Dennis Telzrow, Managing Director & David Burtzlass, Associate) April 17, 2008. See http://www.govtrack.us/congress/bill.xpd?bill=h108-2407; http://www.govtrack.us/congress/bill.xpd?bill=h109-458; http://thomas.loc.gov/cgi-bin/bdquery/D?d109:1:./temp/~bdvcJD:@@@C|/bss/d109query.html.
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Michael Barone and Michael E. Cohen, Almanac of American Politics, 2004-2008.

See Chart 1, “Payday Loan Industry Lobbying Expenditures.” Raw data for this section was compiled from searches of the Office of the Clerk, U.S. House of Representatives, public disclosure website available at: http://disclosures.house.gov/ld/ldsearch.aspx. CREW searched for all lobbying disclosures filed from 2005 through 2008 listing Advance America, Check ‘n Go, Check into Cash, QC Holdings, QC Financial, Allied Cash Advance, ACE Cash Express, Cash America, EZCorp, CompuCredit, Dollar Financial, FiSCA, or CFSA as a client to create our totals.

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The seven payday entities that employed lobbyists -- Cash America, ACE Cash Express, Advance America, Check ‘n Go, CompuCredit, FiSCA and CFSA -- doubled the number of lobbying firms they collectively employ from eight in 2005 to 16 in 2008. Campaign Donations Federal campaign donations by the employees and political action committees (“PACs”) of the five largest monoline lenders, the five largest multiproduct lenders, and the two industry group PACs have more than doubled over the last three campaign cycles.29 Donations totaled $592,653 in the 2004 campaign cycle, but jumped to $1,529,973 in the 2008 cycle. Total Donations Company Employees and PACs CFSA FiSCA Totals 2004 Cycle $519,399 $0 $73,254 $592,653 2006 Cycle $769,231 $0 $81,150 $850,381 2008 Cycle $1,248,413 $207,060 $74,500 $1,529,973

FiSCA was established in 1987 and has operated a PAC since at least 1993,30 as has Cash Express.31 ACE Cash Express opened its PAC in 2004.32 For the 2006 election cycle, Advance

See Chart 2, “Payday Loan Industry Donations.” Raw data for this section was taken from OpenSecrets.org and CQ Moneyline.com. CREW aggregated campaign donations from the past three campaign cycles from all donors listing Advance America, Check ‘n Go, Check into Cash, QC Holdings, QC Financial, Allied Cash Advance, ACE Cash Express, Cash America, and EZCorp, CompuCredit or Dollar Financial as their employer and all donations made by PACs of those companies and the PACs of FiSCA and CFSA to create our totals. National Check Cashers Association, FEC Form 3X Year End Report, June, 6, 1994; http://www.fisca.org/.
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Cash America, FEC Form 3X Year End Report, January 1, 1994. ACE Cash Express, FEC Form 1, Statement of Organization, November 11, 2003.

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America, EZCorp and QC Holdings launched their own PACs.33 Although established in 1999, CFSA did not form a PAC until the 2008 election cycle.34 The payday loan industry appears to be donating more strategically. In the 2008 cycle, payday groups donated $160,810 to “key members of Congress,” or about 10.7% of their total donations, while in the 2006 cycle, these members only received $55,000, or about 6.5% of total payday giving.35 Key Members Company Employees and PACs CFSA FiSCA Totals 2004 Cycle $57,000 $0 $12,000 $69,000 2006 Cycle $45,000 $0 $10,000 $55,000 2008 Cycle $122,450 $19,860 $18,500 $160,810

Top Recipients of Campaign Contributions - 2008 Cycle36 By far the largest recipient of payday loan campaign cash was Sen. Tim Johnson (D-SD), the chairman of the Senate Subcommittee on Financial Investigations, who received $47,400

EZCorp, Inc., FEC Form 1, Statement of Organization, August 12, 2005; QC Holding, Inc. PAC, FEC Form 1, Statement of Organization, May 19, 2005; Advance America, FEC Form 1, Statement of Organization, September 25, 2006. Community Financial Services Association of America, FEC Form 1, Statement of Organization, February 26, 2007; http://www.cfsa.net/about_cfsa.html. See Chart 3, “Donations to Key Chairman and Ranking Members.” Raw data for this section was taken from OpenSecrets.org and CQ Moneyline.com. CREW aggregated campaign donations from the past three campaign cycles from all donors listing Advance America, Check ‘n Go, Check into Cash, QC Holdings, QC Financial, Allied Cash Advance, ACE Cash Express, Cash America, and EZCorp, CompuCredit or Dollar Financial as their employer and all donations made by PACs of those companies and the PACs of FiSCA and CFSA to create our totals. In compiling these results, CREW used OpenSecrets.org to search for individual contributions by employer and CQMoneyline.com to search for PAC donations. In an abundance of caution, CREW then compared the OpenSecrets.org individual contributions with CQ Moneyline’s individual contributions, but discovered that the information is not consistent across both databases. Therefore, a different methodology might yield different results.
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from the payday industry in the 2008 cycle.37 He is followed by Rep. Dennis Moore (D-KS), who took in $34,419 in the last cycle. Rep. Moore’s district includes the town where QC Holdings is headquartered38 and he serves on the House Subcommittee on Financial Institutions. Rep. Carolyn Maloney (D-NY), the former chair of the House Subcommittee on Financial Institutions was the third highest recipient, accepting $30,750 in payday campaign cash. The ranking member on the Senate Banking Committee, Sen. Richard Shelby (R-AL), was the fourth highest recipient, receiving $25,560. Sen. Jeff Sessions (R-AL) rounds out the top five, having received $25,150. Rep. Kendrick Meek (D-FL) is the 6th largest recipient, receiving $23,650 from the payday industry in 2008. Senate Banking Committee chair, Sen Chris Dodd (D-CT), and the ranking member on the House Financial Services Committee, Rep. Spencer Bachus (R-AL), finished 7th and 8th in CREW’s ranking, taking in $22,900 and $22,500 respectively. Rep. Jeb Hensarling is 9th on the list, receiving $20,000 and Sen. Mitch McConnell (R-KY) is 10th, having received $18,600. Rep. Gutierrez, who introduced the Payday Reform Act of 2009, has taken $18,500 from the payday industry, making him the 11th highest recipient last cycle. Notably, Rep. Gutierrez received no contributions from donors associated with the industry in the 2004 and 2006 campaign cycles. In contrast, Sen. Durbin took only $1,000 from the industry last cycle before introducing his legislation. Public Statements by Industry Donation Recipients Most of the leading recipients of donations have said little publicly about the issues surrounding payday loans. Sen. Johnson was critical of the military loan cap in 2006 citing concerns over unintended consequences.39 Rep. Moore has co-sponsored the Payday Reform Act of 2009, finding the bill “probably strik[es] it close to a proper balance.”40 In 2005, Rep. Bachus argued against an early attempt to cap military payday loans due to the potential effects See Chart 4, “Top Recipients of Payday Loan Industry Campaign Contributions, 2008 Cycle.” The raw data for this section was taken from the Center for Responsive Politics and CQ Moneyline. CREW aggregated campaign donations from the 2008 cycle from all donors listing Advance America, Check ‘n Go, Check into Cash, QC Holdings, QC Financial, Allied Cash Advance, ACE Cash Express, Cash America, EZCorp, CompuCredit or Dollar Financial as their employer and all donations made by PACs of those companies and the PACs of FiSCA and CFSA to create the ranking.
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http://www.qcholdings.com/whoweare.aspx; http://moore.house.gov/district/. Faith Bremer, Payday Loan Industry Generous to Johnson, Gannett News Service, May

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8, 2007. House Financial Services Committee, Subcommittee on Financial Institutions, Hearing of the Subcommittee on Financial Institutions and Consumer CreditSubject: H.R. 1214, The Payday Reform Act of 2009, Federal News Service, April 2, 2009.
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on legitimate creditors.41 Sen. Sessions supported a “more constrained” version of a military payday loan cap championed by Sen. Durbin in 2005.42 Despite the financial support he has received from the industry, Sen. Shelby offered support for military payday reform in 2006, saying, “as long as certain unscrupulous lenders continue to employ predatory practices, our service men and women suffer."43 CREW was unable to find any public statement on the issue by Rep. Maloney, but she was scheduled to address FiSCA’s conference in 2004.44 Public Relations The largest payday lender in the country, Advance America, recently named public relations expert Tony Colletti to its board.45 The industry also seems to be getting support from, if not working directly with, infamous D.C. PR consultant Rick Berman, who has criticized regulation of the industry on one of his websites since at least February 2008.46 Tim Miller, of Berman’s Center for Consumer Freedom, penned a letter in support of the payday industry in March 2008.47 Mr. Berman also is behind the website Econ4U.org, which advocates for payday loans.48

Panel Aims to Protect Military from Insurance Hard Sell, Congressional Quarterly Today, March 16, 2005. Marcy Gordon, Democrats Press Bankruptcy-Bill Provisions to Help Seniors, Military Personnel, Associated Press, March 1, 2005.
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Rick Maze, Lawmakers Question Payday Loan Cap, Marine Corps Times, October 2,

2006. Press Release, Financial Service Centers of America to Hold National Conference, PR Newswire, October 8, 2004. Press Release, Advance America Announces Appointment of Tony S. Colletti to Its Board of Directors, PR Newswire, January 30, 2009.
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http://www.consumerfreedom.com/news_list.cfm?topic=41.

Letter from Tim Miller to The Editor of the Capital Times (Madison, Wisconsin), March 7, 2008.
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http://www.bermanexposed.org/; http://econ4u.org/moneymatters_payday.cfm

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Chart 1 Payday Loan Industry Lobbying Expenditures

$4,500,000 $4,182,550 $4,000,000

$3,500,000

$3,000,000

$2,500,000 $2,045,000 $2,000,000

$1,500,000

$1,000,000

$500,000

$0 109th Congress 110th Congress

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Chart 2 Payday Loan Industry Donations

$1,800,000 $1,529,973

$1,600,000

$1,400,000

$1,200,000

$1,000,000

$850,381

$800,000 $592,653

$600,000

$400,000

$200,000

$0 2004 Cycle 2006 Cycle 2008 Cycle

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Chart 3 Donations to Key Chairmen and Ranking Members
$180,000 $160,810 $160,000

$140,000

$120,000

$100,000

$80,000 $69,000 $60,000 $55,000

$40,000

$20,000

$0 2004 Cycle 2006 Cycle 2008 Cycle

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Chart 4 Top Recipients of Payday Loan Industry Campaign Contributions 2008 Cycle

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Amount $47,400 $34,419 $30,750 $25,560 $25,150 $23,650 $22,900 $22,500 $20,000 $18,600 $18,500 $16,000 $15,500 $15,400 $15,000

Last Name Sen. Tim Johnson (D-SD) Rep. Dennis Moore (D-KS) Rep. Carolyn Maloney (D-NY) Sen. Richard Shelby (R-AL) Sen. Jeff Sessions (R-AL) Rep. Kendrick Meek (D-FL) Sen. Chris Dodd (D-CT) Rep. Spencer Bachus (R-AL) Rep. Jeb Hensarling (R-TX) Sen. Mitch McConnell (R-KY) Rep. Luis Gutierrez (D-IL) Rep. Debbie Wasserman-Schultz (D-FL) Rep. John Boehner (R-OH) Sen. John McCain (R-AZ) Rep. Bobby Rush (D-IL)

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