A Beginner's Guide to Stopping Payday Lenders

Just like last year and the year before, my home state of Kentucky failed to pass a cap on the interest payday lenders can charge their prey.

A bill was proposed to put a 36 percent cap on the amount of interest that payday lenders could charge. It's identical to the cap that the federal government put on payday lenders who deal with military personnel and their families.

I think payday lending is a scummy business. I suspect many people agree with me. A referendum on capping payday lenders at 28 percent in Ohio got 63 percent of the vote.

Most states don't offer ballot initiatives and referendums. They elect legislators and ask them to represent us.

Dealing with legislators does not seem to work for people fighting payday lenders.

I've been rooting for the "good guys" for several years. And I've been watching them get clobbered for several years. It's like watching the Harlem Globetrotters play the Washington Generals in basketball. The victories are few and far between for the Generals.

Here is my advice for making something happen. Not just in Kentucky, but in any state:

1. Read Gary Rivlin's book, Broke USA. Then wait a week, and read it again.

I reviewed Broke USA for The Huffington Post and thought it was one of the most influential books to come out in some time. Rivlin is an incredible storyteller, and the rise of the "poverty industry," where companies make money off the poorest of the poor, is an incredible story.

Rivlin tells us how states like Ohio and North Carolina were able to successfully fight the payday industry. It would be easy for other states to model what they have done.

I've personally given out more than 30 copies of Broke USA, but more need to be purchased. I'm always stunned when someone committed to fighting payday lending tells me that he has never read Broke USA. It's like a Christian minister preaching even though he or she has never read the Bible.

Broke USA is a mandatory read for anyone who wants to fight payday lenders.

2. Embrace the "Great Person Theory."

Larry Diamond, who is now at Stanford, started his teaching career at Vanderbilt University. He taught his social movement students, including me, a concept called the "Great Man Theory." The thrust of that theory espouses is that causes are only successful when they have a central leader, like a Martin Luther King or a Gandhi, to be the focal point.

In the days of Twitter and Facebook, it is easier to operate without a "Great Person." But in fighting payday lending, it would help.

Many of the groups fighting payday lending are part of larger coalitions with a litany of other legislative interests. Fighting payday lending is merely one of many issues on their plates.

The payday lenders are all-in. It's life or death for them. They hire the best lobbyists. In Kentucky, they hired former Secretary of State Bob Babbage, the state's highest-paid lobbyist. (Disclosure: Babbage is a former business associate and remains a close friend, despite our extreme differences on payday lending.)

Payday lenders have a well-organized, well-financed front and that are going to fight to the death with everything they've got. They make lots of contributions to all the right people.

Unless a "Great Person" steps up to the lead the other side, it's going to be hard to defeat them.

3. Find a poster child for the payday industry's ills.

In 1998, I was part of a group that made Kentucky the first state to have model legislation reigning in the companies that purchased structured settlement payments. The bill had Harry Moberly, one of the state's most effective legislators, as it sponsor. It had the backing of the state's trial lawyers and bar association. But what really "sealed the deal" was a brave young woman, who had been horribly mistreated by a settlement purchasing company, came forward to tell her story.

The day I saw her picture on the front of the Louisville Courier-Journal, I knew the battle was over. She put a human face on a back-burner issue and turned it into a front page issue. The bill passed the legislature unanimously.

One of the reasons it was easy for Congress to put a 36 percent cap on payday lending for military people is that it was easy to imagine a soldier, serving in Iraq or Afghanistan, being taken advantage of. The human victim was present.

4. Show the legislatures you have clout.

I've yet to see an election lost on the payday lending issue. That needs to happen before elected officials will take the opponents seriously.

I can see a scenario where the issue could make or break an election, especially if a legislator got big campaign contributions from payday companies. When people wanting to get rid of payday lending get organized and vote out a couple of payday lending supporters, the rest of the legislatures will take them seriously.

And, just maybe, pass this long-needed legislation.

Don McNay, CLU, ChFC, MSFS, CSSC of Richmond, Kentucky, is an award-winning columnist, structured settlement consultant and Huffington Post Contributor.
He is the author of the book, Son of a Son of a Gambler: Winners, Losers and What to Do When You Win the Lottery. He has appeared on the CBS Evening News With Katie Couric along with numerous other television and radio programs.
You can read more about Don at www.donmcnay.com
McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.