Government has supported payday lenders with PPP loans
It may have only taken a few legal fights and a lobbying campaign on Capitol Hill, but payday loan companies have managed to get a cut in the nearly $ 700 billion relief fund Washington set aside. to help small businesses across the country weather the coronavirus outbreak.
Records of people who received paycheck protection program loans released last week show that 35 companies that provide payday loans, auto title loans and other borrowing options to high interest and low cost have brought in millions of dollars in federal coronavirus aid, starting at $ 9 billion. to $ 23 billion in total. The Small Business Administration, which administers the PPP, does not publish exact totals for each loan grant.
The group of companies that have benefited includes CashCall, Inc., a California-based company that was sued in 2013 by the Consumer Financial Protection Bureau for charging borrowers money they didn’t owe and was hit with ” fined $ 100,000 in 2017 when the District of Columbia attorney general sued for charging interest rates of up to 169% on loans.
None of this mattered in April, when the company received a loan worth $ 350,000 to $ 1 million.
Other recipients of small business aid include Montana Capital Loans, another California company that the state government’s commissioner for business oversight recommended losing its loan license in 2017 due to violations of policies. rules ; and Hutcheson Enterprises, an Alabama-based company that operates more than 300 credit bureaus in nine states.
Hutcheson has received between $ 2 million and $ 5 million in federal P3 loans. Company chief Roy Hutcheson told the Daily Beast on Wednesday that unless he got help he was going to have to lay off a third of the company’s workforce. “We’re like any other business, we’ve got the employees and the person down the street who needs the money, they’re no different from me,” Hutcheson said. “I feel like we had as much right to get a loan as anyone else. “
But there are many who disagree with this point, from congressional lawmakers to consumer advocates, who find it scandalous that an industry that has become synonymous with taking advantage of low-income Americans has had access to loans from. emergency guaranteed by the government.
“It goes without saying that predatory lenders who charge American workers up to 400% for payday loans should not receive taxpayer subsidies or near zero interest loans,” said Kyle Herrig, president of Accountable.US, a liberal watchdog group. “Congress needs to establish a fairer and more transparent system to relieve real small businesses,” Herrig said, “not predatory lenders looking for handouts.”
“It is outrageous that payday lenders have access to these essential funds,” said Sen. Sherrod Brown (D-OH), a leading member of the Senate Banking Committee who signed a May 6 letter with others. Senators urging SBA to deny payday lenders access to P3 funds. “Taxpayer money shouldn’t go to payday lenders who rip off working families and trap consumers in debt cycles.”
At one point, at least, the people leading the business bailout program seemed to agree. In April, a bipartisan group of lawmakers friendly to payday lenders pleaded with the Treasury Department to open up the consumer lender loan program; the same month, the SBA denied a payday lender called Payday Loan LLC a forgivable loan worth $ 644,000 on the grounds that giving that type of lender access to small business aid funds was not in the “public interest”.
The company then filed a lawsuit against SBA in federal court for the denial of the PPP loan. It is not known what changed, but on May 11, Payday Loan LLC withdrew its complaint after saying it received a “firm offer” for a PPP loan, and federal records show it received one from valued at $ 350,000 to $ 1 million on May 3. The SBA did not respond to a request for comment from The Daily Beast regarding its specific PPP guidelines regarding payday lenders and other high interest lenders.
When it passed the CARES Act that created the PPP in late March, Congress was in a hurry to bring much-needed relief to small businesses suddenly faced with a stalled economy and fearful of not surviving. The program has undoubtedly helped hundreds of thousands of businesses keep their employees on their payrolls, but millions of dollars have also been clawed back by well-endowed entities like publicly traded fast food chains, corporations funded by private equity, Church of Scientology and organizations related to Trumpworld luminaries like Jared Kushner.
Many of these companies that received loans repaid them after going through public scrutiny, which payday lenders have not done to date.
Lawmakers are frustrated that the program’s implementation, while successful in many ways, nonetheless froze some small businesses – many of which waited months for a loan – at the same time as it offered a slice of the pie to companies considered to be among the poorest performers in the US economy.
“What we need now is what we needed four months ago when this crisis started: targeted assistance to our small main street businesses to help people keep their jobs and their jobs. open house, ”said Representative Andy Kim (D-NJ), a member of the House Small Business Committee and the special panel set up by the House to oversee the coronavirus response. “We need to make sure that future actions are focused on exactly that, and that there is enough transparency to hold the SBA accountable when the money goes where it shouldn’t go.”
Some $ 130 billion, which was earmarked after P3 funds quickly ran out in April, remains in the program coffers. Lawmakers have spoken of establishing stricter guidelines around which organizations may be eligible for relief now, although no clear plan is on the table. The office of Senator Marco Rubio (R-FL), chairman of the Senate Small Business Committee, did not respond to whether payday lenders’ access to P3s meant changes to the program were needed.
So far, the payday lending industry has clearly been successful in making its case with the Trump administration and Congress to squeeze taxpayer money out of the PPP pot. The letter from members of the Treasury Chamber on behalf of the industry came a month after two major payday loan companies lobbied lawmakers over his interests in the program, as The Daily Beast reported in may.
Some industry figures have also spoken openly about the Trump administration’s kindness to the industry and linked their financial support to the president with the hope that their interests would be heard. In 2019, the The Washington Post reported during an industry webinar where attendees spoke about the importance of donating to the Trump campaign and boasted that their contributions had secured them a White House hearing. One of the webinar attendees, Speedee Cash, received a PPP loan worth $ 150,000 to $ 300,000.