Payday Payday: How Predatory Lending Money Flows Through Missouri Politics

2015 Update

Predatory lenders spend a lot of money on Missouri politicians and political consultants to protect their obscene business practices from basic interest rate limits and other reforms. Predatory lenders spend a lot of money on Missouri politicians and political consultants to protect their obscene business practices from basic interest rate limits and other reforms. "Missouri is fertile soil for high-cost lenders," due to triple digit interest rates on payday loans and other high-cost loans that target families in crisis. In 2012, there was a major ballot initiative push to limit the interest rates and fees on payday loans and cap the states interest rate at 36 percent. The initiatives opposition primarily out of state funders - raised and spent millions of dollars to prevent this grassroots action from being on the ballot. This report tracks how predatory lending money flows to lender front groups and how predatory lending money flows to public officials, political candidates, and consultants. The facts are startling:

An incredible $1.53M moved through the payday lenders' main front group, Missourians For Equal Credit Opportunity (MECO) during the 2014 ballot initiative campaign cycle, even though there was no payday lending ballot measure that cycle.

The installment lenders Stand Up Missouri front group, funded almost entirely by out-of-state companies who charge triple-digit interest rates to Missourians, also remains active. In fact, theyve moved almost $450,000 into their campaign committee this cycle, allegedly to fight the same non-existent ballot measure.

Where is all of this money going? As you'll see below, it's going to consultants, lawyers and politicians from across the state -- and from both major political parties. Below, you'll read:

How predatory lending money moves through ballot issue committees In Missouri Who is getting paid by the lenders ballot issue committees Which politicians are receiving campaign contributions from predatory lenders What real reform looks like

Our lack of real predatory lending laws is an embarrassment and harmful to the thousands of Missouri families ensnared in tragic cycles of debt.

How Predatory Lending Money Moves Through Ballot Issue Committees In Missouri

In July 2011, James C. Thomas III established Missourians for Equal Credit Opportunity (MECO), a front for the payday loan industry, as the first industry campaign committee with the Missouri Ethics Commission. Thomas is associated with Jeff Roe, founder of Axiom Strategies and a former chief of staff to Rep. Sam Graves.

This relationship extends into the financial realm. From 2013 to July 2015, MECO paid Axiom $483,982.30 for strategic planning, regional operations management, and field research. Ninety-four percent of the receipts reported by MECO have come from Missourians for Responsible Government (MRG), a 501(c)(4) organization that is not required to disclose the sources of its funding. Missourians for Responsible Government has been led by Patrick Tuohey, the the western Missouri field manager for the Show-Me Institute, a State Policy Network affiliate for which radical ideologue Rex Sinquefield is president. Despite MECOs funders attempts to remain anonymous, filings by QC Holdings with the Securities and Exchange Commission provide strong clues about who is footing the bill. From ProPublica:

Payday lender QC Holdings declared in a 2012 filing that it had spent "substantial amounts" to defeat the Missouri initiative [to reform predatory lending laws in Missouri]. QC, which mostly does business as Quik Cash (not to be confused with Kwik Kash), has 101 outlets in Missouri. In 2012, one-third of the companys profits came from the state, twice as much as from California, its second-most profitable state. If the initiative got to voters, the company was afraid of the outcome: "ballot initiatives are more susceptible to emotion" than lawmakers deliberations, it said in an annual filing. And if the initiative passed, it would be catastrophic, likely forcing the company to default on its loans and halt dividend payments on its common stock, the company declared. In late 2012, QC and other major payday lenders, including Cash America and Check into Cash, contributed $88,000 to a group called Freedom PAC. MECO and Freedom PAC shared the same treasurer and received funds from the same 501(c)(4). Freedom PAC spent $79,000 on ads against [former Rep. Mary] Still [a payday lending reformer] in her 2012-losing bid for a state senate seat, state records show. (The mention of Still seems to have come out of nowhere.)

Missourians for Equal Credit Opportunity was established in 2012 to defeat the grassroots ballot initiative to cap interest rates on payday loans to 36 percent. The other ballot committee established in 2012 to defeat the popular ballot initiative to reform predatory lending laws was Stand Up Missouri, which reported no contributions from QC Holdings. It therefore is reasonable to conclude that QCs money moved through MRG to MECO. The following table summarizes MECOs contributions reported to the Missouri Ethics Commission. MECO has actually been three separate administrative committees with the MEC since 2011, and we have removed balance transfers between the committees for clarity. Missourians for Equal Credit Opportunity Contributions, 2011-2015:

Missourians for Responsible Government - 8/19/2011 - $200,000.00 Missourians for Responsible Government - 9/26/2011 - $250,000.00 Missourians for Responsible Government - 11/10/2011- $150,000.00 Missourians for Responsible Government - 4/11/2012 - $46,000.00 Missourians for Responsible Government - 4/11/2012 - $140,000.00 Missourians for Responsible Government - 4/12/2012 - $100,000.00 Missourians for Responsible Government - 4/20/2012 - $75,000.00 Missourians for Responsible Government - 4/25/2012 - $321,400.00 Missourians for Responsible Government - 1/5/2012 - $250,000.00 Missourians for Responsible Government - 3/2/2012 - $250,000.00 Missourians for Responsible Government - 3/21/2012 - $260,000.00 Missourians for Responsible Government - 10/26/2012 - $414,000.00 Missourians for Responsible Government - 12/28/2012 - $96,432.00 Missourians for Responsible Government - 7/26/2012 - $210,000.00 Missourians for Responsible Government - 6/11/2012 - $181,500.00 Missourians for Responsible Government - 1/22/2013 - $153,260.00 Missourians for Responsible Government - 3/21/2013 - $81,480.00 Missourians for Responsible Government - 10/24/2013 - $395,000.00 Missourians for Responsible Government - 1/28/2014 - $395,000.00

Note that MECO raised more than one million dollars through MRG in the 2013-14 ballot initiative cycle plus 2015 (an off year), during which there was not an attempt to collect signatures for a predatory lending reform initiative petition. Missourians for Equal Credit Opportunity (MECO) is not the only committee raising and spending lending industry money to block consumer protections. The ironically named Stand Up Missouri committee has raised more than $1.4 million since 2011, almost entirely from out-of-state predatory lending corporations. Less than three percent of Stand Up Missouris money actually came from Missouri addresses just $36,810 out of $1,392,336 collected since 2011. Stand Up Missouris CEO and chairman is also the Vice President of Western Shamrock Corp, a high-interest consumer installment lender from Texas. The following companies represent 95 percent of Stand Up Missouris contributions. Stand Up Missouri Contributions, 2011-2015:

World Acceptance Corporation $323,300.00 National Installment Lender Association $165,000.00 Tower Loan $156,000.00 Brundage Management Company, Inc $109,550.00 Wallace Management Co. $82,050.00 American Financial Services Association $75,000.00 Security Group Inc $58,750.00 SourceLink $44,375.73 Western Shamrock Corporation $36,450.00

Stand Up Missouri $23,410.44 RBS Computer System $18,500.00

Who is getting paid by the Lenders Ballot Issue Committees?

The monies raised and spent by lenders to oppose basic consumer protections are staggering. But which consultants and companies are getting paid by these committees to thwart citizens demands through the initiative petition process and through pliable politicians in Jefferson City? Filings with the Missouri Ethics Commission show committee money going to relatively few firms and consultants. Heres a breakdown of top MECO expenditures since inception through 2015:

Axiom Strategies $1,125,333.77 Silver Bullet Group, Inc. $1,004,000.00 Graves & Garrett $386,340.41 Stinson Morrison Hecker $267,381.20 Revolution Media Group $241,835.00 Law Office of James C Thomas III $51,956.50 Wilson Perkins Allen $24,380.00 Kansas City Call $7,140.00 The St. Louis American $4,599.00 Joseph Haslag $3,750.00 Kinetic 5 $2,600.00

As you can see, money went to just a few hired guns, namely:

Jeff Roes Axiom Strategies for regional operations management, compliance oversight, and other unspecified services.

The Silver Bullet Group for signature gathering on sham petitions and signature verification.

The Graves Bartle Marcus & Garrett, Stinson Morrison Hecker and James C Thomas III law firms.

Whats especially interesting is how much money some of these firms have received during the 2015 and 2014 initiative petition cycles, during which no signature gathering effort was mounted. A breakdown of the firms pocketing predatory lending money during this two-year period of non-activity is as follows:

Axiom Strategies - $160,336.50 Graves Bartle Marcus & Garrett / Graves & Garrett - $25,461.58 Kinetic 5 - $1,900.00

Stand Up Missouris committee reports show money going to numerous additional consultants and firms. Top Stand Up Missouri expenditures for 2011-2015:

Denton US LLP $241,256.45 SNR Denton $100,828.25 Saveer Entertainment $42,000.00 Missouri Legislative Black Caucus $25,000.00 National Convention LEC $20,000.00 One Goal Consultants $12,500.00 Keymer, Inc $11,639.50 Harold Black $7,120.81 Renewal Financial $6,000.00 Kansas City Urban Summit $5,000.00 Kwame Foundation $5,000.00 Kansas City Freedom Schools $2,500.00 Tom Miller $2,049.19 St. Louis Baptist Ministers Union Christmas Celebration $1,000.00

What sort of work did these companies provide for predatory lenders during this cycle? MEC records dont reveal much. SNR Denton and Bardgett & Deutsch, LLC Blitz, were paid for unspecified professional services such as legal, lobbying, and media consulting. Lobbyist Cheryl Dozier, who is also the Executive Director for the Missouri Legislative Black Caucus, was paid for professional services and community outreach. Saveer Entertainment of Olivette and St. Louis was paid for professional services and media. Stand Up Missouris consultants continued to be paid through the 2013-2015 cycle of very limited initiative petition activity as well:

World Acceptance Corporation $134,600.00 American Financial Services Association $115,000.00 National Installment Lender Association $115,000.00 Security Group Inc $82,250.00 Tower Loan $66,500.00 Brundage Management Company, Inc $58,750.00 Wallace Management Co. $33,150.00 Stand Up Missouri $23,410.44 Personal Finance Company,LLC $19,750.00 RBS Computer System DBA Royal Management $12,500.00 Western Shamrock Corporation $12,250.00 Empire Finance Co LLC $12,200.00 Don's Loan Service, INC $7,000.00 Ponca Finance Company, Inc. $4,700.00

Which politicians and political committees are receiving predatory lending contributions?

Missouri Ethics Commission reports show that enormous sums of money move from predatory lending companies and interests to politicians, parties and PACs across the state and across party lines. Significant sums are funneled through the MO Consumer Lenders PAC, managed by lobbyist Randy Scherr of Jefferson City. Scherr is a lobbyist for many corporations, including the United Payday Lenders of Missouri (UPLM). The UPLM Board of Directors includes representatives of QC Financial Services, Just Say Cash, Advance America and The Loan Machine. Many predatory lending companies also contribute to politicians, party committees and PACs directly. Top ten recipients of predatory lending money from companies and via the MO Consumer Lenders PAC, 2007-2015, include:

House Republican Campaign Committee $215,950.00 Majority Fund (Senate GOP) $173,425.00 Steve Tilley $87,850.00 Missouri Republican Party $79,725.00 Senate Democratic Campaign Committee $79,725.00 Chris Koster $78,700.00 House Democratic Campaign Committee $53,350.00 Tim Jones $52,325.00 Missouri Democratic Party $50,000.00 Kevin Engler $46,262.50

A full list of payday, installment, title and other predatory lending donations used to calculate these totals may be found here.

What Real Change Looks Like

Predatory lending is gutting our communities and corrupting our democracy. It is time for real reform, not laws written by the payday lending industry and rubber-stamped by legislators. The average interest rate on a payday loan in Missouri is 455 percent. Thats one of the highest averages in the nation, and its 27 times the interest rate cap in Arkansas, where lenders cannot charge more than 17 percent annual percentage rate (APR). Families pay fees upon fees upon fees, lining the pockets of predatory lenders in exchange for what was advertised as a quick fix. In reality, these loans are a stepping-stone toward bankruptcy. Real reform ends this debt trap. Real reform outlaws triple digit interest rates and prevents payday lenders from fleecing poor families who have absolutely no capacity to repay a loan. The Missouri Legislature can stop the debt trap. A 36 percent (APR) cap, just like what Congress put in place for the military and what thousands of Missouri voters support a, would immediately provide relief for hundreds of thousands of our working families.

Capping interest rates is not an extreme step. Eighteen states and the District of Columbia already have measures to ensure their residents are empowered to step outside the debt cycle, propelled by payday loan vendors.

For example, in Georgia, payday lending is explicitly prohibited and a violation of racketeering laws. New York and New Jersey prohibit payday lending through their criminal usury statutes, limiting loans to 25 percent and 30 percent annual interest, respectively. The Arkansas Supreme Court ruled in 2008 that the state Check Cashers Act, which purported to authorize high-cost payday lending, violated the state's constitutional usury cap.

Payday lending is not specifically authorized and is de facto prohibited by several state small loan rate caps. These states include Arizona, Connecticut, Maryland, Massachusetts, North Carolina, Pennsylvania, Vermont, and West Virginia.

The Consumer Financial Protection Bureau (CFPB) can also reform the industry. Though this federal agency is not empowered to end the debt trap nationally by capping payday loan interest rates, the CFPB can take significant steps to protect consumers. For example, the CFPB can pass rules to make sure that lenders take into account a borrowers ability to repay a loan. If the CFPB is aggressive in its rulemaking, some of the worst predatory practices of the industry could be eliminated. You can be a part of the solution. The vast majority of Missourians support a 36% APR cap on payday loans, but this moral imperative has been drowned out by the deep pockets of predatory industry operatives. Missouri legislators need to hear from voters like you more than they hear from the payday-lending lobbyists, and we must demand nothing less than a 36% APR cap on all lending products. Meanwhile, you can make sure your members of Congress know that the CFPB must pass the strongest rules possible to reign in the payday industry.