At a meeting of Northern Virginia credit unions with state legislators in October, Virginia Credit Union League lobbyist Reginald Jones told the audience how credit unions were doing a good job of creating alternatives to payday loans.
When the legislative session starts in January, payday lenders will expect him to tell a different story. The lenders pay his law firm, Williams Mullen, almost $648,000 to lobby for their interests. The credit unions have used Jones, known as one of Richmond's most effective lobbyists, for 27 years. It paid him $25,000 for his services last session.
But with payday lending emerging as one of the most controversial issues facing the General Assembly, Navy Federal Credit Union pulled out of its state trade group last week in protest over Jones. After losing the nation's largest credit union as a member, the Virginia Credit Union League also decided not to use Jones as its lobbyist. He could not be reached for this story.
Payday lending adversaries in Virginia have been critical of the credit unions for using Jones as a lobbyist. Virginians Against Payday Lending has unsuccessfully urged the credit unions to get involved in a political quest to banish the lenders in the state with an interest rate cap of 36 percent, which all other lenders face.
The credit union league's board has decided to stay out of that fight, while also developing programs that offer their members alternatives to payday loans. The group says it is more effective by staying out of issues that don't directly affect credit unions, and isn't changing that stance to support a 36 percent cap at the 2008 session.
"That'll be up to our board of directors, but we do not anticipate taking a position on that," said Lewis Wood, spokesman for the credit union league.
Ralph L. Yeatts, senior vice president of Navy Federal Credit Union, said payday lending contradicts the principles of credit unions. Navy Federal said credit union officials didn't know until recently that its state group shared a lobbyist with the payday industry - even though Jones has held both roles for six years - and believes it is a conflict of interest to advocate for both.
"This just came to light fairly recently, and Navy Federal does not support the payday lending industry," said Yeatts.
Many payday lenders are touting a new Federal Reserve study that contradicts a North Carolina study that said credit unions were able to help fill the gap as payday lenders were legislated out of North Carolina. Jones would have been forced to make the case for each side, even as he gets paid substantially more by the payday industry.
"I don't know how you can represent two different organizations that have two different philosophies," said Yeatts.
The credit union board didn't consider Jones' representation of the two groups a conflict, but they didn't want the payday issue to be a distraction to their own issues. Nonetheless, they have informed Jones that his law firm must choose between them and the payday industry at the end of the 2008 session.
"We want somebody who is also not representing payday lenders," said Wood.
Although the credit union league will use its own staff to lobby this year, Jones will still serve as the league's legal adviser on state regulatory matters. He won't deal with legislators face to face but will give the credit union's lobbying staff advice on bills.
The state credit union league says the issue doesn't directly affect its member credit unions, even though they offer products competing with payday lenders. The three largest credit unions on the Peninsula offer alternative payday products that include credit counseling to help people deal with long-term financial problems.
But the state group doesn't want to get involved because it doesn't want to imply that it can replace payday lending for everyone.
"We can't service everyone," said Wood. "We're not the be-all, end-all solution to payday lending."
The Community Financial Services Association of America, the payday lending trade group that pays Jones, says half its customers are credit union members and that credit unions are competitors.
The CFSA has said it welcomes credit unions' programs because they legitimize the need for the payday lending product. But it has also challenged credit unions' effectiveness as a payday replacement and complained that industry critic Center for Responsible Lending is affiliated with a credit union, which is a competitor.
Payday lenders have been in legal fights in Virginia for harassing borrowers who fell behind on payments, but their lobbyists have also been accused of attacking whistleblowers who helped defeat payday lending in Washington, D.C.
Former payday manager Williams Harrod has sued his former employer, Check N' Go. The suit says Williams Mullen lobbyist Thomas Cassidy, working with a Check N' Go lobbyist, incorrectly told police in the capital that Harrod was a wanted sex offender, causing the whistleblower to be detained outside a payday hearing.
Cassidy, who works with Jones in the lobbying/public relations arm of Williams Mullen, has denied the allegations that he smeared Harrod.
One of the biggest allies and campaign contribution recipients of payday lenders, Senate Majority Leader Richard Saslaw, D-Fairfax, was at the October meeting explaining how expensive it has become to win state office.
Saslaw was the largest individual recipient of payday lenders' largesse during this year's election cycle, receiving almost $41,000. They are counting on Saslaw to repeat his performance of last year, when he was pushing a bill with reforms lenders support and payday opponents say will do nothing to end the cycle of debt many borrowers get into.
Commercials have started blanketing television in anticipation of the fight. Saslaw has become more powerful this year, too. With the Democrats taking over the Senate, Saslaw has become Senate majority leader and chairman of the key Senate Labor and Commerce Committee that will hear payday bills.
The state credit union pictures of the October credit union event include an intense conversation between Saslaw and Jones. The caption didn't describe the topic of the chat. It said Saslaw was noting the importance of credit unions' involvement in fundraising and volunteering for campaigns.
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