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Behind the Scenes: Title Lenders & Campaign Contributions

Tom Woodward/Creative Commons

When members of the General Assembly convened in January, they were considering more than a dozen bills aimed at cracking down on the car-title lending industry. All of those efforts were scrapped, though, when lawmakers decided against passing legislation and instead asked the state regulator to take action. Now new campaign finance numbers that show what was happening behind the scenes.

In the week before the General Assembly session began, title lenders gave $35,000 in campaign contributions to political action committees. That’s even though the election has come and gone. Like many businesses, title lenders make a habit of making campaign contributions after the election and before the session, when they are prohibited from giving.

“They serve a very useful purpose for the business because it reminds people right at the start of the session who their friends are."

That’s Steven Farnsworth at the University of Mary Washington.

“The coalition of people to block regulation may include some Democrats and some Republicans, and that’s why they are equal opportunity givers. Some money goes to Democrats and some goes to Republicans."

Frank Shafroth at George Mason University says title loan businesses are placing a very safe bet. 

“If you’re a gambler the odds are better for you, right? If you make your contributions before the election, your candidate might lose."

But, Shafroth says, the conviction of former Governor Bob McDonnell for selling his influence to a wealthy benefactor has changed how people think about the relationship between money and power. 

“There’s been a little nervousness I think in Richmond about taking campaign contributions that could be tied to some sort of official action."

Take, for example, the $15,000 contribution LoanMax gave to the Senate Democratic Caucus the day before the session began. A few days later, the Senate Democratic leader brokered a deal that involved two of the state’s leading title lenders voluntarily agreeing to stop offering multiple kinds of loans. That deal ended up torpedoing all the reform bills.

“It’s impossible to say that there was a quid pro quo. I mean, you just can’t say that."

That’s Quentin Kidd at Christopher Newport University.

“But it is possible to say that there was an effort on LoanMax’s part to gain access to elected officials so that their case could be heard."

LoanMax certainly got a hearing from Senate Democratic Leader Dick Saslaw. He’s the one who negotiated that deal involving a voluntary agreement with two of the three title lenders authorized to offer consumer finance loans. LoanMax was not part of that deal, even though the company currently holds a license to offer multiple kinds of loans at one location in Alexandria. Saslaw says LoanMax isn’t the problem. “LoanMax doesn’t do that business. They don’t do it in the same facility. They’re the ones that called and alerted me to what was going on."

Pope: “Yeah. Well they have a license to do it."

“They don’t do it. End of discussion."

State regulators refuse to release documents from LoanMax detailing how many consumer finance loans it issues each year. And regulators are not subject to the state’s public records law. So that  actually may be the end of that discussion.

But federal officials in Washington are having a different kind discussion about these kinds of loans, and leaders at the Consumer Financial Protection Bureau may be on the verge of issuing a new rule. That rule could radically change the business model of these companies. It would force lenders to prove that borrowers can pay back loans before any money changes hands, and before people get trapped in a cycle of debt they can’t get out of.

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