Patrick McHenry

Congressman Patrick McHenry

Campaign for Accountability, a Washington, DC nonprofit watchdog, filed a formal request last week with the Office of Congressional Ethics calling for an investigation of 11 members of Congress of both parties, including North Carolina Congressman Patrick McHenry. The subject: their ties to the predatory payday lending industry.

Here is the news release that accompanied the request:

CfA Files Ethics Complaint Against 11 Members of Congress Alleging Collusion with Payday Loan Industry

Washington, DC – Today, Campaign for Accountability (CfA) asked the Office of Congressional Ethics to investigate 11 members of Congress for possible criminal and ethics violations by accepting contributions from the payday lending industry shortly before or after taking official actions in support of the industry.

Those named in the complaint include: Rep. Stephen Fincher (R-TN), Rep. Scott Garrett (R-NJ), Rep. Alcee Hastings (D-FL), Rep. Jeb Hensarling (R-TX), Rep. Blaine Luetkemeyer (R-MO), Rep. Patrick McHenry (R-NC), Rep. Gregory Meeks (D-NY), Rep. Randy Neugebauer (R-TX), Rep. Pete Sessions (R-TX), Rep. Steve Stivers (R-OH), and Rep. Kevin Yoder (R-KS).

CfA Executive Director Anne Weismann stated, “It seems payday loans taken out by their constituents helped fund big paydays for members of Congress who used their positions to advocate on behalf of this unscrupulous industry.”

CfA’s request follows a report issued last week by Allied Progress that outlined actions taken by the representatives to aid payday lenders – including sponsoring legislation to limit oversight of the industry – either shortly before or after they received campaign and/or PAC contributions. CfA alleges this conduct may violate criminal laws regarding bribery, illegal gratuities and honest services fraud, as well as House rules prohibiting members from engaging in official action in return for campaign contributions.

At least seven of these members, for example, received contributions from the industry proximate in time to signing onto an August 22, 2013 letter to then-Attorney General Eric Holder and FDIC Chair Martin J. Gruenberg complaining about the Department of Justice’s “Operation Choke Point,” which payday lenders opposed.

Ms. Weismann continued, “The Office of Congressional Ethics should immediately investigate whether these members of Congress were abusing the public trust by carrying the water of the payday lending industry in exchange for contributions. Once again, it appears that the public good has been sacrificed at the alter of high dollar donors. This is exactly the sort of pay-to-play scheme that leaves Americans so disheartened about the state of our government.”

According to the report that helped spur the complaint (“Cheaper by the Dozen: How Twelve members of Congress Were Showered with Campaign Cash Just by Payday Lenders Just Before and Soon After Taking Official Actions to Benefit the Industry”), McHenry received $94,199 in campaign contributions from payday lenders from 2011-15 and took thousands in the weeks before signing an August 2013 letter to Attorney General Eric Holder questioning a Department of Justice initiative designed to crack down on unscrupulous lenders.

We’ll keep you apprised of developments in this matter as they arise. Stay tuned.


Payday debt trapFederal regulators at the Consumer Financial Protection Bureau are moving ahead with the development of rules to regulate the predatory payday lending industry and this is excellent news for vulnerable consumers in dozens of states. One sizable potential problem with the effort, however, involves states like North Carolina that have already had the good sense to ban the predators outright.

According to consumer advocates, if the feds aren’t careful in how they draft the new rules, they might conceivably legalize payday loans in places like North Carolina even as they’re cracking down on it in other states. Recently, dozens of the advocates in the states where payday loans  are already illegal (including several here in North Carolina) wrote the CFPB Director Richard Cordray urging him to carefully tailor any new rules to avoid  this problem.

In the letter, advocates urged the CFPB “to issue final rules that build on, rather than undermine, strong state protections and that enhance our ability to enforce them.”

The groups continued: “Indeed, it would be unacceptable for the CFPB to issue weak payday lending rules, which would likely usher in a new wave of predatory lending in non-authorizing states and throughout the country.”

Let’s hope the agency sees the obvious wisdom of allowing states to enact and keep consumer protection laws that are stronger than the soon-to-be implemented rules and of keeping the federal standards as a basic consumer protection floor, rather than a ceiling.

Click here to read the letter.

And for more information on stopping the payday lending debt trap, click here.



President Obama 3Looking for something to restore your faith in our government? Then check out the new rules adopted yesterday by the Obama administration to clamp down on predatory lenders who take advantage of American servicemen and women.

The new Department of Defense rules, which were announced Tuesday by the President in a speech to the Veterans of Foreign Wars, update the Military Lending Act—a 2006 law that capped interest rates and add-on fees to members of the military and their families at 36 percent.

Unfortunately, the original 2007 regulations implementing the law capped rates for just a small number of loan types, such as payday loans of 91 days or less and so-called “car title loans” of 181 day or less. Since that time, sharks have evaded the rules by simply extending the terms or restructuring the loans — thus allowing them to continue to target service members (something that often impacts their security clearances and even jeopardizes their careers).

Happily, the new rules take big step toward putting an end to these evasions in that they:

  • Apply market-wide to all high-cost credit products that target service members, including payday, auto title and installment loans designed to evade the 2007 protections;
  • Cap interest and add-on fees at 36 percent for loans issued to service members and their dependents;
  • Prevent lenders from using junk fees such as credit insurance, debt cancellation or debt suspension to circumvent the 36 percent interest and fee cap.
  • Preserve service members’ access to the courts by prohibiting forced arbitration agreements;

Research by the Department of Defense released last year found that as many as one out of every ten enlisted serviceman and woman continued to be targeted by high-cost credit designed to evade the Military Lending Act. DoD estimates that the final rule will reduce involuntary separation caused by financial hardship, resulting in a savings of $14 million a year or more.

The rules come as a particular boon to North Carolina, home to tens of thousands of active military personnel and one of the nation’s largest military populations.

Of course, the obvious next step for federal regulators in the years ahead is to extend the protections now afforded to active military personnel to all individuals affiliated with the military and, eventually, all American consumers period. Let’s get to work.


The indictments of the often-predatory for-profit college industry continue to pile up. This is from a new article by Prof. Stephanie Cellini for the Brooking Institution in which she argues that public community colleges are regularly a much better bet for students:

“Some back-of-the-envelope calculations suggest that for-profit associate’s degree students need at least an 8.5 percent annual earnings gain to cover the cost of tuition, foregone earnings, and debt service at a typical for-profit college. Our estimates fall short of this threshold, suggesting that for the average student, the earnings gains are too low to justify the cost and generate a positive return on investment. It also suggests that many students may not have full or accurate information on the earnings gains that they can expect post-college.

How do these estimates compare to the social costs of a for-profit education?  Adding in costs to taxpayers in the form of federal student grant aid, loan defaults, and other sources of federal funding would require a 9.8 percent earnings gain to cover the cost to the individual and society. In the public sector, despite higher taxpayer costs, the much lower costs to students means that  only a 7.2 percent annual gain is needed to cover the combined private and social costs—a figure well below current earnings gains estimates in that sector. These figures again suggest that—on average—public institutions may be a better deal for students and taxpayers.”

Of course, as Lindsay Wagner reported recently, lousy performance is far from the only common problem when one patronizes the for-profit college industry. There’s also the risk of blatant, predatory rip-offs.


Payday loans.jpgThe federal Consumer Financial Protection Bureau is unveiling some long-awaited proposed rules targeting the predatory payday lending industry at a big hearing in Richmond, Virginia today and you can follow along on Twitter at the hashtag #StoptheDebtTrap. Generally, the proposed rules amount to a promising start. There are, however a few worrisome potential loopholes. The good people at the Center for Responsible Lending explain:

Consumer Financial Protection Bureau to Limit Payday Loan Debt Trap; Curb 400% Interest Rate Loans

The Consumer Financial Protection Bureau will offer a first look at where the agency’s efforts to rein in the abusive practices of payday and car title lenders are headed at a Thursday hearing in Richmond, VA. The consumer agency will release information outlining their deliberations and take testimony from a panel of consumer and civil rights advocates as well as industry representatives.

Mike Calhoun, President of the Center for Responsible Lending, will present testimony at the hearing.

Calhoun comments on the proposal:

“The proposal endorses the principle that payday lenders be expected to do what responsible mortgage and other lenders already do: check a borrower’s ability to repay the loan on the terms it is given. This is a significant step that is long overdue and a profound change from current practice. If made mandatory, the ability to repay standard will help millions of borrowers avoid dangerously high-cost payday and other abusive loans. The requirement would prevent debt traps, an all-too common practice where a lender flips loans over and over and the consumer ends up paying double the amount borrowed in interest and fees. And the Bureau appropriately applies the standard to both shorter and longer term loans, including vehicle title loans.

At the same time, we are deeply concerned about provisions in the proposal, the so-called “debt trap protection options,” which would in fact permit payday lenders to continue making both short- and longer-term loans without determining the borrower’s ability to repay. The industry has proven itself adept at exploiting loopholes in earlier attempts to rein in the debt trap. The consumer agency can look to necessary revisions to the Military Lending Act after widespread abuses were found, dragging active service members into debt so damaging that a Defense Department report found it undermined military readiness.

These “options” are an invitation to evasion. If adopted in the final rule, they will undermine the ability to repay standard and strong state laws, which give consumers the best hope for the development of a market that offers access to fair and affordable credit.

We urge the consumer bureau to adopt its strong ability to repay standard without making it optional.”

Let’s hope the regulators are listening.