Trump Received Millions from Payday Lenders. Then he assisted them in making money off the working poor.

When Donald Trump paid a visit to Mike Hodges’ home in Nashville in 2018, he was still a tiny fry among Ipass loans payday lenders. Hodges and his wife, Tina, possessed approximately one-hundred stores distributed all over the state, issuing micro-loans for fees that work out to yearly interest rates as high as 450%. In comparison to the 1,000-store chains that arose from the industry’s pioneers in the 1990s, their company, Advance Financial, was a smidgeon. 

Renowned Trump backers

The Hodges, on the other hand, soon established themselves as prominent Trump backers. They donated over a million dollars to his campaign and main super-PAC. When Trump came to Nashville to give a speech at the Gaylord Opryland in January 2018, Hodges informed a reporter for USA Today that he was among the people who offered a private encounter with Trump. The family co-sponsored a Nashville performance by Vice President Mike Pence the following October, with ticket prices ranging from $1,000 to $100,000. Mike Hodges had established himself as the industry’s main contact with the Trump White House by that time, a status he publicly talked about.

Every coin counts

According to an audio recording obtained by the Washington Post from an industry webinar, Hodges said two weeks before the Pence event, “any amount, however little or huge, is crucial.” Hodges mentioned the Republican National Committee’s chairman: “For instance, I went to Ronna McDaniel and said, ‘Ronna, I need your help on something.’ ‘Hey, we have one of our huge givers,’ she’s been able to phone the White House and say. They require a listening audience.'” 

Since Trump assumed office, payday lenders and others who peddle predatory financial products to the working poor in the United States won a slew of successes. The Consumer Financial Protection Bureau’s enforcement proceedings against the business dropped drastically, and the country’s top banking regulators appeared to be working on a loophole that would allow payday lenders to operate even in regions where their product has been prohibited. 

In August 2019, a CFPB whistleblower claimed that his managers directed staff economists to fake a study to minimize the harm to consumers who take out payday loans on a regular basis.

The working poor in America had been the largest losers in this arrangement, particularly Black and Latino employees, who were disproportionately caught by payday lenders’ excessive rates (about $15 after every $100 for credit due back in two weeks). Green is the industry’s primary focus, but it also serves white low- and medium-income areas. 

According to a 2017 research by the Center for Responsible Loan, neighborhoods dominated by persons of color in Colorado were seven times more likely than mostly white communities to have a payday lending outlet. According to a 2012 survey by the Pew Charitable Trusts, black people are three times as likely as white persons to have taken out a payday loan.

Today, the Hodges have expanded their political clout as they open locations across Tennessee and offer online payday loans in a dozen other states. As per the Federal Election Commission, Hodges provided more than $150,000 to Trump’s campaign in 2016. Mike and Tina Hodges each provided $125,000 to Trump’s major super-PAC, America First Action, in 2018, and Hodges himself contributed another $250,000 in 2019. 

According to the Federal Election Commission, Hodges and their employees contributed less than $10,000 in the 2014 election cycle. However, at least $410,000 in the 2016 cycle and at least $1,045,000 in the lead-up to the 2018 midterm elections. The vast bulk of such money went to Republican war chests, including individual House and Senate Republicans’ campaigns, as well as numerous Republican campaign committees. (According to the Federal Election Commission, Hodges gave $125,000 to the RNC in 2019 and another $60,000 to the National Republican Congressional and Senatorial Committees.) By the time the tape of Hodges boasting about his contacts to the Trump White House surfaced, the Hodges and their workers had already contributed another $800,000 or more.

“It’s difficult for me to say this amount because I would have thought you were crazy if you told me this five years ago,” Hodges told the Post. “However, we’ve already given $1.25 million to [Trump’s] campaign.” So Tina and I have become, over the last couple of years, one of the biggest donors to the campaign.” Since then, the Hodges and Advance Financial workers have given at least another $528,000 to Republican candidates, nearly all of it to Republicans. Hodges declined to be interviewed for this story, instead of sending a Hunter S. Thompson quote: “You have to be a PLAYER in a democracy.”

Regulatory scrutiny

Payday lenders in the United States had become accustomed to regulatory scrutiny by the time Trump was elected. The Consumer Financial Protection Bureau was established as part of a sweeping series of financial reforms signed into law by President Barack Obama in 2010, which payday lenders perceived as a possibly existential threat to their company. Phil Locke, the pro-payday Michigan Financial Service Centers Association’s president for five years, remembers “frequent” emails from FiSCA warning about a new federal monitor with the potential to crack down on “unfair, fraudulent, or abusive conduct or practices.” The Consumer Financial Protection Bureau (CFPB) revealed its intention to examine the payday loan business six months after it was established. “People were terrified of the Consumer Financial Protection Bureau,” Locke remarked at the time.

The Consumer Financial Protection Bureau spent five years researching a new regulation to regulate “small-denomination loans.” In a speech in 2015, Obama addressed the issue, saying, “As Americans, we don’t mind seeing somebody make a profit… However, if you’re earning money by putting hardworking Americans in a debt trap, you need to find a new business strategy.”

Research reveals interesting results

Researchers at the Consumer Financial Protection Bureau discovered that three out of every four payday loans are given to borrowers who take out more than ten loans each year. Three out of every five loans were given to borrowers who had spent more money on fees than they had borrowed by the time they had paid off the loan. 

A borrower who borrowed $400 needed to come up with $460 in two weeks to repay the loan. Yet, according to their analysis, more than half of payday loan clients were refinancing their loans so many times that they paid at least $400 on the original $400 loan. These were people on the edge of society, and they were disproportionately people of color once again. According to a 2016 Pew survey, the average payday borrower earns around $30,000 per year, and 58 percent of them already struggle to meet their monthly costs without the added stress of repaying a high-interest, short-term loan. Because the CFPB lacked the jurisdiction to set a limit on how much interest a company might charge, it instead devised the ability-to-repay regulation. The measure, according to CFPB experts, would save customers $7 billion each year if enacted.

A payday trade association conducted its annual gathering at the Trump National Doral hotel south of Miami in 2018 and 2019, bringing in about $1 million for the Trump Organization.

Since the Obama administration, when the very profitable debt cycle was threatened, donations to Trump began to pour in. According to the Federal Election Commission, Allan Jones, the founder, and CEO of payday lender Check Into Cash, and other executives from his management firm contributed more than $65,000 to Trump’s 2016 campaign, and his company donated $25,000 to the president’s inaugural committee. 

Advance America, the nation’s largest payday lender (1,500 locations), donated at least $250,000 to Trump’s inauguration in 2017. Rod Aycox, a proponent of auto title loans from the beginning, donated $1 million to the inaugural committee. According to ProPublica estimates, the Community Financial Services Association of America, a payday trade association, held its annual gathering at the Trump National Doral hotel outside of Miami in 2018 and 2019, bringing in nearly $1 million for the Trump Organization.

Payday lenders also spent over $1 million a year on the services of dozens of lobbyists in Washington. When Hodges hired lobbyist Al Simpson, who had previously served as Mick Mulvaney’s chief of staff in Congress, he seemed to outdo everyone. Mulvaney had referred to the Consumer Financial Protection Bureau as a “joke…in a terrible, sad kind of way” when he was a legislator. He’d since moved to the White House as Trump’s head of the Office of Management and Budget, and was quickly promoted to interim director of the Consumer Financial Protection Bureau. According to the Washington Post, while Mulvaney was doing double duty, Simpson met with him several times. (Mulvaney would then take over as Trump’s third chief of staff.) According to the Center for Responsive Politics, Advance Financial’s parent firm spent $450,000 on Simpson’s services as of October. (Requests for comment from Simpson and Mulvaney were not returned.)

Loan repayment reforms

Mulvaney’s first public move as interim director of the Consumer Financial Protection Bureau was to suspend the bureau’s new ability-to-repay criterion, which had been established following a five-year process, and announce the bureau’s plan to rethink it. Mulvaney requested a budget of zero dollars a month later. “I’ve been advised,” he said in the request, that the bureau already has enough money on hand “to carry out its legislative obligations.” The Consumer Financial Protection Bureau (CFPB) has halted new investigations and announced the dismissal of a complaint against four companies accused of operating illegal payday lending operations with annual interest rates of up to 950 percent. 

According to a New York Times investigation, a slew of other cases will likely be dropped under this new administration. According to a Consumer Federation of America research, consumers received $43 million in weekly relief from the CFPB under the former (and first) director, Richard Cordray, but that figure had dropped to under $500,000 under Mulvaney. 

Mulvaney’s deputy in the Office of Management and Budget, Kathy Kraninger, took over the Consumer Financial Protection Bureau when he was named Trump’s temporary chief of staff in December 2018. Her previous work experience was in the field of homeland security. She had no prior experience in the financial services industry. Nonetheless, the Senate confirmed Kraninger as the CFPB’s permanent director by a vote of 50–49. Through the Supreme Court declared in June that a president could fire the bureau’s chief without cause, she appeared to be a shoo-in for a five-year term that would run until the end of 2023. (meaning a new president could replace whoever was running the agency).

Kraninger declared in February 2019 that she would repeal the ability-to-repay provision before it took effect, arguing that there was “insufficient data and legal backing” to justify it. Typically, federal regulatory bodies didn’t suddenly throw out a new regulation that had been developed over a five-year period; studies had to be undertaken and rationales presented.

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