Dodd Dinner With Online Payday Lenders Transforms Into Fundraiser

The Online Lenders Alliance, a lobby group for Internet payday lenders, is hosting a three-day conference in Washington, D.C. The agenda's highlights include Senate Republicans, such as Richard Shelby (Ala.), who is listed as attending a Wednesday reception, and David Vitter (La.), who is expected to deliver a keynote address on Thursday morning.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) was on the agenda for a Tuesday dinner, along with special guest Sen. Tim Johnson (D-S.D.). The Huffington Post, hoping to attend (but unsure if press would be allowed), went to the restaurant to see what Dodd would have to say about online payday lending. Consumer advocates who cheered Dodd's advocacy of credit card reform, which passed the Senate that very day, are also hoping for a 36 percent cap on interest rates, per a measure introduced by Sen. Dick Durbin (D-Ill.)

Dodd told the Huffington Post last week that he was not crazy about such an interest rate cap because of how it would affect short-term lenders. A 36 percent cap on annualized interest rates would effectively ban payday lending, whether from a storefront or a website, since a typical $90 fee on a $300 payday loan amounts to an annual percentage rate of over 1,300 percent. Dodd's home state of Connecticut uses a 12 percent limit to ban payday lending, which the Connecticut attorney general calls "exploitive and predatory."

The Huffington Post didn't get a chance to go into these niceties with Dodd. Inside the restaurant, Dodd staffers said the dinner, which was not open to press, was not even sponsored by the Online Lenders Alliance.

The dinner "is not an OLA event," OLA spokeswoman Lisa McGreevy said in a subsequent phone interview. But the OLA agenda lists a Dodd dinner -- was there a mixup?

"I don't think there was any mixup," she said. "There is a fundraiser tonight for Senator Dodd."

McGreevy added: "There may be some OLA people there."

When Dodd and Johnson arrived at the restaurant -- Bistro Bis, near the Capitol -- the Huffington Post said hello and asked about the fundraiser.

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"Tim is hosting me," Dodd said.

Does it have anything to do with the Online Lenders Alliance?

"Some people will be here from there," Dodd said.

But it's not an OLA event?

"No."

Here's what the OLA's agenda says:

Dodd has received $44,000 from people affiliated with the payday lending industry this year, the Los Angeles Times reported.

Click here for a PDF of the OLA's conference agenda.

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Comments

[jerjer]

WHOOPS! The New Payday Loan Study is available here:
http://paydayloanindustryblog.com/new-payday-loan-industry-survey-results-available/

Jer

[jerjer]

Good for Dodd! Consumers deserve as many choices as possible for solving their financial challenges.

Regarding payday loans, we're already seeing rate discounts, coupons, first loan free and other creative methods for marketing payday loans. COMPETITION will continue to drive rates for payday loans down.

Our government needs to keep it's nose out of our affairs.

Payday loan companies, in general, do a good job of disclosing their fees and the APR; certainly much better than banks do with their overdraft fees that approach 2000% APR's!

Finally, there is empirical evidence that payday loan consumers are not the ones complaining! A new study ( see: New Payday Loan Study )
reveals some surprising results (at least surprise by the so-called consumer protectionists); overall, actual consumers of the payday loan product are more than satisfied with their overall payday loan experience! And the majority (88%) payoff their loan after a single use!

[dambrath]

Considering the loss of the short-term lending industry would deprive a lot of people of a perfectly valid financial option, the opposition has surprisingly little to offer to fill that void. I would like to see their alternative plan before kowtowing to the sob stories of the few.

[PaydayLendingRep]

An annual interest rate cap of 36% would result in the elimination of an affordable credit choice for consumers.

At a 36% APR, the total fee charged on a $100, two-week advance would be $1.38. Payday advance lenders could not cover the cost of originating a loan, let alone meeting employee payroll and benefits and other fixed business expenses.

[Jon Schultz]

A 36% APR cap would eliminate the option of small-dollar, short-term loans for working people by requiring that the loans be offered for far less than the cost of issuing them.

The APR is just a small part of the picture. There are circumstances under which it would be absolutely wise for one person to ask another, "Lend me $20 and I will pay you back $25 in one hour," even though that would be a 219,000% APR. What is important is NOT the APR, but whether the actual cost of the loan is worth the benefit which it confers.

Yes, some payday-loan borrowers get themselves into a debt bind, just as many credit-card borrowers do as well. The fact is that borrowing money, at any APR, is somewhat risky and should only be done after careful consideration. It is not the lender's fault when someone develops a debt problem - assuming there has been no deception - because others have taken out the same loan and benefited thereby. Surveys show the overwhelming majority of people who have used payday loans consider the service to be a useful financial tool.

It is violation of freedom of commerce for the government to tell independent merchants or service providers how much they can charge, and such price controls are invariably counterproductive. I hope those calling for interest rate caps will put their desire to be one of the good guys aside and show a little respect for freedom in America.

[shamcork]

Democratic senator Chris Dodd is a disgrace to the office which he holds.

Please, people of Connecticut, throw him out and vote for Rob Simmons.

[BCrago77]

I doubt anyone here can come up with a moral argument as to who PayPal lenders are terrible, so long as these lenders are upfront about their terms.

1) Annulaized interest rates are deceptive in the context of short-term loans. A $50 fee on a $300 loan is creates a giant annual rate, that has zero impact upon the borrower's life after he repays within a month. Many credit cards have an yearly fee of $59 or more. Classify that fee as interest, then apply it to the account of someone who pays their entire balance each month, and you get a similar annual rate of well over %100. Same with bounced-check fees, overdraft coverage fees, etc.

2) The Payday interest rate is still high. But a loan with high interest of $300 can make a tremendous positive difference for someone with modest income. If you pay your rent late, you might not get your lease renewed, and have a hard time getting another apartment if you have a modest income and/or low credit score. If you need to repair your car to get to work, and you need to keep your job...etc.

The moral here is to look at the public policy consequences of allowing v. not allowing Payday lenders, as opposing to simply replying upon the age-old moral intuition against high-interest lenders, which goes back to Shakespeare, the Bible, and likely farther.

Sometimes our moral intuitions get it wrong.

[BCrago77]

Appy polly loggies for the errors in my post immediately above; "who" should be "why," "replying" should be "relying," and there might be one or two more that I still haven't caught.

[truthinlending]

The usual nonsense from the payday lender about how TRUTH in lending doesn't apply to them. The APR (annual percentage rate) is the way you measure the cost of a loan against another loan to determine which is more expensive. It is like miles per hour--it doesn't matter whether you have been driving 15 minutes or 6 hours, you still measure the speed as miles per hour.

The truth is that the payday lenders don't want you to know the truth about how expensive their loans are.

The other truth they don't want you to know is the almost no one pays off the loan in one pay period--the average borrower gets at least 8 loans and when you add up those costs it is even worse.

The final truth they don't want you to know is that this product is designed to look like a short-term loan but set-up in such a way that you become trapped in a long-term loan.

[BCrago77]

I doubt anyone is still reading this, but in response to truthinlending - I've already said that PayDay loans have the very high interest rates. It's also true that if you pay back the loan within a month, a high annual rate has no impact on your life.

truthinlending states: "almost no one pays off the loan in one pay period" How does he know this. He doesn't. He made it up. When I lived in Chicago, I used these loans a total of 7 or 8 times, and I never rolled them over. The media has found people who continually roll over and end up paying a lot of money, but never gave evidence that such people are representative.

Repeating my final point earlier: What would be the consequences for most Payday borrowers if these loans were made illegal? Shouldn't that be the controlling question?

[bebula]

"since a typical $90 fee on a $300 payday loan amounts to an annual percentage rate of over 1,300 percent"

Sorry, I don't understand where the 1,300 percent figure comes from.

Could someone please explain the reasoning here?

[truthinlending]

The annual percentage rate is the standard of measurement for the cost of a loan--sort of like miles per hour whether you are driving 15 minutes or 6 hours.

If you pay $90 for a $300 loan and have to pay it back the next day that is obviously much more expensive than having to pay it back in a year.

The 1300 APR is based upon how soon the loan has to be repaid.

And btw, late fees are not loans and it doesn't make sense to apply an APR to them.

[Acebass]

Short term or payday lenders are loan sharks, they prey on the needy and should be run out of business or at least held to the same restriction as ordinary lenders. There is no provision for paying down the principle once the loan is made. You can renew it from week to week by paying the interest and in some cases the borrowers pay for years on the same loan and in reality pay the loan back 10 fold before they are able to exhaust the loan. This is not right and should be against the law.

[sean6886]

As long as money is involved in campaigns, the government will work for their money masters and not the people of the United States.
Campaigns are costing millions and millions of dollars, and getting it from these kinds of corporations with agendas is the easiest way, rather than taking time off and going door to door, as they should do. They don't hear the people, they hear the cash register.

[Acebass]

thats why I support the http://www.fairelectionsnow.org/

[truthinlending]

Making an online payday loan in Virginia is a felony and these people he is dining with do it all the time. Call it dining with felons.

[notAMoron]

Do these senators just carry collection baskets around in their briefcases?

Why would they even go to some dinner with loan sharks?

BTW HP is allowing these guys to advertise on this page too.

[jorge4u]

I have to say this but Dodd makes me more uncomfortable with each passing day.

[DaCoach]

Another example of why most politicians fear transparency. When is the last time you could sit down with your elected official and discuss legislation, let alone write it? Do you think it has anything to do with your lack of financial support for his/her election? Term limits now.

[WierdWookie]

Dod is a perfect example of the "Term limits" bill which finally went down in flames. Fanning the flames were the politicans who wanted to stay in office long after their brains melted.
We have examples of this brain drain in high office right now. They show up just in time to vote party line.
When Americans wake up and pay attention to who is doing what in our Government, things will change.

[hopeforchangenow]

I tried to e-mail Sen. Dodd to tell him what a lousy human being he is - but guess what no e-mail on his Senate website. Isn't he clever? Bill Moyer on PBS had a show about these types of predatory lenders, along with their cousins the car sellers, JD Bylander (I think that is right). It showed how Wall Street put their heads together to tap the untapped credit market of the poor. This is what they came up with. They price the cars based on the maximum the people can pay. No leeway. This is greed in it's purest and sickest form.