'They’re not here to help anybody; they’re just here to loot poor people' -- Fair Lending Coalition lobbyist on the payday loan industry's ability to defeat efforts to cap interest rates in New Mexico
If you wonder why it’s still legal in New Mexico to charge up to 1,000 percent on payday and title loans, a clue lies in the campaign finance records of the Office of Secretary of State.
Payday lenders, title loan lenders and other high-interest storefront lending operations or their lobbyists gave state legislators tens of thousands of dollars during the last two election cycles, an ABQ Free Press investigation found.
The industry’s apparent payback for that largesse came during this year’s 60-day legislative session when two bills enjoying broad public support to cap interest rates at 36 percent were killed in committee.
One bill got a committee hearing in the House of Representatives and then was tabled. The bill in the Senate never got a hearing.
The 2015 legislative session was the latest in a string of failures. Former Attorney General Gary King tried to persuade the Legislature starting in 2007 to reduce allowable interest rates. The persistent failure of payday lending reform in New Mexico runs counter to what’s happening elsewhere in the United States as state regulators try to break what is called the “debt trap,” where low-income people take out successive loans to pay off earlier ones – and never get out of debt.
Regulators in 13 states recently have reined in exorbitant interest and fees. In North Carolina, a state with a large military presence, lawmakers have banned payday lenders completely. The Department of Defense supports limits on payday lenders because servicemen and women are among the industry’s targets.
Before the 2015 session of the New Mexico Legislature, 45 community, social service, religious and service organizations backed payday lending reform or were prepared to testify in favor of capping interest rates at 36 percent, which has been done elsewhere. Four of the state’s largest newspapers editorialized in favor of interest rate caps.
But their voices weren’t heard.
Reform advocates who went to the Roundhouse to testify in favor of capping interest rates allege that the former chairman of the Senate Corporations and Transportation Committee, Phil Griego of San José, effectively gave the payday industry a veto over the legislation.
Griego told both sides that the interest rate cap bill wouldn’t get a hearing unless reform advocates and industry lobbyists first agreed on a compromise, according to lobbyists for both sides. When the Legislature adjourned its 60-day session, according to reform advocates, the bill was still locked in committee.
The power of money
The payday loan industry (we use the term in this article to encompass all forms of high-interest storefront lending) was well prepared to defend the revenue stream their storefront offices generate.
The industry has been generous. A review of campaign finance records shows that the industry spent $74,675 on the most recent campaigns of 24 key legislators – the top leaders of the Senate and the House and members of the two key committees assigned to hear payday loan bills this year.
The debate over the intersection of money and influence in Santa Fe is an old one. Advocates for ethics reform see the appearance of impropriety. Lawmakers see nothing wrong with accepting campaign donations from industries they regulate.
Sen. Clemente Sanchez, a Grants Democrat who has received $2,700 from the industry since 2012, said contributions to his campaign do not affect how he votes. Sen. Michael Padilla, an Albuquerque Democrat who has received $2,000 from payday lenders, said, “If someone decided to write a check, that’s one thing; you know I’m not going to send checks back, but that doesn’t mean that I looked for it, because I didn’t.”
Another thing the industry had going for it this year was manpower. As many as 23 payday loan industry lobbyists worked the Roundhouse in 2015; on the side for reform, there was one.
ABQ Free Press could not put the question of money and influence at the Roundhouse this year to many of the legislative leaders. That’s because calls and emails to the following people who received payday loan donations were not returned over a period of several months:
House Speaker Don Tripp, a Socorro Republican; President Pro Tem Papen, a Las Cruces Democrat; House Majority Leader Nate Gentry, an Albuquerque Republican; Rep. Brian Egolf, a Santa Fe Democrat; Senate Majority Leader Michael Sanchez, a Belen Democrat; and Senate Minority Leader Stuart Ingle, a Portales Republican.
Tale of two bills
While several bills were introduced during the 2015 Legislature to cap rates or change the way payday lenders do business in New Mexico, reform advocates rallied around two identical measures – House Bill 36 and Senate Bill 72.
Both were pre-filed – meaning they were introduced before the Legislature convened for its 60-day session on Jan. 20. The bills officially got their committee referrals on Jan. 23, the third day of the Legislature.
In the Senate, SB 72, sponsored by Rep. William Soules, a Las Cruces Democrat, was referred by Senate Majority Leader Michael Sanchez, a Belen Democrat, to the Senate Corporations and Transportation Committee and to the Senate Judiciary Committee. Sanchez received $5,100 from payday lenders, his campaign finance records show.
The chairman of the corporations committee, Sen. Phil Griego, was the second leading legislative recipient of payday loan campaign contributions, taking $11,075 from the industry, his campaign finance records show.
(Griego, a real estate broker, resigned from the Legislature a week before the end of the 2015 session. He faced a likely censure by his peers over a conflict of interest during the 2014 session.)
After this year’s session adjourned, Griego told ABQ Free Press that the complexity and divisiveness of the payday loan interest-cap issue threatened to bog down his committee and endanger passage of other legislation. Griego said he ordered both sides to work out a compromise before he would give the bill a hearing.
“What that means is he basically gave the industry veto over this legislation,” said Steve Fischmann of the New Mexico Fair Lending Coalition, a collection of nonprofits, which pushed for the payday loan interest rate cap.
“So all the industry had to do was not talk to advocates, and no legislation would ever get to the committee,” Fischmann said.
Clemente Sanchez, who assumed the chairmanship of Griego’s committee after Griego’s resignation, said, “The way it works is the chairman of the committee decides what goes on the agenda, and since
it was Phil Griego at the time, he never brought it up. Since it’s up to the chairman to put it in the agenda, we never talked about it at all.”
Over in the House, HB 36 hardly fared better.
HB 36, sponsored by Rep. Gail Chasey, an Albuquerque Democrat, was referred to the House Public Affairs Committee and to the House Ways and Means Committee. The referral to House Ways and Means was unusual because that committee generally hears appropriation bills, tax bills or bills that affect tax revenues or proposed changes in government operations with fiscal impacts.
The referral of HB 36 was made by Speaker of the House Don Tripp, a recipient of $1,750 in payday loan campaign donations, according to his campaign finance records.
State Rep. Yvette Herrell, an Alamogordo Republican, gave HB 36 a hearing in the House Regulation and Public Affairs Committee but then tabled it for the duration of the session. Herrell received $2,150 in payday loan contributions, her records show. Herrell did not respond to phone calls or emails from ABQ Free Press on why she tabled the bill.
A member of Herrell’s committee, Rep. Nora Espinoza, a Roswell Republican, whose records show she received $2,200 in payday loan contributions, said, “After reviewing our records, HB 36 had a hearing on Feb. 2 in an open public meeting but was tabled by the committee after debate.”
When the Legislature adjourned on the afternoon of Saturday, March 21, both HB 36 and SB 72 were still in the two committees to which they had been referred 57 days earlier.
“It’s clear that the industry and special interests have access and influence that the rest of us don’t have,” said Fischmann, the lending reform advocate.
“And what people are doing is legal, but the fact that it’s legal doesn’t mean that it’s not corrupt, because it’s terribly corrupt,” he said.
“I’m a former state senator, and I served four years in the New Mexico Senate, so I’ve seen it firsthand,” Fischmann said.
Sen. Clemente Sanchez takes issue with that logic.
“That’s not why we receive contributions, and there’s no strings attached, so that doesn’t mean I am going to vote with them on anything,” Sanchez said when asked about influence his donors might seek to gain.
Viki Harrison, executive director of Common Cause New Mexico, said the influence of money at the Legislature is apparent year in and year out.
“That is why we have the lobbyists, the larger corporations and the folks with money that are able to make these kinds of contributions, as opposed to your average citizen, so that’s the nature of the way it is in Santa Fe with the citizen’s Legislature,” she said.
“This has been a decade-long if not a hundred-years-long conversation about wanting professional legislators, but people tend to like things the way they are,” Harrison said. “They are just slammed with bills, and they’re only in session for a couple months at most, so that means they’re out in the community the rest of the time.”
A massive loophole
ABQ Free Press’ investigation into the payday loan industry’s influence at the 2015 Legislature uncovered a loophole in the secretary of state’s campaign reporting system that allows lobbyists to funnel vast amounts of money to legislators without publicly identifying the source.
An example is James “J.D.” Bullington, a lobbyist for FastBucks, a payday lender, as well as 23 other business interests. Records show Bullington has not identified on whose behalf he gave legislators campaign contributions since 2103.
Although campaign and lobbyist disclosure laws require that the ultimate source of all lobbyist donations be reported, Bullington’s donations show up in his name only. FastBucks did not file any contribution reports under its own name between 2012 to 2014, according to the secretary of state’s website.
A review of reports filed by the key legislators shows Bullington gave them $21,875 in contributions during the 2013 and 2014 cycles. In an interview, he said some of that originated with FastBucks, but he declined to offer details.
The Lobbyist Regulation Act states that lobbyists must report to the Office of the Secretary of State “the names, addresses and occupations of other contributors and the amounts of their separate political contributions.”
Bullington faults the secretary of state’s online lobbyist filing form. “The Secretary of State is going to eventually update the website because we do electronic filing now and there is no box; it says to put who it was made to and the dollar amount, and those are the only two boxes.” Other lobbyists confirmed their belief there is a technical problem with the online filing form.
An examination of all of Bullington’s campaign contributions since 2013 to the present shows he has given candidates $130,600 – $28,500 of that to Gov. Susana Martinez in 2013 alone – with no explanation of where the money came from.
A spokesman for the Office of the Secretary of State said lobbyists who make campaign donations using a client’s money should report them on another online form. Once opened, that form automatically populates fields with the name of the client, address and nature of the client’s business. Use of the form would eliminate the appearance that all the money is coming from the lobbyist. Why the form isn’t being used by lobbyists was unclear.
The payday loan industry argues that it serves as a lender of last resort for many poor New Mexicans who can’t qualify for conventional loans because of lack of resources or poor credit. Additionally, the industry argues that high interest rates – as high as 1,000 percent with most loans averaging 340 percent – are necessary because of the high loan default rate.
Sen. Michael Padilla, who sits on the Senate Corporations Committee, said he supported an interest rate cap, but he thought 36 percent was too low for the industry to make any money. Bullington said trying to set a flat rate cap across the spectrum of payday and title loans is unworkable.
“Some companies do underwriting; some have people walking in with minimal credit checks; others do income credit checks; others do long-term loans that are a year or more; and others do very short-term loans,” Bullington said. “So this type of bill doesn’t fit the entire industry very well.”
Fischmann sees no redeeming social value in an industry that can legally collect up to 1,000 percent interest.
“They’re not here to help anybody; they’re just here to loot poor people. There are all kinds of complicated financial arguments about how [the industry’s argument] is not true, but I think 90 percent of the public wants interest rate caps, because they get it and they know it’s a ripoff,” he said.
By Rene Thompson and Dan Vukelich