Payday lenders donate to Dodd
Sen. Christopher J. Dodd (D-Conn.), who has won praise from consumer groups for taking on credit card providers over predatory lending practices, has collected thousands of dollars in donations from people affiliated with the so-called payday loan industry.
The lawmaker raised more than $44,000 from pawnshop owners and other businesses that provide high-interest loans, often to people with bad credit ratings, according to campaign finance reports.
The amount, a fraction of the $1.05 million that Dodd brought in during the first quarter of 2009, nevertheless raises questions among people who scrutinize the link between fundraising and public policy.
Dodd is chairman of the Senate Banking, Housing and Urban Affairs Committee. The payday loan industry is fighting a bill in the committee that would cap annual interest rates on consumer loans at 36%.
“It’s not surprising to me that he would be receiving money from payday lenders and others,” said Sheila Krumholz, executive director of the Center for Responsive Politics, which tracks the influence of money in politics.
“There is a concerted effort on the part of the special interests to have a say in what emerges in legislation. . . . These issues are so controversial and of great interest to Chris Dodd’s constituents and all Americans, particularly in this economic climate.”
Dodd’s donors in the payday loan industry declined to comment. But on its website, the National Pawnbrokers Assn. -- whose members and political action committee gave a total of $10,000 -- offered “talking points” to counter its critics.
The association said that pawnbrokers were often the last resort for loans for low- and moderate-income people, and that if the bill passed, “the last option available to millions of consumers in the U.S. will be eliminated.”
Dodd’s spokesman, Bryan DeAngelis, would not say whether the senator supports the bill, which would tighten regulations on the payday loan industry, though he said that Dodd was not influenced by campaign contributions.
“Sen. Dodd has spent his career fighting for consumers against abusive lending practices, including passing the credit card act he recently passed out of committee,” DeAngelis said Friday. “He will continue to stand up for consumers as the banking committee considers additional legislation in the coming months.”
Dodd is facing a tough political fight as he heads toward the 2010 election, with two Republicans announcing their intent to challenge him. The senator has been accused of being too cozy with powerful Wall Street financial companies. He faced sharp criticism for his role in the legislation that protected bonuses for executives at bailed-out insurer American International Group Inc.
The payday lenders are, in many ways, more Main Street than Wall Street. But the industry is flexing its political muscle in response to threats of tighter federal regulations.
Payday loans are small, short-term loans with interest rates of 400% or more a year.
Critics say these businesses prey on low- and moderate-income workers and trap borrowers in a cycle of debt that is impossible to escape.
“The payday lenders are among the most aggressive and abusive lenders in the country,” said Travis Plunkett, legislative director of the Consumer Federation of America.
The group is among the many consumer organizations that have praised Dodd for fighting credit card companies.