By Bob Negele
Payday lending companies have made headlines recently as policymakers clamp down on regulations for the payday lending industry. Last month, 103 Advance America centers closed because of modified laws in Pennsylvania and Oregon.
Earlier this fall, Virginia legislators debated the legality of some predatory payday lending practices.
The latest news from the cash advance sector has to do with the 2008 presidential election. According to reports from South Carolina's online publication The State, payday lending companies in South Carolina are donating tens of thousands of dollars to presidential campaigns. Here's why that should worry you.
Payday lending companies provide quick, short-term loans to people who need money before their next paycheck. In theory, their service provides an easy credit source for people who might not be able to get loans from more traditional lenders.
In practice, though, the high fees and interest rates most payday lending companies charge often leave borrowers in a debt spiral. When the loan amounts due to payday lenders grow too high to handle, many borrowers have no choice but to file bankruptcy to protect their personal finances.
The recent laws clamping down on payday lending practices have been largely proposed and supported by Democrats, who traditionally seek measures aimed to assist lower-income groups.
Reports indicate that payday lenders like Advance America have donated more than $64,000 in campaign funds to presidential candidates, with the bulk going to Democrats' campaigns. This may seem counterintuitive at first-why support the people trying to shut you down?
Because the contributions could have long-term effects.
Sources indicate that some experts are worried that, if a democrat supported by a payday lender gets elected, the money will influence policy decisions. Specifically, some believe that Democrats funded by payday lenders will feel obligated to pass legislation favorable to the payday lending industry.
The State reports that Hillary Clinton and Bill Richardson (both democratic presidential candidates) have each received more than $22,000 from payday lenders. Apparently, some analysts have expressed concern that this could present a conflict of interest should either of these candidates land in the White House.
According to reports, Billy Webster, co-founder of Advance America, is behind many of these donations. A spokesperson for the company is quoted as saying that Webster has always been politically active, and his latest donations are not intended to sway policy in any direction.
Perhaps those words would be more believable if his South Carolina-based company were not facing three lawsuits challenging its policies.
The suits reportedly charge that Advance America violated consumer protection practices and engaged in predatory lending. Several parties are involved.
The article notes that payday lending companies have also donated sums of money to candidates in local political races, from both ends of the political spectrum.
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