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'Dan Rather Reports' criticizes payday loan industry

November 23, 2006 - Alton, Illinois

Dan Rather's news program Dan Rather Reports this week featured the hour-long program "The Best Congress Money Can Buy." Appearing on the HDNet network (Rather's new home), the show contained a lengthy negative segment about the payday loan industry and its lobbying activities.

Below is the transcript from the program's segment that dealt specifically with the payday loan industry.

The original transcript for the entire program can be found at HDNet. The excerpt below has been slightly modified for readability: the original had Rather's narration in ALL CAPS, which was difficult to read. We present Rather's narration bolded instead. Additionally, obvious typos introduced into the transcript during the transcription process were corrected--leaving the original content intact.

Transcript of Dan Rather Reports Number 102, "The Best Congress Money Can Buy"

You may be surprised to see what happens when K street is hired to protect the interests of an industry that has been accused of taking advantage of senior citizens and U.S. soldiers. It works like this: millions of Americans take out small loans from so-called " payday" loan shops and then find themselves paying sky-high interest rates that can soar to 500 percent a year. But making loans for people who live paycheck to paycheck as become a booming business. And, thanks to hired guns in Washington and across the country there's nothing illegal about it.

Once upon a time, at least according to Hollywood, if you didn't pay back your loan on time, you got a visit from fellows with brass knuckles and baseball bats. Nowadays getting the money is still easy, but the pain can be felt more in your wallet. Payday loan shops are now a $40 billion business with more than twice the number of stores as Starbucks. Some payday loan companies are even traded on the stock exchange. The ads make it seem easy. Stuff happens in life and sometimes that stuff costs a little more than we happen to have at the moment. When I'm feeling that squeeze, the only place I'll go is Advance America Cash Advance.

Mary Ann Olson, who lives in Portland, Oregon, was short the money she needed to buy a pair of orthopedic shoes. She thought a payday loan sounded like a good idea. "I needed $140 for the shoes, and I needed to get it 'cause of my feet, I went ahead to Pay Day Loan. And that's when I borrowed $150. Olson, who has multiple sclerosis, lives in an assisted living home and qualified for a loan because of her steady social security checks. I remarked about the interest and they and they said, "Well, you're only be paying 5 or 10 percent interest." And and I believed them. When it came time to repay the loan, Olson was short a few dollars and so she solved the problem by taking out another loan. I just went to another Pay Day Loan and got more money to pay them off. And then a third Pay Day Loan to pay off the second one because it was every two weeks. It became a compulsion for me. I was sitting at the bus stop and across the street was another Pay Day Loan. And I just went right across the street and borrowed the money. It was that easy. Only takes about 20 minutes. They're nice. They have candy.

Ed Mierswinski, of the non-partisan U.S. Public Interest Research Group, doesn't think payday lenders are so nice. He views them as old-time loan sharks with modern-day political savvy and connections. He and a group of consumer advocates are trying to shut the industry down. It's kind of like the game of what we call "whack-a-mole" first you restrict them and then they pop up in another place and then you've got to beat them back again. Well, how does this work? What tactics do they use to get their influence spread and get their way in Congress with the regulatory groups at the federal level? The first thing you do is you get a public relations flack. And your flack says, "Create an association with a benign-sounding name." And they created the Community Financial Services Association. Sounds wonderful. It sounds very, very nice You come up with a name that sounds wholesome even though the business you're in might be distasteful. I mean, lending money at 500 percent interest you want to call yourself a community group because that deflects from the attention that you would otherwise get. Second, hire some lobbying firms to advise you on where to distribute your campaign donations.

That's advice payday lenders took to heart. In the past five years, they've ponied up nearly five million dollars to lobbyists. Their chief advocate is Tim Rupli, who under Republican rule was considered one of the most influential lobbyists in town. We wanted to speak to Rupli, but he declined. He happens to be the one that the payday lenders went to and said, "We need influence to prevent Congress from passing a bill that will make our loans illegal and we're gonna pay you a lot of money to do that." Rupli has earned more than $2 million from payday lenders in the past three years. He is a renowned fundraiser. In the past five years, Rupli and his wife have donated more than $250,000 to lawmakers. All together, payday lenders, their lobbyists and spouses donated more than $3 million to members of Congress since 2001. For a long time, the investment paid off, as Congress looked the other way when cases of people destroyed by predatory lending came to light. The average member of Congress if he or she is getting campaign donations from a payday lender. If he or she is generally hearing from these people that "We're just providing a choice. We're out there in the neighborhoods providing a service." They don't want to be the ones that just shut them down.

Pat Cirillo, a statistician who often works for the payday loan trade groups, says her own research shows that consumers do know what they're getting into. It's as simple as it gets. There's a poster on the wall. $100 costs $15. (Laughter) $200 costs $30. It's incredibly obvious. And when you talk to consumers, and they explain the costs of their various options, they clearly understand the difference.

But many, like Mary Ann Olson, do not understand what they are getting into. In a short time, she owed money to nine different payday loan shops and was carrying a service charge that swallowed most of her social security check. Olson began bouncing checks and running up bank fees. Before she knew it, those $150 orthopedic shoes had cost her more than $2,000They were calling me 12 times a day. I had changed my telephone number. They overdrew my bank account knowing there was no money in there. It was devastating. I was a nervous wreck. I really was. You know, I had trouble sleeping, eating. I was out every day, trying to find money. And yet, you know what; it was partly my fault for not being a wiser consumer.

But consider what consumers are up against an industry that benefits when folks don't read the fine print and one that can pay for political protection. You make donations to both sides of the aisle. You have a partner running the company from both sides of the aisle. The payday lenders have Mike Oxley, a Republican, in the House. And they have Tim Johnson, a Democrat, in the Senate as their number one guns.

In the past few years, both Oxley and Johnson, among other lawmakers, have sent letters to Federal regulators criticizing proposed payday lending restrictions. The industry nurtures its relationships with lawmakers and key Congressional staffers by hosting conferences near warm, sunny beaches. Last march, payday lenders flew in Senator Tim Johnson, and state legislators to Palm Springs. Another favorite spot is Jackson Hole, Wyoming. Once you're out in a beautiful place like Jackson Hole or Hawaii or Miami, which are other favored delegation, you've got the member. So you have maximum access, which can result in leveraging quite a bit of influence. Is that the theory? Absolutely. Is that the practice? Absolutely. In fact, one of the best places is if you've got your own plane.

Advance America apparently agrees. The company has made its corporate jets available to both Democratic and Republican lawmakers, among them: Tom Delay, Mark Warner, Joe Lieberman and Mike Oxley, plus the Democratic Governors Association. These rides are not free, but they are usually given at a fraction of the actual cost and well below first class airfares. Well, consumer interest groups, including your own are looking to influence Congressmen as well. Do you take people on these junkets? Can you? Ah-- if we had the money, I suppose it would be legal, but we would probably consider it improper.

For more than five years, payday lobbyists beat back all attempts at consumer protection. They had a landmark victory last year, when they were able to bottle up a proposal by Senator Elizabeth Dole, of North Carolina, who was trying to prevent payday lenders from gouging military personnel. They pressured Dole to withdraw her bill and, instead, ask the Pentagon to study the matter. The tactic backfired when the Pentagon's report was released this fall. It was devastating. Admiral Charles Abbott testified that payday lending is the most serious single financial problem the military has ever encountered. We see every day in our offices around the country individuals who have come in and fallen into the Venus flytrap of the payday lending problem and it has literally destroyed their lives.

Just ask Brian Anderson, an aviation warfare systems operator from San Diego who borrowed $300 and ended up having to pay back $15,000. I was very surprised when it happened to me. I didn't think I would get myself caught up in this vicious cycle. Anderson, who is 34, has been in the service for half his life. In 2002, he was short on cash and worried about feeding his family. I have three kids, ages 13, 9, and 5. And all of them are in different growing cycles. And so you know you have to go out there and buy clothes for them, you have to feed them, they need they're toys and stuff. Plus you still have your everyday expenses that you have to take care of: your gas, maintenance of your cars, insurance, so it added up a lot. He found a payday shop near his base, and before long, he was caught in the same debt-trap as Mary Ann Olson. I couldn't stand for payday to come around because I would have to start my little routine of going to one store to pay them off, taking another loan out, going to another store to pay them off. And they figure with the military they have a good client because if I default to my loan they could go to the commanding officer and say hey you know this guy owes us money.

At a Senate hearing this fall, Senator Johnson made one last stand submitting a proposal from the payday lending industry that he acknowledged he hadn't actually read. But one last question and I know nothing about this proposal myself, it was called to my attention that the CFSA has made a proposal to DOD. But Undersecretary of Defense David Chu took on payday lenders and Senator Johnson. You can have disastrous consequences for the quality of life and for the careers of service members. Where do you suggest these guys go? What do you say to that young soldier. What he wants to go to his mother's funeral. What are you going to do? This issue is predatory lending, lending or getting people in over their heads. Taking military people into a debt loan that they cannot sustain. It's not about airline tickets to a funeral. In the end, the payday lobby lost this battle. The Senate approved a 36 percent cap on lending to military personnel and their families, as part of the Defense Authorization Bill. And, immediately, the largest payday lenders announced they'd close their shops near military bases and stop lending to soldiers altogether. It's unfortunate that it took a war to ban payday lending even to one segment of our society. But I hope that Congress will say, "Okay, we've protected military families. What about protecting everyone else?"

Cindy Vega works for a trade group that represents check cashers and payday lenders. Consumer groups claim it as a victory on the face of it may seem that way but the ultimate end to that may be that it restricts choice for military personnel in terms of how they handle their finances. And we think that's a shame. The pay day loan business is absolutely going to try and regroup. They are going to try to pass a law next year to weaken what the Congress did. They are going to try and go state by state and make it easier to lend to the rest of us because they don't have the gravy train of the military families.

But Airman Brian Anderson hopes Congress puts them out of business. A $300 loan, many, many years ago turned into $15,000 in fees and interest and return checks. And it's one of those things I wouldn't wish that upon anybody.

Transcript Source

HDNet, Dan Rather Reports, Show Number 102: "The Best Congress Money Can Buy"

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