A few days after a well-publicized rally denouncing unscrupulous payday lending practices, The Pitch news site revealed that Herb Sih, an appointee on Kansas City’s Economic Development Corp., had run a lead-generating business that drummed up customers for online payday loan outfits.
This was awkward. Mayor Sly James had attended the rally and compared payday lenders to roaches. But it was he who had appointed Sih to the influential board.
Sih resigned from the development corporation before the week was out.
So, is making money off of an industry that charges people ridiculous amounts of fees and interest for emergency short-term loans a legitimate cause for shaming?
I say yes. In fact, I’d like to see more of it.
Polite society in Kansas City looked the other way in recent years while a number of its denizens became very rich, very quickly from Internet payday lending. And the willingness of Missouri politicians to be bought off by the industry has made the state a hotbed for payday loan shops, where annual interest rates average a whopping 452 percent.
In the 2014 election cycle, U.S. Rep. Kevin Yoder of Kansas was Congress’s sixth largest recipient of campaign donations from political action committees and employees connected with the payday industry, according to a report just out from Americans for Financial Reform, a consumer coalition. He collected $85,757.
Research last year from Progress Missouri, a liberal group, showed a ghastly amount of payday money flowing through Missouri politics. In the years 2013 and 2014, two campaign committees bankrolled by the industry collected almost $1.5 million.
Chunks of money were spread around on a bipartisan basis to various politicians and operatives. Axiom Strategies, the campaign firm founded by Jeff Roe, collected $364,189, the largest single amount.
Why does this matter?
This month, the Missouri Court of Appeals Eastern District ruled that, like a lower court, it had no power to grant relief to a consumer who in 2006 obtained a $100 consumer installment loan from Loan Express, an entity of Capital Solutions Investments I Inc.
Erica Hollins signed a note pledging to repay $155 in principal and interest. But she quickly fell behind on payments. In 2009, the St. Louis County Circuit Court entered a judgment against Hollins for $912. Of that amount, $729 was interest payments. The lending company began garnishing Hollins’ paycheck.
The situation appears “obscene and usurious,” wrote appeals Judge Kurt S. Odenwald. But because Missouri law sets no cap on interest rates, there was nothing the court could do.
Hollins’ attorneys at Campbell Law in St. Louis had tried to turn her case into a class action suit. While agreeing the court’s hands were tied, appeals Judge Robert G. Dowd wrote an opinion, citing other cases contained in the suit.
The most egregious: A class member had taken out an $80 loan. Capital Solutions had collected $5,345. At the time of the lawsuit the consumer still owed a balance of $19,643.
You read that right. A balance in excess of $19,000 on an $80 loan.
Such examples, Dowd wrote, “demonstrate the inherent injustice in these lending arrangements.” He urged the Missouri legislature to examine its laws regarding payday loans and “return them to their original purpose of allowing small loans at manageable interest rates to aid our fellow citizens in managing the obligations of their daily lives.”
Year after year, consumer and faith groups urge the legislature to reform payday lending laws. Year after year, the legislature refuses, and the industry makes certain that everyone is well compensated.
So, yes. Whether it’s a respected local businessman or a U.S. congressman or a state politician or consultant, I’m all for shining a light on those who enable or benefit from predatory lending. They may be upstanding citizens in other respects, but their hands are dirty from payday cash.
Reach Barbara Shelly at 816-234-4594 or firstname.lastname@example.org. On Twitter @bshelly.