Keep mitts off law reforming payday loans
It got me thinking about the continuing saga of the ways the rich have manipulated our political system to make it easier for them to steal from the poor. In our state, payday loans once created a billion dollar stream of funding, from people in difficult straits, to payday loan kings like MoneyTree. That was before 2010, when our legislature, led by then-Representative and current state Sen. Sharon Nelson, D-Maury Island, completely reformed the payday loan law. They balanced out the deal between the financial companies who provided payday loans and the people who needed them. It became much less likely that the payday loan companies would pile one loan on another, using the second one to repay the first and the third to repay the second, all of which meant more money for the company and more debt for the borrower.
One happy outcome of this is that the number of payday loans decreased significantly from over 3,250,000 in 2009 to 855,000 in 2011. The amount of money tied up in these loans dropped from over $1.3 billion to $300 million. At 15 percent interest, that meant a $150 million loss to the payday loan industry ... and a $150 million gain for the folks who took out payday loans.
And it's not like you can't get a payday loan anymore. Sixty-eight companies had 256 locations around the state in 2011, two years after the reform bill passed. If you take out a payday loan for $700 for six months, you would end up paying back $914. That includes 15 percent interest and a loan origination fee of $95. On an annual basis, that all adds up to a 35 percent interest rate. Lots of money still there for MoneyTree!
But apparently not enough. So this year the money lenders have connived to legally extort poor people by proposing a new pathway for companies like MoneyTree. Under this new bill, if you take out a $700 loan for six months, you pay 36 percent interest, and you pay a loan origination fee of $105, and you pay a monthly maintenance fee of $52.50 a month. When you are done paying off your loan, you have doubled MoneyTree's money -- you borrowed $700 and you paid back almost $1,400. On an annual basis, your interest rate is 192 percent!
The state Senate approved this proposal for legal extortion, by a vote of 30 to 18. It helps to follow the money. Dennis Bassford is the CEO of MoneyTree. He lives in a multimillion-dollar mansion hidden in a private forest on Mercer Island. I wonder how he got all that money?! But now he wants more. So last year he and his brother Dave and sister-in-law Sara gave $5,000 to Sen. Don Benton, R-Vancouver. That $5,000 meant something, as Benton won with 50.07 percent of the vote, just 78 more votes than his opponent! Benton is vice chair of the Financial Institutions Committee and helped to shepherd this bill through the Senate.
Sen. Steve Hobbs, D-Lake Stevens, is the chair of the Financial Institutions Committee. He not only voted for this bill, he enabled its passage out of committee. Along with Hobbs, Snohomish County Sens. Barbara Bailey-R, and Kirk Pearson-R, voted for this bill for MoneyTree. On the Democratic side, Snohomish County Senators Maralyn Chase, Nick Harper, Rosemary McAuliffe, and Paull Shin all voted to stop MoneyTree from raiding the pocketbooks of desperate people.
If there are any heroes in this sordid story of the Legislature taking from the poor and giving to the rich, it is Sen. Sharon Nelson. She sponsored the reform bill back in 2009, and she adamantly opposed the take-backs envisioned this year. She knows no action means that Dennis Bassford will still get his 35 percent interest rate and still sleep in his mansion. But the folks he lends to will also be able to sleep with a roof over their heads and some sense of security. Now we have to hope that the House agrees and buries this bill before it goes any further.
John Burbank is the Executive Director of the Economic Opportunity Institute (www.eoionline.org). He can be reached via email at email@example.com