Payday Lenders Have a Pal at the White House
During a recent appearance on "Meet the Press," unofficial Trump advisor Corey Lewandowski called for the removal of Richard Cordray as director of the Consumer Financial Protection Bureau.
His statement seemed to come out of nowhere, prompting NBC's Chuck Todd to seek an explanation: Did Lewandowski happen to have "a client that wants" Cordray fired?
"No, no," he insisted, "I have no clients whatsoever."
That emphatic denial stood unchallenged for two days — until the New York Times revealed Lewandowski's ties to Community Choice Financial, an Ohio-based company that was a major client of his former consulting firm before offering his new firm a $20,000-a-month retainer for "strategic advice and counsel."
Community Choice is one of the country's biggest players in the world of triple-digit-interest payday and car-title loans. Majority-owned by Diamond Castle Holdings, a private equity firm with $9 billion in assets, the company has more than 500 storefronts and does business (factoring in its online as well as physical operations) in 29 states.
The company's CEO has described the Consumer Bureau as "the great Darth Vader" of the federal government, and the source of that ill-feeling is plain to see.
The Consumer Bureau is getting ready to issue a set of consumer-lending rules that, if they resemble a proposal put forward last year, will require verification of a borrower's ability to repay. That simple concept runs directly counter to the business model of the payday industry, which is to keep its customers in debt indefinitely, making payments that put little or no dent in the principal. Many people end up spending more in loan charges than they borrowed in the first place.
Like other payday lenders, Community Choice Financial has been a magnet for complaints and investigations. A California class-action lawsuit filed last year accuses the company, along with its subsidiary Buckeye CheckSmart, of violating a federal telephone-harassment law. That is also the theme of dozens of stories submitted to the Consumer Bureau's complaint database. "This company," says one borrower, "called my elderly parents issuing threats against me to 'subpoena' me to court…"
Another complainant describes a series of phone calls and "threats of criminal prosecution… on a loan I know nothing about, did not apply for or receive, and have never received any bills for." Community Choice and its subsidiaries — companies with names like Easy Money, Cash & Go, and Quick Cash — figure in more than 650 Consumer Bureau complaints, over unexpected fees, uncredited payments, bank overdraft charges triggered by oddly-timed electronic debits, and collection efforts that continue even after a debt has been fully repaid, among other recurring issues.
Community Choice has also been a pioneer in in the subspecialty of evading state interest-rate caps. In Ohio and Texas, among other states that have tried to ban payday loans, Community Choice's payday shops have camouflaged their predatory loans by using bank-issued prepaid cards with credit lines and overdraft charges; calling themselves mortgage lenders instead of consumer lenders; and registering as credit repair companies in order to charge separately for their supposed assistance in resolving people's financial troubles.
The success of these legal workarounds tells us that it will be very hard for the states to address the scourge of payday lending without help. That's why payday lenders are pushing Congress to strip the Consumer Bureau of its authority over them. And, that's why Community Choice brands CheckSmart and Cash Express have been generous contributors to sympathetic members of Congress, and why — with the help of Lewandowski and other mouthpieces — the industry is trying to get the Trump administration to remove the Bureau's director (even if there is no legal basis for doing so) and replace him with someone who can be depended on to leave payday lenders alone.
Lewandowski may be too embarrassed for the moment to continue raising his voice on the industry's behalf. We can hope that's true, at any rate. With or without his assistance, however, the industry's campaign will continue, and the Lewandowski episode has made the stakes very clear: Will the Consumer Bureau be allowed to go on doing the job it was created to do, standing up to the financial industry's power and insisting on basic standards of transparency and fair play? Or will some of the financial world's fastest and loosest operators find a way to undermine this agency and keep it from cracking down on their abuses at great long last?