Sen. Bob Corker (R-Tenn.), the top GOP negotiator in the Senate's arduous financial-reform talks, is doing the dirty work for one of the dirtiest of financial industries: payday lending. Corker, the New York Times reports today, is pushing hard to throw a loophole in Senate banking committee's bill for the payday lending industry—essentially a form of loan sharking—to blunt any new oversight. The move sets up a potential showdown with Sen. Chris Dodd (D-Conn.), banking committee chair and leader of the financial-reform talks, whose November draft of legislation empowered a new, independent consumer-protection agency to crack down on payday lenders, among other non-banking institutions.
According to the Times, while a consumer agency tentatively agreed to by Dodd and Corker might be able to write new regulations for payday lenders, it would have to consult with other regulators to enforce those rules. Consumer advocates have repeatedly said gutting a consumer agency's rule-enforcement power would kneecap the new agency and limit its usefulness. And if the Senate goes lightly on the payday lending industry, it's likely to set up a battle between the House—whose bill last winter called for new oversight of the industry—and the Senate when the two try to merge their bill.
Corker's support for the payday lending industry is no surprise given the power the industry wields in his home state. The main trade group for payday lenders, the Community Financial Services Association, was founded in Tennessee in 1999, and has donated $1,000 to Corker. Corker has also received thousands more in donations from other heavy-hitters in the payday lending business, like $6,500 from the founders of Advance America, a leading payday lender. And overall, the industry's lobbying efforts almost tripled between 2005 and 2008 to maintain lax regulation of their industry, while at the same time business is booming for payday lenders. Especially with all those unemployed workers to prey on.