The arrogance of Rhode Island’s payday loan industry

Legal loan sharks get what they want

By Steve Ahlquist for UpRiseRI

That's far-right Charlestown Senator Elaine Morgan sitting near the center

It’s been a while since in person committee meetings were held by the Rhode Island Senate in rooms with no cameras, meaning that these hearings are not being live-streamed, or even recorded, beyond a pretty bad audio recording.

UpriseRI brought a camera into room 310 last night to cover the Senate Committee on Commerce which was taking up, for perhaps the twelfth time in a dozen years, legislation that would repeal the provisions of the general laws allowing deferred deposit providers, also known as “payday lenders.”

The bill, S2166, is sponsored by Senator Ana Quezada (Democrat, District 2, Providence), who was unable to introduce her bill in person. See some earlier reporting on the issue of payday lending here:

The General Assembly continues to be complicit in the evil of payday loans

How predatory payday lenders keep customers hooked

Repeal of this provision is supported by a vast array of community, faith, social service and advocacy organizations and activists, but opposed by a small clique of powerful, wealthy and politically connected lobbyists and corporation who make literally millions of dollars via their predatory lending practices.

In her testimony in favor of the bill to resign in payday lending, Margaux Morisseau, Deputy Director of the Rhode Island Coalition to End Homelessness, spoke about doing social service work in Woonsocket in 2009 and realizing that “hard working families were going to be homeless” because payday lender Advance America had opened a store in the middle of the neighborhood she worked in, and was targeting residents.

After working with legislators at the General Assembly to craft the first payday lending reform bill – which would have capped the interest lenders could charge at 36% annually, the bill was removed from consideration minutes before a scheduled floor vote “because of one phone call made by a powerful lobbyist,” said Morisseau.

In the 12 years since, lobbyists continues to be paid tens of thousands of dollars every year, preserving the millions of dollars in profits the predatory lending companies suck out of communities. A bill to stop payday lending has never reached the House or Senate floor for a vote.

The protection payday lenders are given by General Assembly leadership, protections that include holding hearings in rooms without cameras, has bred arrogance among those who lobby for – and profit from – payday lending. 

Lobbyists Stephen Alves (paid $40k annually by predatory lender Access Financial) and and former Speaker of the House William Murphy (a bargain at $30k annually from Purpose Financial, doing business as Advance America) don’t even bother deliver oral testimony to the committee – at least when there are cameras rolling – they instead submit written testimony. 

Murphy does one better than Alves – his name isn’t even on the testimony he provides. Instead, he delivered a letter from Purpose Financial’s Senior Policy Counsel Julie Townsend. You can read their testimony at the bottom of this report.

These lobbyists don’t testify at hearings because they don’t need to. They have the State House firmly in their grip. The hearings on their bills are done in camera-less rooms. They kill bills with last minute phone calls and at chummy fundraisers. They see inequality and human suffering not as an evil, but as an opportunity.

But the arrogance award for those testifying against the payday loan reform legislation at last night’s committee hearing has to go to Bill Staderman, President of the Rhode Island Association of Financial Service Centers, who owns and operates payday loan companies throughout the state. Staderman presented himself as a clever, charming monster, but he is neither clever nor charming.

Staderman began by saying that payday loans were “simple” things that people enter into willingly, of their own free will. Playing to the privilege he sensed in the room, Staderman said, “I’m sure that most people here, probably everybody here, has not gotten a payday loan themselves…”

Getting these payday loans is “quick, and it’s a small amount – the most in Rhode Island is $500,” said Staderman, which brought a challenge from Senator Tiara Mack (Democrat, District 6, Providence) during questioning.

Noting her personal experience of growing up low-income, “I’ve seen the financial cost, I’ve seen the generational cost and I’ve also experienced the generational cost of predatory payday loans,” said Senator Mack. “We can call them small amounts [but] $500 to someone who does not make $500 a week … is a large chunk of money.”

Staderman could not help but respond to Mack’s powerful, factual and emotive testimony with anything but condescension. “I appreciate you agreeing with what I said,” said Staderman. “Here is the reason why: $500, I said before, might be a small amount – I grew up in a tenement in Brooklyn…” Then putting on some sort of undefinable accent, Staderman continued, “$500. It’s a lot of money fuggedaboutit.” Sensing he was going to be interrupted by Senator Mack, Staderman interrupted, “Let me finish please Senator…”

Staderman then babbled on for minutes, and took questions from Senators Cynthia Mendes (Democrat, District 18, East Providence) and Kendra Anderson (Democrat, District 31, Warwick, Cranston). Finally, Senator Mack spoke up again, trying to explain her family’s struggle with generational poverty. As tears came to Senator Mack, Staderman said interrupted her with, “I grew up with that, I’m sorry.”

“I’m not done,” said Senator Mack. “I’m crying, but not done. It’s hard to…”

“My father didn’t have a car until he was 40 years old,” said Staderman, interrupting again. “Or a license.”

“Yes,” said Senator Mack, who patiently explained more of her lived experience. She also spoke about the working people who cannot afford the time away from work to testify at the State House on issues of vital importance.

As Senator Mack left the room to compose herself, Staderman still needed the final word. He was cut off by Committee Chair Susan Sosnowski (Democrat, District 37, Block Island, South Kingstown). “No that’s enough,” she said.

What none of the testimony provided by the payday loan industry does is try to refute the arguments made against the practice by the advocates testifying against them.

State Treasurer Seth Magaziner, for instance, noted that Rhode Island remains the only state in New England that still allows this usurious practice. Treasurer Magaziner added that the United States Congress outlawed payday lending in and around military bases because they are seen as a threat to military preparedness.

Alan Krinsky, testifying on behalf go the Economic Progress Institute, brought up several key points, backed by research and data, about the negative impacts of payday loans on both borrowers and the community.

• the average payday loan consumer gets caught in a cycle of debt, taking out 10 loans per year due to an inability to pay of the balance and constantly growing fees;
• payday lenders increase wealth disparities by disproportionately targeting people of color; and
• nationally, 18 states and the District of Columbia enforce laws with rate caps of 36 percent or lower. Rhode Island is the only New England state.

Also submitting testimony in favor of reigning in payday lenders were the United Way of Rhode Island, Rhode Island Kids Count and the Capital Good Fund.