The barons of D.C.’s payday loan industry need some help in the chambers of the D.C. Council.
Their problem is the Payday Loan Consumer Protection Act of 2007, a bill introduced by Ward 3 Councilmember Mary Cheh and Ward 8’s Marion S. Barry Jr.
Payday lenders go by names like Check ’n Go and ACE Cash Express. They push high-interest, short-term loans for people who limp from check to check. Say, for instance, that you don’t have enough cash in your account to cover the Pepco bill. Drop in to Check ’n Go, and you can get a $100 loan and pay it back in two weeks for $116.11.
Even though that translates into an annual percentage rate (APR) of more than 400 percent, it’s been legal under D.C. law. Payday outfits are regulated by their own section of the D.C. Code that allows them to charge more than $16 for a $100 loan.
The Cheh-Barry proposal threatens the payday industry’s payday, subjecting their outfits to the same interest-rate cap as any other financial outfit in the District—no more than 24 percent APR. The payday lenders claim that passing the bill will essentially wipe out their industry, limiting their profits to a maximum of 92 cents on each $100 lent.
And so the lenders have struggled for months with a simple legislative mission—how to undo the Cheh-Barry axis? They’d need a councilmember from one of the city’s less-affluent wards, where payday loan operators thrive on folks who need quick money to pay bills. Even better: a member with a proven record of keeping an open mind when it comes to pending legislation.
Seems the loan barons have already found their man: Barry.
Cheh and Barry introduced their legislation in March. And by the time it came up for its first-reading vote on July 10, the industry had clearly done some good work at 1350 Pennsylvania Ave. NW. Though not a single councilmember voted against it, Barry abstained.
Surprise! Says Cheh: “When we talked about it, it seemed like we were exactly on the same page.”
For his part, Barry pleads ignorance—that he didn’t realize the bill would likely kill the payday industry when he put his name on it. “I didn’t know a lot about the payday loans,” he says, in an interview that represents a momentous thaw in Barry-LL relations. “After I got into it, I found out I was misled about the 24 percent APR.”
Since Barry returned to the D.C. Council in 2005, he’s proven himself time and again capable of seeing both sides of complicated issues. It’s a talent that shines through when the stakes involve moneyed interests—and really shines through when the stakes involve stadiums.
Throughout his 2004 campaign against Sandy Allen, Barry made no secret of his scorn for using tax dollars to build a baseball stadium and kept that stance into 2006. But that March, Barry cast votes in favor of the stadium lease, after a $611 million spending cap was imposed on the project. The Washington Post reported that a call to the council dais from local megadeveloper and longtime ally Herb Miller helped convince Barry to give the lease his thumbs-up. And even the cap wasn’t entirely sacrosanct: Last October, Barry pushed a plan to have Miller build a garage/retail/condo complex adjacent to the stadium, which required the cap to be loosened.
Barry had a similar conversion inside his own ward. When plans were first broached in 2005 for a new D.C. United soccer stadium to be located on Poplar Point, he went on the record as being “absolutely, unequivocally” against. But after San Francisco developer Victor MacFarlane came to town, feting local politicos and promising a big commercial and residential development push along with the stadium, Barry went whole-hog behind the plan. When the Fenty administration backed off the plan in late July, Barry told the Post, “Once again, Mayor Fenty has disrespected residents east of the river. I feel a sense of betrayal.”
So just who are the moneyed interests when it comes to the payday-loan crowd? LL was introduced to them while whiling away his Friday evening at home last week. He was watching the Washington-Syracuse football game on ESPN when an ad informed him that the “City Council is Considering Limiting Your Financial Choices.”
A bald, mustachioed gentleman in the commercial used a payday loan to get his car fixed before his next paycheck cleared. “I mean, it kept a small problem from becoming a big one!” the guy said. And now, the ad claimed, the D.C. Council wants to make nothing but big problems for Joe Q. Paycheck.
The message, according to the fast-talking gentleman at the end of the spot, was paid for by “DCFSA”—the D.C. Financial Services Association, a group with a rich history dating all the way back to July 17, 2007, according to the city’s corporation registry. The DCFSA has also pumped money into a slick Web site, reformpayday.com, where consumers can watch the group’s two commercials, download handy personal-finance tips, and read about the “best practices” of its members.
Both DCFSA’s Web site and its corporate papers were registered by third parties, making it impossible to put an actual name on the group. The Web site lists the group’s president as Sonny Eyabi, and a pro-payday op-ed appeared in Sunday’s Post under Eyabi’s byline. A Monday evening call to a Laurel, Md., home listed under Eyabi’s name was returned less than an hour later by the group’s spokesperson, Tyrone Bland, who said that Eyabi is unavailable for comment.
Bland says that Eyabi is a district manager for a payday loan company—someone who “understands the ins and the outs” of the payday biz. The DCFSA, Bland says, represents some 43 payday stores, with ACE and Check ’n Go owning the bulk of those.
Despite the commercials and professional Web site, Bland says that this is “not a million dollar” campaign. “This is not an over-the-top financial battle we’re engaged in. It’s more for the purposes of our customers,” he says. “It’s nothing more than another financial option.”
Over-the-top or not, the local lenders have opened their checkbooks enough to pay for some professional help in the halls of the John A. Wilson Building. Since July, Bland says, the DCFSA has hired lobbyists, though he declines to name who they are; the hiring was done after the most recent lobbying reports were filed. “We’ve hired a couple of local firms,” he says. “I’m not in the business of naming names.”
LL, however, is. Here are a couple of boldfacers involved one way or another in the payday beat:
• Harold Brazil. According to the Rev. Graylan Hagler, a longtime activist who’s recently led a push against payday lenders, the former at-large councilmember showed up at one of his protests earlier this summer outside a Petworth loan shop. “He was like, ‘We’re on opposite ends of this one,’” Hagler says. “I said, ‘Yeah, you’re on the wrong end.’”
Reached by phone at his law office, Brazil says he “wasn’t hired as a lobbyist” and is “not involved in it at all at this point.”
• Frederick Cooke. Hagler says Barry’s longtime friend and personal lawyer also called him up to “let me know he was into this.” Cooke did not return a call to his office for comment.
As for DCFSA’s relationship with the councilmember from Ward 8: “We have spoken with Mr. Barry. We’re trying to provide him with the same information, nothing more, nothing less, than the other councilmembers.”
The “information” presumably includes an inventory of reforms that the industry proposes to impose upon itself. The DCFSA favors limiting “rollovers,” where additional fees are tacked on if a borrower can’t repay his loan after the usual two weeks, finding out ahead of time whether payday borrowers are going to be likely to repay, and more fully disclosing the costs associated with their loans.
Bland claims his group’s lobbying efforts “haven’t been able to gain any real traction.”
Good thing, then, that the DCFSA has gotten some help from the Consumer Financial Services Association of America (CFSA), an Alexandria-based national trade group representing payday lenders. According to city campaign finance records, the national group has paid lobbyist Thomas Cassidy of Williams Mullen Strategies $20,000 to press the pro-payday case in city hall.
In a log submitted in his July 1 lobbying activity list, Cassidy reported meeting with various councilmembers and staffers throughout May and June, including several meetings with Cheh and a member of her staff. On May 8, he met with Barry and his chief of staff, Keith Andrew Perry.
Barry says he plans to talk to Cheh and his fellow councilmembers about revising the bill ahead of its scheduled reading on Sept. 18. “What we need is reform,” he says. “We need major reform.”
Those reforms, he says, will likely include limiting rollovers, requiring financial counseling, and other “community benefits”—points pretty much right off of the DCFSA’s agenda.
Barry denies any implication of a flip-flop: “Ain’t no shame in changing your mind.”
No Eleanor in NOLA
On Aug. 1, Congresswoman Eleanor Holmes Norton’s office put out a press release touting a “major Katrina anniversary hearing in New Orleans” to be held Aug. 27. Talk about a no-brainer: For two years, the Katrina debacle has been a winning issue for Democrats, and Norton has done a lot of work on Gulf region aid as chair of a House subcommittee. Now, with opinion polls showing Congress’ popularity sinking, why not take the show on the road for the disaster’s second anniversary?
But Aug. 27 came and went without any hearing, in New Orleans or elsewhere—and not a peep from Norton’s office about the cancellation. What happened?
Turns out the anniversary would have been a convenient date for politics—but not for the politicians: Despite lining up New Orleans Mayor Ray Nagin and Louisiana Gov. Kathleen Babineaux Blanco as witnesses, Norton “could not get a quorum of committee members because they were either out of the country or on vacation just before Labor Day,” says spokesperson Doxie McCoy.
A new date for the hearings, she says, has not been set.
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