Off the Kuff Rotating Header Image

Division over the payday loan bill

Quite a heated little fight in the Senate yesterday.

An ugly scene erupted in the Texas Senate today, with Sen. John Carona (R-Dallas) suggesting that some of his Republican colleagues were “shills” for the payday loan industry and worrying that the GOP would be seen as “the party that is backed and bankrolled by payday lenders.”

After intense negotiations this week, Carona told lawmakers he had struck a deal to pass legislation to reform payday and auto-title lending in Texas. Most of the consumer groups, the cities, Senate Democrats and even the payday loan industry were on board with the “hard-fought compromise,” he said.

“There have been great concessions on both sides,” Carona said. “We can leave this chamber at the end of May and honestly say we made a significant incremental step forward on protecting consumers.”

However, as Carona moved toward a suspension of the rule to bring the bill up for debate, which requires two-thirds of the Senate, he complained that payday-loan lobbyists were calling senators on the Senate floor and asking them to change their votes. He even hinted that two GOP senators were acting as agents for the industry.

“If we don’t do it this time, you won’t be able to regulate this industry two years from now,” he said. “This industry will be so much wealthier, so much more politically powerful that you won’t be able to say no and you won’t be able to draw the line. I know the lobbyists are just in a frenzy right now to try to stir up some action on the floor and get one or two of my colleagues who seem to be working the floor to change their vote.”

Sen. Carona wound up pulling the bill down. The Trib adds some details.

Carona, who said the bill had been “negotiated literally through the night,” brought with him to the floor six amendments that were intended to address the concerns of some consumer advocates who said the bill didn’t go far enough in limiting the abilities of short-term lenders.

Ultimately, the bill was pulled before debate on the amendments began, but Carona said they mostly contained ways to strengthen consumer protections, including limiting the types of loans that short-term lenders could offer, mandating that lenders accept partial payments, and limiting the maximum duration of multiple-payment loans — a major sticking point for consumer advocates.

“There are only two or three amendments that the industry really finds objectionable,” he said, “and in that case, all we’re asking the chamber to do is do what’s right for consumers.”

Early in the debate, state Sen. Kirk Watson, D-Austin, said many senators’ support for the measure would depend on the inclusion of those six amendments in the final bill.

“I think that there will be an effort to stop 16 people from voting for any conference committee report that strips those out,” he said, referring to the version of the bill that could emerge from a future House vote.

But some senators, who had previously expressed their intent to vote for the bill that emerged from committee, balked at the proposed changes. In an argument about process that turned personal, critics of the bill took issue with the way Carona brought his amendments to the floor.

Leading the criticism was state Sen. Troy Fraser, R-Horseshoe Bay, who charged that Carona hadn’t given the chamber enough time to review the proposed changes. While calling payday lending reform a “difficult issue,” he asked Carona if he had sent the amendments around 24 hours in advance. Carona’s reply was sharp.

“No, sir,” he said. “And, frankly, I haven’t seen you do that with your bills.”

[…]

Fraser was joined in his criticism by Sen. John Whitmire, D-Houston, who also argued that the legislative process should be slowed down to give senators time to consider prospective amendments, adding that he had concerns about Houston’s ability to regulate payday lending under the bill.

“What’s the rush?” Whitmire asked Carona.

Because “the industry has hired damn near every lobbyist in town to kill this bill,” Carona replied.

When Carona replied that he had been in constant contact with the city of Houston to determine its position on the bill, Whitmire erupted, telling Carona that he would represent his own constituents. He again criticized Corona for rushing the process.

“When you were negotiating this most recent agreement, I was chairing [Senate] Criminal Justice for four hours,” Whitmire said. “I think this has gotten totally out of control.”

The bill in question is SB 1247. Before this kerfuffle, the main divisions had been among consumer advocates.

Some progressive groups, including the Center for Public Policy Priorities and Texas Impact, have thrown their support behind the bill, arguing that it’s better than the status quo.

“For us, doing nothing is not an option this time around,” said Don Baylor, senior policy analyst at the Center for Public Policy Priorities. He points to estimates that limiting the number of times borrowers can “roll over” loans would save consumers at least $132 million.

“You get to a point where you ask yourself the question, Is there any more money [for consumers] left on the table? The folks that have decided to support it have decided there isn’t any more money on the table.”

Bee Moorhead, director of interfaith group Texas Impact, said that it’s important that legislators show the increasingly aggressive and powerful industry who’s boss.

“The thing that’s hard is that first step,” Moorhead said, “saying the state gets to decide under what terms you do business.”

Opposing the bill, however, are most Senate Democrats, the Texas Catholic Conference, Baptist organizations, Texas Appleseed and AARP.

They say that Carona’s approach falls short of meaningful reform and sanctions harmful new loan products.

“Our opposition is that this bill doesn’t do what it purports to do,” said Ann Baddour, with Austin-based group Texas Appleseed.

The pre-emption of local ordinances is the sticking point for many, myself included. It should be noted that there is a decent argument for proceeding anyway, as articulated in the Chron.

The bill has split the community of nonprofits that lobby legislation affecting the poor. Favoring it are the Center for Public Policy Priorities, Goodwill Industries and Texas Impact, whose leaders believe it provides a pragmatic system of statewide regulation.

While it pre-empts the stronger city ordinances, they believe lenders simply are directing borrowers to suburban locations outside the reach of city enforcement.

The industry has launched legal challenges to those ordinances that probably will be resolved by the conservative Texas Supreme Court, said Scott McCown, executive director of the public policy center. “Do we really think that if the ordinances are challenged, the Texas Supreme Court is going to say they are valid and enforceable?” he asked.

McCown also said most cities do not have the “economic wherewithal” to enforce the ordinances. While he would like the bill to be stronger, McCown said, “our assessment is that this was the best we could do.”

[…]

Carona’s bill would limit the number of times lenders could “roll over” a loan and charge new fees. That provision would save Texas consumers at least $132 million a year, according to an analysis by the Texas Consumer Credit Commission.

[Rob] Norcross said [the payday lending group Consumer Service Alliance of Texas] agreed to it in response to the plethora of city ordinances and the burden that dealing with so many different laws creates for business. “If anybody thinks anybody (in the industry) is happy, they are wrong,” he said. “This is a high price to pay.”

I’m a half-a-loaf guy and I get where McCown and Moorhead are coming from. I’m still reluctant to support this thing, though perhaps I’d feel better once I knew what the amendments that never got to be debated are about. The Observer indicated that Carona may bring the bill back on Monday, though the Trib suggested it could be longer than that. I don’t know what to think at this point, other than to marvel once again at how sleazy the payday lending industry is. Trail Blazers has more.

Related Posts:

One Comment

  1. […] here, here, and here for some background. The Observer calls the bill “surprisingly tough”, […]