Lawmaker Who Recited Words of Payday Lenders’ Lobbyist Also Took Their Donations

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U.S. Rep David Scott, D-Georgia

Rep. David Scott of Georgia may have pulled back the curtain a bit last week on the impact of campaign contributions.

During a House hearing entitled “Short-term, Small Dollar Lending: The CFPB’s Assault on Access to Credit and Trampling of State and Tribal Sovereignty,” Scott, a Democrat, joined with Republicans in criticizing the Consumer Financial Protection Bureau, which is in the early stages of drafting rules to regulate some of the practices of the payday loan industry.

And with his attack — lifted a little too literally from text written by a lobbyist for the lenders — Scott was taking the side of an industry that has given him more than $72,000 since his election to the House in 2002. The bulk of that money was contributed during the Great Recession, which prompted lawmakers to develop the Dodd-Frank Act and rein in predatory lending practices to consumers. In 2008, as the global financial crisis came to a head, the payday loan industry gave Scott more than $17,000, as shown in the table below.

CFPB was a creation of Dodd-Frank Act, set up to ensure that credit agencies are lending responsibly to consumers. According to the Federal Trade Commission, payday lenders charge as much as 390 percent annual interest on short-term loans. These loans often go to Americans who wouldn’t be approved for traditional credit through banks, credit unions or credit cards, the Pew Research Center found in 2012. During the hearing of the House Financial Institutions and Consumer Credit subcommittee, CFPB acting director David Silberman said two-thirds of individuals who use payday services don’t have the ability to repay the loans.

Scott’s comments, though, seemed to indicate he was right there in the trenches with the short-term lenders — or even that he had given up his day job and joined their ranks: At one point, Scott referred to “positive feedback from our borrowers.” As it turns out, Huffington Post reported, the lawmaker was reciting outdated Senate testimony from payday lobbyist Richard Hunt as his own material, forgetting to change Hunt’s possessive pronoun from “our” to “their.”

Of the seven-term congressman’s haul from the industry, about $22,000 came from Atlanta or nearby Peachtree City, making some of the lenders hometown fans of his. Scott’s 13th Congressional District includes part of Atlanta.

But it’s also likely that some of Scott’s constituents are deep in debt to some of the companies.The median household income in his district is $47,004, or 14 percent below the national average, while unemployment there is 15.1 percent — more than triple the national average.

A spokesman for Scott, in an interview with OpenSecrets Blog, denied that the lawmaker was quoting from Hunt’s testimony and harshly criticized the Huffington Post reporter who made the linkage. “We didn’t pull [the testimony] for him to read,” said Michael Andel of Scott’s office. “He made up his own stuff.” But a video of Scott’s remarks shows him using several phrases that are verbatim or very close versions of Hunt’s words, including the reference to “positive feedback from our borrowers.”

In any case, according to Andel, Scott believes that payday lending isn’t a long-term solution, but necessary for the moment. “The big question: how does a struggling person get their hands on some money?” Andel said. “These people are in a crisis and need short term cash” and have nowhere else to turn.

It wasn’t just Scott who’s taken money from the industry and may have had a conflictiing agenda. Many of the House members at the hearing last week have received campaign contributions from payday lenders. In the 2012 presidential election cycle, the industry donated nearly $3.6 million to candidates, parties and outside spending groups. Last year, it spent almost an identical amount of moneylobbying Congress and the CFPB.

One of the companies that has contributed to Scott over the years, Advance America Cash, is now owned by Mexican billionaire Salinas Pliegro, who purchased the company for $780 million in 2012, according to Forbes. The magazine went on to compare Advance America’s interest rates, which are unusual in the United States, to those at a standard bank in Pliegro’s country.

Advance America’s website warns that “Cash advances are used to cover short-term financial situations; not a long-term financial solution.” However, a report by the Kansas City Federal Reserve bank concluded that “profitability of payday lenders depends on repeat borrowing.”