PAYDAY LENDER INFLUENCE IN INDIANA

Do Lawmakers Represent Hoosiers or Payday Donors and Lobbyists?

FEBRUARY 2018

CENTER

PAYDAY LENDER INFLUENCE IN INDIANA February 2018

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INTRODUCTION In their latest attempt to generate profits and protect their predatory business model in Indiana, payday loan companies are using their influence once again to move an installment loan bill through the state legislature. House Bill 1319 would authorize 12-month loans at rates up to 222 annual percentage rate (APR)—three times the state's felony loan-shark rate. These so-called “installment loans” are structured as longer, higher-dollar versions of payday loans, with similar debt trap hazards. As part of a multi-state effort, the payday industry has sought this type of legislation for three years in Indiana. Though their installment bills failed in committee in 2016 and 2017, this time it has already passed out of the House. With uncertainty at the federal level around a Consumer Financial Protection Bureau (CFPB) rule aimed at reining in the industry, the bill in Indiana is well timed to allow the industry to skirt the federal rule. Payday lenders have used the traditional playbook—campaign contributions plus lobbying—to lean more heavily this session on relationships strategically developed over many years. At stake is the financial stability and wellbeing of low-income Hoosiers. Indiana has over 300 payday loan stores, currently charging an average APR close to 400 percent and draining an estimated $70 million each year in fees.1 The typical borrower has a household income below $40,000 a year and has fallen behind on bills, which means high loan fees often lead to a spiral of debt. In Indiana, 60 percent of borrowers take out a new loan the same day they pay off the last one,2 payday borrowers are twice as likely to declare bankruptcy, and the state has the seventh highest rate of bankruptcy in the nation.3 Knowing the ruinous impact of this industry and the strong public opposition in Indiana to de-regulating payday lending,4 state legislators have a choice between protecting Indiana families from predatory lending or bending to the political influence payday companies and their lobbyists have built over the years. Campaign donations and lobbying expenditures from the industry total at least $1.7 million since 2007, according to analysis by Every Voice Center and Hoosier Action.5

1 “Fact Sheet: Payday Loans in Indiana, It’s Time to Stop the Debt Trap,” Indiana Institute for Working Families. Accessed February 23, 2018: http://incap.org/iiwf/documents/Paydaylendingfactsheet1-draft7.pdf 2 Policy Brief, Indiana Institute for Working Families, December 2017. Accessed February 23, 2018: http://incap.org/documents/PaydayLendingPolicyBrief_2017.pdf 3 “Fact Sheet: Payday Loans in Indiana, It’s Time to Stop the Debt Trap,” Indiana Institute for Working Families. Accessed February 23, 2018: http://incap.org/iiwf/documents/Paydaylendingfactsheet1-draft7.pdf 4 Polling by Bellweather Research & Consulting from January 2018 includes the following findings: 80% of registered Hoosier voters believe payday lending should be more regulated, 75% would oppose a new payday lending store opening in their neighborhood, and 84% believe payday loans are more harmful than helpful. Accessed February 24, 2018: http://incap.org/documents/INPaydayLendingMemo1.22.18.pdf 5 Campaign contribution figures are based on analysis of data downloaded on February 9, 2018 from the National Institute on Money in State Politics (NIMSP), for contributions coded as coming from the “Payday/Title Loans” industry, and contribution data downloaded on February 21, 2018 from the Indiana Secretary of State website. Companies currently and recently licensed as payday lenders were included in totals. Lobbyist registration information and lobbying expenditure figures (based on annual compensation totals) are based on files downloaded from the Indiana Lobby Registration Commission website.

Campaign donations and lobbying expenditures from the industry total at least $1.7 million since 2007, according to analysis by Every Voice Center and Hoosier Action.

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PAYDAY LENDERS SUPPLY LAWMAKERS WITH CAMPAIGN CASH Payday lenders and their lobbyists have made at least $600,000 in campaign contributions since the 2008 election cycle to Indiana state candidates and party committees. The peaks in giving occur in gubernatorial cycles, with former Governor Mike Pence taking particularly large sums from the industry. Halfway through the 2018 election cycle, the industry gave heavily, for a non-gubernatorial election period. The top recipient this cycle is also the top recipient across all recent cycles, among sitting legislators: House Speaker Brian Bosma. His conspicuous campaign cash from payday is detailed later in this section. The two payday companies that give the most campaign cash, Check Into Cash and Advance America, are also the two companies with the largest footprints in the state. Check Into Cash, with 125 locations, tops the donor list, spending at least $146,850 on Indiana candidates since 2007. The company was started by W. Allan Jones, the millionaire from Cleveland, Tennessee who some have dubbed the pioneer of payday loans.6 Jones helped found the payday trade group, Community Financial Services Association of America (CFSA).7 Advance America, with 77 locations in the state, is a close second on the donor list, giving at least $131,505.

6 Gary Rivlin, “Portrait of a Subprime Lender: Allan Jones, Payday King,” The Huffington Post, June 6, 2010, updated December 6, 2017. Accessed February 24, 2018: https://www.huffingtonpost.com/gary-rivlin/portrait-of-a-subprime-le_b_602182.html 7 Check Into Cash FAQ’s and Policies, accessed February 24, 2018: https://checkintocash.com/faqs/in-store-cash-advance/

Table 1. Campaign Money Totals by Election Cycle

to Candidates and Party Committees

TWO YEAR CYCLE TOTAL 2008 $88,930 2010 $55,833 2012 $155,949 2014 $82,483 2016 $168,143 2018* $62,147 Total $613,486

*Partial cycle

Table 2. Campaign Money Totals by Payday Company Donor

DONOR TOTAL SINCE 2007 Check Into Cash $146,850 Advance America $131,505 Cash America International* $71,600 Checksmart Financial Co $27,400 PLS Financial Services** $26,407 Ace Cash Express $10,500 Hoosier Check Cashing Of Ohio $6,000 QC Holdings $1,070 Axcess Financial Services $2,425 Community Choice Financial $6,525 TOTAL $430,282

*Cash America was licensed as a payday lender through 2014. Their donations through 2014 were included. **PLS Financial was licensed as a payday lender through 2015. Their donations through 2015 were included.

$88,930

$55,833

$155,949

$82,483

$168,143

$62,147

$0

$50,000

$100,000

$150,000

$200,000

2008 2010 2012 2014 2016 2018*

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Lobbyists who represent payday companies are also significant campaign donors. The small number of lobbyists currently registered with payday clients gave more than $170,000 in donations to candidates and committees over the years. Campaign money from lobbyists is the sweet spot in political influence, when the donors who hand over checks at fundraisers, year after year, also show up in legislative offices talking about a bill important to their clients.

LOBBYIST WITH PAYDAY CLIENTS FIRM TOTAL SINCE 2007 James A. Purucker* John Frick & Associates $86,835 Brian L. Burdick Barnes & Thornburg LLP $60,200 Matthew D. Whetstone 1816 Inc. $28,611 Matthew Bell Catalyst Public Affairs $6,567 Eric I. Miller $991 Total $183,204 *Purucker has been a lobbyist for PLS Financial, which was licensed as payday through 2015. His donations through 2015 are included. Powerful House Speaker Brian Bosma is the top recipient of checks from payday lenders and their lobbyists, taking at least $22,528 directly to his campaign committee. Based on the campaign finance report he filed on January 16, 2018, his most recent payday-related donations include $1,000 from Advance America on December 27, 2017, $500 from lobbyist Brian Burdick on September 6, 2017, and $5,000 from Check Into Cash on June 22, 2017.8 Bosma’s latest report also reveals a $123.87 in-kind donation from Matt Whetstone, a payday lobbyist, former legislator, and former staffer to Bosma.9 The expenditure side of Bosma’s report indicates this amount was tied to a fundraising event, with the explanation “golf outing expenses.” Despite opposition from even his home church, Bosma helped the payday bill pass out of the state House earlier in February, taking the rare vote as Speaker.10 House sponsors of the bill are also among the top recipients of payday money in the state legislature including Rep. Woody Burton ($9,405), Rep. Robert Heaton ($4,050), and Rep. Wendy McNamara ($2,800). Additional House sponsors who have taken payday money include Rep. Martin Carbaugh ($1,800) and Rep. Bob Morris ($1,400). Among top recipients in the House, shown in Table 4, all but one lawmaker (Rep. Phil GiaQuinta) voted for the House bill in January.11

8 Indiana Secretary of State’s Campaign Finance Website, accessed February 25, 2018: http://campaignfinance.in.gov/PublicSite/SearchPages/FilingDetail.aspx?FilingID=63491&SeqID=42735 9 Eric Bradner, “Pence, Bosma face ethics questions over adding former legislators to staff,” Indiana Economic Digest, 11/30/2012. Accessed February 25, 2018: http://www.indianaeconomicdigest.net/main.asp?SectionID=31&SubSectionID=135&ArticleID=67586 10 Kaitlin L. Lange and Tony Cook, “With a push from Bosma, Indiana House votes to allow 'loan shark' rates,” IndyStar, February 2, 2018. Accessed February 25, 2018: https://www.indystar.com/story/news/politics/2018/02/02/push-bosma-indiana-house-votes-allow-loan-shark-rates/1084989001/ 11 Roll Call 113 on HB 1319, Indiana House of Representatives, January 31, 2018. Accessed February 27, 2018: https://iga.in.gov/documents/c065d690

CANDIDATE CHAMBER TOTAL SINCE 2007 Brian C. Bosma House $22,528 David C. Long Senate $20,325 Travis Holdman Senate $9,700 Charles (Woody) Burton House $9,405 William C. Friend House $6,313 Aaron Freeman Senate $5,500 Jean Leising Senate $4,900 Gregory E. Steuerwald House $4,550 Ron J. Alting Senate $4,308 Matthew S. Lehman House $4,150 Robert (Bob) Heaton House $4,050 Mark B Messmer Senate $3,809 Edmund (Ed) Soliday House $3,400 Erin Houchin Senate $3,366 James W. Merritt, Jr. Senate $3,350 Sean R. Eberhart House $3,179 Greg Taylor Senate $3,000 Phil GiaQuinta House $3,000 Heath VanNatter House $2,969 David N. Frizzell House $2,800 Wendy (Mac) McNamara House $2,800

Table 4. Campaign Money Totals by Top Recipients, Among Current State Legislators

Table 3. Campaign Money Totals by Payday Lobbyist Donor

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Senate President David Long is the number two recipient of direct donations, taking at least $20,325. Senate co-sponsors Sen. Mark Messmer ($3,809) and Sen. Erin Houchin ($3,366) are also top recipients. Payday executives and lobbyists have also sent campaign donations to party committees, funds legislative leaders can wield in key races. The House Republican Campaign Committee, an important component of Speaker Bosma’s power over fellow legislators, has taken at least $38,170 from payday interests. The Republican Senate Majority committee has taken at least $26,600, and Democratic party committees are not far behind in taking payday money.

Table 5. Campaign Money Totals by Party Committee Recipients

PARTY COMMITTEE TOTAL SINCE 2007 House Republican Campaign Committee Of Indiana $38,170 Indiana Republican Senate Majority Campaign Committee $26,600 Indiana House Democratic Caucus $20,750 Indiana Senate Democratic Committee $20,500 Total $106,020

CAMPAIGN CASH IS BACKED UP WITH LOBBYING Over the past decade, the payday industry has spent $1.1 million lobbying lawmakers, paying individuals and firms with close ties to Indiana politicians. The trade group Community Financial Services Association of America has spent the most on lobbying since 2007, more than $300,000. Advance America and Check into Cash’s have hired some of the most influential and well-connected lobbyists roaming the halls of the Statehouse. Both employ the firm Barnes & Thornburg LLP, headed by Robert Grand, who Republicans rely on heavily for their campaign cash—Grand currently serves on the Republican National Committee’s finance leadership team and has raised money for the Trump-Pence campaign and Trump’s inauguration fund.12 The firm has stepped up access for their payday clients by deploying Brian Burdick, their Indianapolis managing partner, who explained the benefits of the payday bill recently13 and, as noted above, is also a generous and strategic campaign donor. Another lobbyist for Advance America is Matt Whetstone who has taken a couple turns through the revolving door, serving as a state representative for 11 years, before becoming a lobbyist at Krieg Devault, going back to work for Bosma as House parliamentarian, and then lobbying again.14 Whetstone leverages relationships inside and outside the state legislature so well that he even remained employed as a lobbyist during his recent work for the legislature.15 This payday lobbyist recently defended HB 1319, misleadingly warning that not passing the bill risks “disenfranchising Indiana residents of all regulated short-term credit.”16 12 Profile of Robert T. Grand on Barnes & Thornburg LLP website, accessed February 25, 2018: http://www.btlaw.com/robert-t-grand/ 13 Tim Evans, “Lawmakers face familiar question: How much is too much to charge for small, short-term loan?” IndyStar, January 14, 2018. Accessed February 25, 2018: https://www.indystar.com/story/news/2018/01/14/lawmakers-face-familiar-question-how-much-too-much-chart-smalfate-high-interest-short-term-loans-bac/1020203001/ 14 Profile of Matthew D. Whetstone on 1816 Inc. website, accessed February 25, 2018: http://www.1816inc.com 15 Eric Bradner, “Pence, Bosma face ethics questions over adding former legislators to staff,” Indiana Economic Digest, 11/30/2012. Accessed February 25, 2018: http://www.indianaeconomicdigest.net/main.asp?SectionID=31&SubSectionID=135&ArticleID=67586 16 "WHETSTONE: Struggling consumers need more loan options," Indianapolis Business Journal, February 23, 2018. Accessed February 25, 2018: https://www.ibj.com/articles/67626-whetstone-struggling-consumers-need-more-loan-options

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A fellow revolving door traveler is Matt Bell, also a former representative and now a lobbyist at Catalyst Public Affairs Group.17 Bell’s payday clients include Check Into Cash and Community Choice Financial (an online small dollar lender).

Table 6. Lobbying Expenditure Totals By Payday Organization

PAYDAY COMPANY OR TRADE GROUP TOTAL SINCE 2007 Community Financial Services Assn of America $309,024 Cash America International* $261,659 PLS Financial Services** $167,206 Advance America $164,506 Community Choice Financial $103,498 Check Into Cash $103,272 Axcess Financial $17,996 Total $1,127,161 *Cash America was licensed as a payday lender through 2014. Their lobbying expenditures through 2014 were included. **PLS Financial was licensed as a payday lender through 2015. Their lobbying expenditures through 2015 were included.

CONCLUSION The payday industry’s power over legislators results in policymaking that allows these lenders to trap low-income Hoosiers in a cycle of debt that’s hard to escape. While payday CEOs profit, their customers struggle to get by. Public policy shouldn’t be based on how much campaign cash an industry can give or who their lobbyists golf with in the state legislature, but about what’s best for the public. Lawmakers who’ve taken big bucks from these lenders rushed the industry-backed bill through the House, when instead they should have sided with the majority of their constituents, who believe in keeping this industry in check. Lawmakers should make payday loans safer by capping interest rates at 36 percent and supporting access to alternative products and tools that promote financial capability. And, importantly, we need to overhaul our campaign finance system, which prizes campaign cash and lobbyists over the needs of ordinary people. We need a system that allows candidates to run for office on the strength of their ideas and grassroots support, irrespective of whether they’re wealthy or have access to big campaign donors. Creating a small-donor matching program, or similar system to raise the voices of everyday people in politics, would go a long way toward creating a government that’s truly of, by, and for the people.

17 Profile of Matt Bell on Catalyst Public Affairs Group website, accessed February 25, 2018: http://www.catalystpag.com/our-team/

Hoosier Action is a new organization dedicated to building the Indiana that we deserve. We organize primarily in Southern Indiana, bringing together farmers and food stamp recipients, laid-off union members and agricultural workers from Mexico, students and teachers, and many folks who are struggling with the new crisis of opioid addiction. Hoosier Action is a member-owned and -led organization. We bring Indiana’s working families into real relationship with one another. We fight for a small-town agenda that puts working Hoosier families at the center, with a vision of a future where everyone can thrive. Learn more at HoosierAction.org. Every Voice Center is a national organization that works to ensure that everyone is heard in America’s democracy by amplifying the voices of everyday people and reducing the influence of big money in politics. We believe our government should work for everyone, not just the rich and powerful. Learn more at EveryVoice.org.