Thursday was a good day for supporters of financial reform. It was a great day for payday lenders.
The legislation that now appears destined for President Obama's desk won't include an amendment that would have limited the number of high-interest loans payday lenders could make to cash-strapped consumers.
The industry had mounted an aggressive "grass-roots" effort to sway lawmakers by having customers voice opposition to a Consumer Financial Protection Agency and basically tell politicians to leave payday lenders alone.
The companies said they were just trying to protect people's ability to get credit. A more revealing perspective can be found in confidential e-mails and documents sent to workers at Advance America, the country's largest payday lender.
"After a customer repays their loan, the customer then asks for a new loan," wrote Dan Harnum, a divisional director of operations for the company in Michigan.
"TELL YOUR CUSTOMER THAT YOU CAN'T LOAN TO THEM BECAUSE THE GOVERNMENT HAS PUT US OUT OF BUSINESS," he instructed subordinates. "That will get their attention. Then ask them to write letters or call their senator/congressman."
First off, that's just not true. The amendment introduced by Sen. Kay Hagan, D-N.C., would have prevented payday lenders from issuing more than six loans to an individual borrower in a 12-month period. It certainly wouldn't have put anyone out of business.
Then there's the more insidious aspect of what Harnum wrote: The fact that customers keep coming back for more - an endless cycle of debt that leads to interest rates as high as 400 percent a year.
That's what payday lenders were trying to protect.
Harnum did not return calls for comment. Jamie Fulmer, a spokesman for Advance America, declined to comment on the contents of Harnum's e-mail, but he said that "it is in no way our policy or intent to mislead customers."
I wrote recently that California Sens. Barbara Boxer and Dianne Feinstein were seeing a surge in nearly identical calls and e-mails from payday-loan customers asking them to vote against financial reform and creation of a Consumer Financial Protection Agency.
A spokesman for the Community Financial Services Association, a payday-lending industry group, confirmed to me that payday lenders were orchestrating the calls and e-mails as part of a "grass-roots campaign."
Payday lenders had largely kept to the sidelines of the financial reform debate until Hagan introduced her amendment. Then they did everything they could to influence lawmakers, including heavy-handed efforts to push customers into making bogus calls and sending scripted e-mails.
This was especially pernicious because payday-loan recipients could be financially devastated if a lender demanded its money back. Many such customers might have felt they have no choice but to go along with the industry's political wishes.
Hagan wasn't surprised when I told her about the Advance America e-mail and other company documents I'd obtained.
"These documents are just another startling example of the payday-lending industry's deceptive practices," she said. "This predatory industry was trying to trick its customers into opposing my common-sense amendment to limit payday loans."
I received the materials, including sample scripts for calls and letters from customers, from an Advance America employee who was displeased with the company's tactics. The employee, who requested anonymity because of fears of retaliation, also provided the documents to Boxer's office.
"The heavy-handed practices of this industry and its lobbyists underscore why we need a new watchdog agency that protects consumers - not the companies that profit at their expense," Boxer said.
Many of the documents were sent to Advance America offices nationwide by Dawn Morrow, the company's manager for government affairs. She warned that if a Consumer Financial Protection Agency is created, "millions of hard-working Americans will be denied access to credit."
Morrow declined to comment.
Her memo to workers said that "customers should be asked - not pressured - to participate" in the campaign, and the sample scripts emphasize that "this is a voluntary effort."
Nevertheless, the memo outlined steps Advance America workers should take to convey to customers "why their opinions are needed." It instructed workers to have customers write letters to politicians on the spot because "there is not enough time for them to take the letter home to write."
Workers were instructed to provide customers with "a plain, white envelope" and to make sure the letters were addressed correctly. Advance America would then stamp and mail the letters.
Similarly, the memo said that customers who agree to call a lawmaker's office should be told to "make the calls directly from your centers, to save time and avoid any telephone costs for them."
It said company workers should ask customers to let them know "what the member or his staff said in response to the call."
That information should be faxed to Morrow at the end of each day.
Fulmer, the Advance America spokesman, said the company was only trying to help customers share their thoughts with elected officials.
"Too often, the voice of our customers has been hijacked by consumer-advocacy groups," he said. "We think it's important for lawmakers to hear directly from our customers."
Fulmer said customers weren't pressured to participate by being asked to write letters and make calls from Advance America offices. "We're just trying to make it convenient for them," he said.
Fulmer also insisted that customers weren't being given scripts to follow, even though the company's own documents refer to them as scripts. "These are sample talking points," he said.
Harnum had it right when he noted in his e-mail that customers keep coming back for additional high-interest loans. Like crack dealers, payday lenders want to ensure that people remain on the hook.
This "grass-roots campaign" wasn't about the voice of customers. This was about an industry fighting to maximize its profits, no matter what the cost to working people and their families.
But that's not a part of Advance America's script.
David Lazarus covers consumer issues for the Los Angeles Times. He can be reached at firstname.lastname@example.org.
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