representative David Scott Georgia may have lifted the curtain a bit last week on the impact of campaign contributions.
During a House hearing titled “Short-Term Loans and a Small Dollar: CFPB’s Assault on Access to Credit and the Trampling of State and Tribal Sovereignty,” Scott, a Democrat, joined Republicans in criticizing the Bureau of Consumer Financial Protection, which is in the early stages of drafting rules to regulate some of the practices in the payday lending industry.
And with his attack – taken a bit too literally from a text written by a lobbyist for lenders – Scott was siding with an industry that has given him over $ 72,000 since he was elected to the House in 2002. The major some of that money was contributed during the Great Recession, which prompted lawmakers to develop the Dodd-Frank Act and curb predatory consumer lending practices. In 2008, as the global financial crisis reached its peak, the payday lending industry gave Scott over $ 17,000, as shown in the table below.
The CFPB is a creation of the Dodd-Frank Act, put in place to ensure that credit bureaus responsibly lend to consumers. According to Federal Trade Commission, payday lenders charge up to 390% annual interest on short-term loans. These loans often go to Americans who would not be approved for traditional credit by banks, credit unions or credit cards, the Pew Research Center found in 2012. At the House Financial Institutions and Consumer Credit Subcommittee hearing, CFPB interim director David Silberman said two-thirds of people who use payday services do not have the capacity to repay the loans.
Scott’s comments, however, seemed to indicate that he was there in the trenches with the short-term lenders – or even that he had given up his day job and joined their ranks :. “As it turns out, Huffington Post reported, lawmaker was reciting the outdated Senate testimony of a lobbyist Richard hunt – which had opposed stricter industry regulation – like its own material, forgetting to change Hunt’s possessive pronoun from “our” to “their”.
Of the industry congressman’s seven terms, about $ 22,000 came from Atlanta or nearby Peachtree, making some of his hometown lenders his fans. Scott’s 13th Congressional District includes part of Atlanta.
But it’s also likely that some of Scott’s constituents are heavily indebted to some of the companies. median household income in his district is $ 47,004, or 14% less than the national average, while unemployment there is 15.1 percent – more than triple the national average.
A spokesperson for Scott, in an interview with OpenSecrets Blog, denied that lawmakers were citing Hunt’s testimony and severely criticized the Huffington Post journalist who made the connection. “We did not shoot [the testimony] for him to read, ”said Michael Andel of Scott’s office. “He made up his own stuff. ” But one video Scott’s remarks show this using several sentences that are text versions or very close to Hunt’s words, including the reference to “positive feedbacks from our borrowers”.
In any case, according to Andel, Scott believes that the payday loan is not a long-term solution, but necessary for the time being. “The big question: how can a struggling person get their hands on money? Said Andel. “These people are in crisis and need money in the short term” and have nowhere to turn.
It wasn’t just Scott who took money from the industry and maybe had a conflicting agenda. Many MPs at last week’s hearing said campaign contributions received payday lenders. During the 2012 presidential election cycle, the industry donated nearly $ 3.6 million to candidates, parties and external spending groups. Last year he spent almost the same amount of money pressure Congress and CFPB.
One of the companies that have contributed to Scott over the years, Advance America Cash, is now owned by Mexican billionaire Salinas Pliegro, who bought the company for $ 780 million in 2012, according to Forbes. The magazine then compared Advance America’s interest rates, which are unusual in the United States, to that of a standard bank in the country of Pliegro.
Advancing America website warns that “cash advances are used to cover short-term financial situations; not a long term financial solution. However, a report by the Federal Reserve Bank of Kansas City concluded that “the profitability of payday lenders depends on repeat borrowing.”
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Alex joined CRP as a reporting intern in January 2016. Prior to that, she worked for the Brown Institute at Columbia University on a multimedia investigation of contemporary Iranian art, publishing several pieces resulting from the project in The Guardian. She holds a master’s degree in journalism from Columbia.