If you heard an elected official that you are supporting was accepting campaign contributions from tobacco companies, would you stop supporting them? What if they were accepting contributions from big oil or a company charged with toxic pollution? What if a politician you believed in was accepting $50,000 a year in contributions from Goldman Sachs?
If you are a Democrat, the answer would probably be yes. You would probably no longer support an elected official taking money from companies engaged in business practices counter to your beliefs as a Democrat.
What would you do if an elected official you supported were accepting contributions from a payday loan company? Would you be as disgusted? Maybe. But you probably wouldn't give it a second thought.
While contributions from payday-lenders are not part of our litmus test when we decide whom to support, we would be making a huge mistake if they were not factored into our political consciousness.
Payday-lenders ravage low-income communities and take advantage of our most vulnerable citizens, yet supposed liberal politicians accept contributions from these companies without accounting for the social impact of these lenders. This is unacceptable. We, as Democrats, must hold them accountable.
No matter where you live, you've seen payday-lending stores. They have storefronts, usually in strip malls, with friendly names like Check-into-Cash and Advance America. As of 2009, 22,868 payday-lending stores have been operating in the United States. This outnumbers Starbucks and believe it or not, McDonalds.
First, some facts about payday lending for those of you who don't know how they work.
Let's take the case of Sandra Harris, an accounting technician from Wilmington, North Carolina (Sandra's story was chronicled by the Center for Responsible Lending). After Sandra's husband lost his job, her family hit hard times and struggled to pay the bills. When her car insurance premium was due, Sandra could not pay the bill. She turned to a payday-lender. In exchange for a $50 dollar fee, a post-dated check, and proof of a regular paycheck, Sandra received $200 in cash and was able to pay her premium on time.
When the loan matured, she went in to pay it off, but the clerk told her she could keep extending the loan as long as she continued to pay a $50 fee every two weeks (remember the original loan was just $200). Sandra thought of other unpaid bills and was quickly embroiled in a situation, over a few months, where she was taking payday loans from six different lenders to pay off other payday loans. She was only able to escape the debt cycle through the support of family and a compassionate credit union. As a victim of Payday loans, Sandra was paying $600 a month in fee/interest, while the principal of her loans totaled just a few thousand dollars.
Sandra got into trouble because of something called "flipping." Flipping is an industry term for borrowers who extend their payday lending by paying the $50 fee every time the loan matures. Like Sandra, some consumers even get payday loans to pay off payday loans. After all the flipping, the average consumer pays $450 in interest on an original $300 loan -- that's on top of the principal of course -- and pays an annual interest rate of 400% (all of these figures are from a report commissioned by the Center For Responsible Lending).
Payday-lenders generate 76% of their revenue from so-called flipping. These companies can only make a profit if they can send borrowers into a cycle of debt that is nearly impossible to get out of.
So you imagine that payday-lending companies send most of their political contributions to Republicans, right? Wrong.
MapLight.Org -- a California-based watchdog organization that tracks money in politics in California and Washington D.C. -- released a disturbing report this past week, exposing the top twenty recipients of payday-lending company campaign donations in the California legislature.
Nineteen of the top twenty recipients of campaign contributions from payday-lenders are Democrats. It bears repeating, nineteen are Democrats. Only ONE is a Republican.
Call me naïve, but I never thought that Democratic politicians would be in the business of accepting campaign contributions from predatory lenders. But they are and in big numbers.
Let's take California Assemblyman Charles Calderon (D-Montebello) who is number five on the list: he accepted $31,450. He is only out-ranked by his brother California State Senator Ron Calderon (D-Montebello), who received the most contributions at $50,000.
Assemblyman Calderon authored the 1996 bill (when he was in the California Senate) that allowed payday lenders to operate in California. And he's just given the payday industry another reason to love him.
He recently made news by introducing a bill in the California Assembly to increase the borrowing limit with payday-lenders. Assemblyman Calderon somehow managed to get enough complaints from his hard working constituents so he, out of the goodness of his own heart (sense the sarcasm?), has proposed legislation to increase the current $300 limit to $500.
The LA Times editorial board denounced the bill, calling it "a bad idea that would make a costly form of borrowing riskier for consumers."
But as far as Assemblyman Calderon is concerned, he's a modern day civil-rights hero.
In an interview with the Oakland Tribune he explained, "Without this payday loan, people who are in desperate need of money are going to go someplace else... and be at even further risk of identity theft and scams." He does not see payday loans as "debt traps" for consumers."
"I represent East Los Angeles, one of the poorest communities in the country," he pointed out, "I get elected by these people, I have to stand for election...I've lived the life, I came from very humble beginnings."
Payday lending companies do one thing and one thing only: they give poor people the opportunity to be poorer. And they make them pay dearly for the privilege.
I am not insensitive to the people who need payday loans. The $250 most consumers receive goes for food, to pay basic bills, and to take care of their kids. I am not attacking these folks. I am attacking the people charged with protecting us: our elected officials.
Assemblyman Calderon claims he is trying provide his constituents with what they really need.
His reasoning is insulting. He did not and has not proposed a long-term solution against payday loan debt alongside his legislation. He renounces the problem, claiming that an increase in the loan amount is the only solution and anyone against this viewpoint is apathetic to the working poor. A glance at the legislation listed on his website shows a raft of pro-business legislation drafted by lobbyists (not that there is anything wrong with that). He's not killing himself to save the poor people of his district by any stretch of the imagination. He is simply pandering to the industry that supports his campaign.
However, politicians at the state level are not the only ones benefiting from the largesse of payday-lenders.
A report from CREW (Citizens For Responsibility and Ethics in Washington) -- a Washington D.C. based watchdog group -- discloses that payday-lenders donated over 1.5 million dollars in the 2010 campaign cycle to federal office holders.
Of the top ten beneficiaries of this money, seven are Democrats and three are Republicans. Why are Democrats across the country taking money from companies so indifferent to consumer protections and serve as the very definition of usury and predatory lending?
The most hypocritical example is the case of New York Representative Carolyn Maloney, who was the second largest recipient of donations from payday-lenders. Rep. Maloney takes these campaign donations and simultaneously writes blog posts urging Republicans in Congress to support the work of the Consumer Financial Protection Board. She's like a doctor that smokes.
In both these reports, the Democrats taking payday-lender money are the same politicians professing to fight for the working poor, labor, and minorities. They fight for immigrants' rights, they support tough environmental regulations, they call for full-equality for LGBT Americans. They are progressive.
These Democrats go after companies like Wal-Mart for their poor labor record and march with civil-rights leaders like Dolores Huerta and chant "si se puede." Naturally, they attacked predatory mortgage lenders in droves during the financial crisis. They are also painfully aware of what payday-lenders do to their constituents.
But it's easy to take money from payday-lenders, so why not? The company names appearing on their campaign disclosure reports don't jump off the page like "Exxon" or "RJ Reynolds" or "Goldman Sachs." Contributions from companies like Axcess Financial and Advance America sound innocuous enough.
So what can we do?
It is time we hold our elected officials accountable for rolling out the red carpet for payday-lenders. Taking money from payday-lenders should be akin to taking money from tobacco or big oil. Most of these Democrats wouldn't dream of taking money from Goldman Sachs; they should equally embarrassed to accept contributions from payday-lenders.
And what if they don't stop?
Make it the most expensive mistake they've ever made.