As another late bill, Senate Bill 16-185, to allow subprime personal lenders to charge higher interest rates on bigger loans makes its way through the Colorado Senate–debate of the whole chamber on the bill was scheduled for yesterday but punted to Monday–Colorado Ethics Watch released a detailed report on the influence of the subprime personal lending industry over both parties in the Colorado General Assembly. It’s a must-read: if you have the stomach for it, that is.
Because if you’re a liberal Democrat, you’ve got some friends on the list.
While the initial increase that would be permitted if SB 16-185 passes is smaller than the increase House Bill 15-1390 would have authorized, lenders would be able to continually increase loan sizes subject to 36% APR because the cap number would be indexed to inflation. As a result, the effective interest rate for loans greater than $1,000 would continue to increase as inflation increases, trapping greater numbers of Coloradans in the cycle of debt.
Spurred by these incidents, Colorado Ethics Watch investigated lobbying spending and campaign contributions by the major proponents of House Bill 15-1390, Springleaf Finance and Independent Bankers of Colorado, along with other organizations known to be involved in subprime lending from their participation in lobbying on the 2010 payday lending reforms. These lenders and their associated PACs spent more than $730,000 on lobbying from fiscal year 2012 through 2015…
The big sum spent on lobbying is what funded the efforts of Democratic-friendly lobbyists like former Deputy House Communications Director Megan Dubray–who were key to successfully rushing the 2015 bill through the Democratic-controlled House without the scrutiny it deserved. Studies by the Center for Responsible Lending and others have identified a deliberate strategy of courting Democratic support for predatory lending bills, under the pretense of providing “access to credit” for persons who wouldn’t otherwise be able to get a loan.
And be assured, Colorado’s strict campaign finance limits have not cut off the direct flow of campaign cash to lawmakers–just spread it out a little:
In addition to lobbying, subprime and payday lenders gave $126,925.01 in contributions to various candidates and committees between 2012 and 2015. For example, industry participants and associated groups such as political action committees gave $32,526.32 in contributions to legislators in the 2016 Colorado General Assembly. Even though political contribution amounts were not large due to Colorado’s strict campaign contribution limits, they were widely distributed among members of the 2016 legislature. More than two-thirds of the 2016 legislature, including 37 Democrats and 31 Republicans, [Pols emphasis] received contributions from industry participants or their associated PACs…
Here are the top 12 recipients of predatory lender cash in the Colorado General Assembly, listed with their vote on House Bill 15-1390:
The underlying point here is that Republicans can be fully expected to receive support from predatory lenders, and to reciprocate freely with votes that support the industry’s legislative agenda. But in Colorado’s divided legislature, support of at least some Democrats is necessary to pass anything. Consequently of the top six recipients of predatory lending cash on this list, four are Democrats. The top recipient just so happens to have been a Democratic “no” vote on last year’s bill.
It’s important to recognize that nothing we’re describing here is out of the ordinary for an industry seeking favorable treatment in the legislature. Lobbyists with good relationships with lawmakers work their connections. People and companies make perfectly legal donations. Lawmakers vote on stuff. There’s no conspiracy.
The problem is that, while legally operating, these lenders are objectively bad actors. Their products do not help people, they hurt them by strapping them with unaffordable and often inescapable debt—by design. The extreme and in many cases hidden costs of borrowing money from predatory lenders is a moral as well as an economic problem, and the decision to regulate interest rates and keep loan terms fair is a moral judgment also made with the demonstrable best economic interests of consumers in mind.
So yes, there’s a lot at stake. And legislators–especially self-professed progressive Democratic legislators–who side with these loan sharks over their constituents should pay their own price.