Payday for Legislators

With no legislative solution in sight, legislators bank on payday lender contributions

For thousands of working Illinoisans, who have both jobs and cash flow problems, payday lenders have emerged as resource. Payday lenders have grown from a handful of outlets into the hundreds, all across the state. “We provide a service that has proven very popular with consumers,” notes Steve Brubaker, Executive Director of the Illinois Small Loan Association.

Whether a payday loan is a good decision for consumers, though, remains a contentious issue. Critics in the Egan Campaign for Payday Loan Reform note that fees can be substantial, especially on loans that are not repaid within a month. Some borrowers quickly owe many times more than they borrowed.

With their growth in number and size, payday lenders have also increased their campaign contributions. The rapid ramp up in payday giving since 1998 follows the outline, if not the scale, of the growth of giving by casino interests in the early 1990s. From $26,500 in in 1998, all by individual businesses and their owners, through the formation of the Illinois Small Loan Association Committee in 1999, industry giving grew to over $300,000 just two election cycles later. In 2003-2004, the industry is poised to grow again. This cycle, lenders have given over $100,000, and the PAC reported $121,000 on hand ten months before the 2004 elections.

The industry gives heavily to legislative leadership, but also gives small contributions to rank and file members. Of 118 current House members, 53 have reported contributions from payday lenders, either through the PAC or from individual lenders and owners. Of 59 sitting Senators, 31 have taken payday money. Median giving for rank and file legislators was $750 since January 1, 2001.

Top Recipients of Payday Contributions 2001-2004 (Through February 15) (1) Sen. Emil Jones* $62,500 (2) Gov. Rod Blagojevich $54,750 (3) Sen. James ‘Pate’ Philip*+ $45,000 (4) Rep. Michael J. Madigan $35,000 (5) Rep. Lee Daniels* $21,600 (6) Rep. Tom Cross $20,300 (7) Atty Gen. Jim Ryan+ $10,200 (8) Rep. Robert Bugielski+ $8,500 (9) Treasurer Judy Baar Topinka $7,500 (10) Rep. Jack Franks $5.700 * - Includes giving to caucus committee + - No longer in office.

But the bulk of giving goes to leadership. Nearly half (48%) of their political giving went to the leaders of the four legislative caucuses, split almost evenly between the two parties. And another $54,750, or 14% of their total contributions since 2001, went to Gov. Rod Blagojevich.

Critics of the industry include a range of community groups, non-profits and labor unions. Some Egan Campaign supporters, including AFSCME and SEIU, give politically, but payday regulation is not among the donors’ legislative priorities.

At issue is how the state should regulate the lenders. Egan Coalition members want the state to set limits on fees and interest, which is anathema to the lenders. “What we’ve seen in some proposals is a prohibition of the local industry,” says Brubaker. “These proposals would force local lenders out of business.” Federal laws allow out-of-state lenders to charge rates based on where they are headquartered. When Indiana set maximum fees too low, he notes, regulation served only to force local lenders out of business, leaving consumers prey to unregulated lenders from other states.

The matter has percolated through the legislature for several sessions, and shows no signs of resolution. As long as Illinois puts no limits on campaign contributions, special interests are likely to continue to ante up large sums to candidates and caucuses. While the payday lenders and their critics argue over appropriate fees, legislators continue to collect campaign contributions.