How payday lenders became potent political force

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I'm politics and investigations editor Duane Gang.

💵 Money plays a big role in politics and not just at the national level. In Tennessee, millions of dollars go into campaign donations and lobbying efforts each year.

What are the top industries making donations? And have those changed over time, particularly since Republicans began consolidating their legislative power in the early 2010s?

Statehouse reporter Adam Friedman worked to find out. He built a database tracking every political donation to lawmakers and political action committees since 2004 by analyzing publicly available data from the Tennessee Registry of Election Finance.

Payday lenders stood out and their contributions noticeably ramped up right around the 2012 election, which is when Republicans took supermajority control of the Tennessee General Assembly.

To find out more about how the story came together, I asked Adam a few questions about his reporting.

How did you decide to look into payday lending?

The story started with trying to figure out who was donating the most money to Tennessee politicians and then finding out why.

It just so happened after building a database of donations over the last two decades that payday lenders, particularly Advance Financial, were some of the largest donors in state politics.

What did you find when running the numbers?

I found Advance Financial, TitleMax, Check into Cash and several other payday lender organizations had given $4.4 million to state lawmakers since 2012 and spent another $10.4 million lobbying.

Advance Financial was the largest corporate donor in state politics, giving around $2 million.

Figuring this out wasn't easy. Payday lenders tended to run much of their spending through political action committees with obscure names. But, through some data wrangling, I could see all the money these companies spent and who it went to.

Let's remind readers. Why are politicians so crucial in the payday lending process?

Politicians essentially control the payday lending industry's existence because lawmakers set interest rates or, more importantly, set interest rate caps.

Lawmakers in other states like Arkansas, Georgia and North Carolina have capped yearly interest rates at 36% or below, all but preventing the industry from operating.

In Tennessee, payday loans can have a yearly interest rate as high as 464%.

You mentioned other states and interest rate caps. How else is Tennessee different than other states?

Tennessee has a very specific kind of high-interest loan that other states don't have, called the flex loan.

There are four main types of high-interest loans allowed under Tennessee law: cash advance (sometimes referred to as "payday") loans; title or pawn loans; thrift loans; and flexible ("flex") loans.

Unlike the three other types of loans, flex loans don't require the borrower to put up an asset or future paycheck to cover the loan.

A flex loan is like a credit card, except it carries an annual interest rate of 279.5%, while the average credit card is usually 15-20%.

For the industry, 80% of their $831 million yearly income in Tennessee is generated from flex loans.

📰 Read the full story: With GOP rise, payday lenders became potent political force. Cash-strapped Tennesseans pay the price.

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— Duane W. Gang, The Tennessean

This article originally appeared on Nashville Tennessean: How payday lenders became potent political force