Meet Sen. Corker's Payday Lender FriendMarch 11, 2010 - by Donny Shaw
Last month, when bipartisan financial reform negotiations where breaking down in the Senate Banking Committee, Sen. Bob Corker [R, TN] stepped up from out of nowhere and volunteered to take over for Ranking Member Sen. Richard Shelby [R, AL] on representing the Republicans at the negotiating table. By all accounts, he has in fact managed to keep the bipartisan negotiations alive. He and Sen. Chris Dodd [D, CT] are reportedly ready to introduce their bill to the full Senate imminently.
The New York Times reported yesterday that one of the concessions Corker has won from Dodd is a special exemption in the proposed Consumer Financial Protection Agency’s (CFPA) enforcement powers for payday lenders and other nonbank credit dealers. These are generally the most predatory of lenders, commonly charging interest rates as high as 400 percent. Corker’s exemption would allow the CFPA to create rules to regulate the payday loan industry, but it would’t give the agency any power to enforce the rules like it could for banks and mortgage dealers.
Talking Points Memo yesterday ran a profile W. Alan Jones, Bob Corker’s payday loan shark/multi-millionaire friend and political supporter, and how he may have influenced Corker’s decision to fight for the regulatory exemption for his industry:
Meet W. Allan Jones, who in 1993 founded Check Into Cash, a pay-day lending chain that says it now has 1,100 stores in 30 states. The company offers short-term loans designed to tide customers over until their next paycheck. But the interest rates can be as much as 400 percent on an annualized basis, meaning that they lead many borrowers to end up digging themselves deeper into debt.
Lately, Congress has been mulling how to structure a new Consumer Financial Protection Agency (CFPA), so as to avoid a repeat of the financial crisis. And reform advocates have argued that increased regulation of pay-day lenders is an essential piece of the puzzle. But after lobbying by an industry group that Jones helped establish, Sen. Bob Corker (R-TN) acted to thwart the new agency’s ability to effectively monitor Jones’s industry.
As Harper’s noted in a story on the pay-day lender industry last year entitled “Usury Country,” “a payday loan essentially becomes a lien against your life, entitling the creditor to a share of your future earnings indefinitely.”
“It’s the craziest business,” Jones told a reporter in 2008. “Consumers love us, but consumer groups hate us.”
The business has been good to Jones, 56, however. In 2005, a Tennessee business magazine put his net worth at $500 million — high enough to put him on a list of the state’s richest 20 people, alongside FedEx founder Fred Smith and Thomas Frist Jr., the hospital entrepreneur and father of former Senate leader Bill Frist.
And Jones hasn’t been shy about displaying that fortune. According to the magazine, Jones’s 400-acre home boasts an air-conditioned muscle car garage, which includes a $300,000 Maybach; an on-site greenhouse with a full-time horticulturist; a three-story tree house; and — get this — a regulation-sized football field with lights, a scoreboard and supporting field house and stand, which he used to host the first-ever private college football game, raising $100,000 for University of Tennessee-Chattanooga.
Corker’s intervention came after intense lobbying from the Community Financial Services Association (CFSA), a trade group of pay-day lenders created in 1999 by Jones and others in the industry. In the last three months of 2009, CFSA spent $500,000 lobbying Congress on the financial regulatory reform and other issues affecting regulation of the pay-day loan industry, according to disclosure records examined by TPMmuckraker. (One of the top Washington lobbyists hired by CFSA, Wright Andrews of Butera & Andrews, was also the prime lobbyist for the sub-prime mortgage industry earlier this decade.)
Jones is a longtime backer of Corker — as well as of several other lawmakers, from both parties, on the Banking committee. Since 2001, Jones, his relatives, and his employees, have contributed $31,000 to the campaigns of Corker, a former Chattanooga mayor, according to the New York Times.
The pay-day lenders say it was the banks, not them, that caused the financial turmoil, so they shouldn’t be penalized for it. But consumer groups, and their allies in Congress and the Obama administration, argue that the competitive pressure on the banks from less regulated sectors like the pay-day lenders prompted the banks to lower their lending standards, helping to create the mortgage crisis. And they add that the predatory practices of the pay-day lenders merit greater regulation in their own right.