WASHINGTON -- Payday lenders have been gunning for the Consumer Financial Protection Bureau since the day President Barack Obama tapped Elizabeth Warren to set up the new agency. They've had plenty of help from congressional Republicans -- longtime recipients of campaign contributions from the payday loan industry. As the CFPB has moved closer to adopting new rules to shield families from predatory lending, the GOP has assailed the agency from every conceivable angle -- going after its budget, attempting to tie its hands with new layers of red tape, fomenting conspiracy theories about rogue regulators illegally shutting down businesses and launching direct attacks on payday loan rules themselves.
To date, the GOP blitz has resulted in a few close shaves for the young agency, but no actual defeats. But the industry has cultivated a powerful new ally in recent weeks: Democratic National Committee Chair Rep. Debbie Wasserman Schultz (D-Fla.).
Wasserman Schultz is co-sponsoring a new bill that would gut the CFPB's forthcoming payday loan regulations. She's also attempting to gin up Democratic support for the legislation on Capitol Hill, according to a memo obtained by The Huffington Post.
LISTEN to HuffPost's analysis of the bill in the latest episode of the "So That Happened" politics podcast below. The discussion begins at the 53:35 mark:
The DNC chair isn't the first Democrat to defend payday lenders. A handful of House Financial Services Committee members consistently join the GOP's payday loan boosterism. But support from such backbenchers has been politically impotent. Wasserman Schultz, by contrast, is the nominal head of the Democratic Party. Her support undercuts efforts by liberals in Congress to draw contrasts with Republicans on economic issues.
The misleadingly titled Consumer Protection and Choice Act would delay the CFPB's payday lending rules by two years, and nullify its rules in any state with a payday lending law like the one adopted in Florida. The memo being passed around by Wasserman Schultz staffers describes the Florida state law as a "model" for consumer laws on payday loans, and says the CFPB should "adjust their payday lending rules to take into account actions Florida has already taken."
Consumer groups are appalled by the bill. The Consumer Federation of America, the NAACP, The National Consumer Law Center, The National Council of La Raza, The Southern Poverty Law Center and hundreds of others wrote a letter to every member of Congress in December urging them to oppose the legislation.
"The problem here is that Florida's law is a sham," says Gynnie Robnett, director of the Campaign to Stop the Debt Trap at Americans for Financial Reform. "It was backed by the industry."
Wasserman Schultz's spokesman Sean Bartlett defended the bill in a statement provided to HuffPost.
"As a state lawmaker, she helped write Florida’s law that has sharply reduced the need to go to bad actors, curbed predatory practices and created standards and protections for low-income borrowers," Bartlett said. "The Congresswoman wants to work with the CFPB on the way forward, and believes the Florida law is an example of how to achieve their shared goals of balancing strong consumer protections with preserving access to credit in underserved communities."
The CFPB is yet to formally issue its payday lending rules. But the agency's proposed outline is designed to prohibit a cycle of debt in which borrowers take out a single payday loan expecting to pay a one-time fee, but end up taking out several more loans when they are unable to make ends meet at the end of the loan period.
Florida's law has not ended this vicious cycle. According to AFR, about 76 percent of the payday loans issued in the states are "turned" loans, meaning they are issued to help a borrower pay off a previous loan.
Data compiled by the nonpartisan Pew Charitable Trusts is similarly dismal. A typical Florida payday loan customer ends up taking out nine payday loans a year and is stuck in debt for nearly half of that year, according to Pew. The average interest rate on Florida's payday loans is 304 percent -- only slightly better than the 390 percent annual average. Critically, the average payday loan amount of $389 is equal to 35 percent of average paychecks in the state -- in line with national figures.
"That's one of the keys to understanding why Florida's law has not protected consumers," says Alex Horowitz, senior research officer at Pew. "Very few borrowers can afford to sacrifice one-third of their paycheck and still cover their expenses."
There are a host of alternatives to the Florida law. In Colorado, consumers already pay 60 percent less for a payday loan than they do in Florida, according to Pew, and the payday industry continues to thrive. A well-structured CFPB rule could enable even cheaper small loan alternatives from small banks to replace the payday lender business model.
Consumer groups in Wasserman Schultz's home state are actively organizing to support the CFPB proposal. Churches throughout the state are holding a series of mass meetings between March and July designed to highlight the need for the new rules by inviting testimonials from congregation members.
"We want to hear from people who are caught in this vicious cycle of debt to show people that Florida's law is a bad model if you want to take care of families," says Jabari Paul, North Florida Regional Director of Faith in Florida, a social justice coalition of congregations.
Going after the CFPB is becoming something of a habit for Wasserman Schultz. In November, she voted to undercut the agency's standards on auto lending, helping car dealers charge higher prices to customers of color. She recently signed onto a letter to CFPB Director Richard Cordray asking him to exempt credit unions and banks with up to $10 billion in assets from consumer protection rules.
Republicans routinely push deregulatory legislation to dilute federal consumer protection standards. But the Wasserman Schultz payday loan bill had implications at the state level, as well. If approved, the bill would unleash a nationwide lobbying campaign at statehouses that would put new pressure on states like Colorado to weaken their consumer protection standards to fit Florida's law.
A total of seven Democrats are currently co-sponsoring the bill, including five from Florida. Six Republicans from the state are backing it. Paul notes the bipartisan nature of the support for payday lenders, but applauds Rep. Frederica Wilson (D-Fla.) for refusing to join the herd.
"Not all of our congressional delegation members sold us out," Paul says, before offering a pointed critique of the members of Congress who he believes have done just that. "That's the whole point of being a faith organization. We have allegiance to no political agents. Our calling is to do what is right."