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Civil Rights Groups Defending Predatory Lenders: Priceless

What does Martin Luther King Jr. have to do with payday lenders? Nada, but that hasn't stopped African American leaders from invoking his name as they shill for the credit industry.

| Fri Aug. 1, 2008 2:00 AM EDT

Payday lenders and other fringe finance companies are not natural political allies with black political groups. CompuCredit, for instance, was founded by Frank and David Hanna, Georgia businessmen who made a name for themselves in the mid-1990s by turning the nonprofit Blue Cross/Blue Shield of Georgia into a for-profit company and then allegedly plundering its assets. The Hannas have donated heavily to Republican causes, providing some of the largest contributions to former Christian Coalition head Ralph Reed in his failed bid for Georgia's lieutenant governorship. Frank Hanna is affiliated with a group of American Catholics who had lobbied bishops to refuse communion to John Kerry during the 2004 presidential campaign.

Not surprisingly, CompuCredit faced significant obstacles when it came to winning over African American political leaders who tend to be Democrats. But money has helped, as has the strategic employment of African American lobbyists. For instance, CFSA's lobbyist during the Georgia debate last year was Willie Green, a former wide receiver for the Denver Broncos and Carolina Panthers who owns a handful of payday lending outfits. Before the legislature voted on the bill, Green gave an $80,000 loan to Rep. Ron Sailor, an African American legislator who didn't pay it back. Sailor crossed party lines and voted in favor of the Republican bill. Sailor pleaded guilty earlier this year for unrelated money-laundering charges. (The bill failed to pass.)

In 2006, CompuCredit hired J.C. Watts Companies, a firm run by the former Oklahoma congressman, who was the only black Republican in the US House of Representatives when he retired in 2002. CompuCredit paid Watts' firm $60,000 to lobby on its behalf when Congress was considering legislation to cap interest rates on payday loans to members of the military. (The bill passed.) Watts also gave the company entry to the nation's network of historically black colleges and universities, which has been a prime target of the payday loan industry. (CFSA now offers paid internships to students at those schools to work in the corporate offices of big payday lending companies.)

In 2004, Watts and CompuCredit launched a consumer financial literacy initiative through four historically black colleges and universities. The partnership involved CompuCredit's funding market research and the development of a financial literacy curriculum for students. (A call to Watts' company went unreturned.) The notion of payday lenders offering classes on financial literacy is akin to Altria sponsoring anti-smoking classes. After all, as the Center for Responsible Lending's Corbett observes with a laugh, "If they improve financial literacy, black folks would never go to their stores." Yet such programs have been a staple of the industry's PR efforts and they've proliferated with the help of black advocacy groups. ("At this time, CompuCredit is not engaged in any activities directly related to historically black colleges and universities," says CompuCredit's Donahue. "We have never located any services—kiosk, portal, or other presence—on any college campus, and there are no plans to do so.")

In June 2007, when many states were considering bans on payday lending, CFSA launched the "Youth Learn & Save" program, which provides high school and college kids with financial literacy rallies and summits. The programs use a modified curriculum created by the Federal Deposit Insurance Corporation (FDIC) and even feature a workbook that includes a description of a predatory payday loan. Presumably the instructors—payday loan company employees and owners themselves—can offer a unique perspective on that particular subject. A brochure for one seminar held in January this year at a majority black high school in Texas says, "Sharing Dr. King's Dream through Financial Literacy." In June, the National Baptist Congress of Christian Education, the largest and oldest black religious convention in the country, hosted one of the events.

CFSA launched the financial literacy campaign last fall at Jackson State University in Mississippi, along with the National Conference of Black Mayors, which also got money to fund college scholarships. Dora Muhammad, a spokesperson for the NCBM, says that the group no longer works with CFSA. "Once we learned of some of the practices and the impact on the communities, we terminated that relationship," she says.

In addition to the consumer education campaign, CFSA announced that it would partner with the National Black Caucus of States Institute, a public policy research center for black state legislators, to "educate African American legislators and community leaders on critical issues regarding consumer credit." CFSA also recently added a new grant program to its offerings through NBCSI.

Kathleen Moore, CFSA's director of partnering and program development, who previously worked at Habitat for Humanity, insists that such outreach programs have nothing to do with politics or generating business for her members. "I do not promote payday lending. This is part of our giving-back agenda," she says. "None of our outreach is targeted at ethnicity."

Critics can be forgiven, however, for suspecting the worst. Last September, Washington DC's City Council was about to vote on a bill that would cap interest rates on payday loans at 24 percent, effectively banning the practice. CFSA scheduled one of its "Youth Learn & Save" rallies days before the vote. With promises of free food, a rap DJ, and an appearance by Kelvin Boston, the African American host of the PBS show Moneywise, CFSA had gotten several public high schools to let kids out of school for a field trip to a local Boys & Girls Club for a full day of financial literacy training conducted by some of the area's payday lenders. CFSA had also promised to donate $10,000 to expand a Boys & Girls Club financial literacy program at one of the city's poorest, all-black high schools, and to give $100 savings bonds to all the participants. When the DC school chancellor Michelle Rhee got wind of the event, which had not been officially sanctioned, she pulled the plug on it just before it was supposed to take place.

CFSA's Moore, who organized the event, blames the cancellation on industry opponents at the Center for Responsible Lending, who she claims threatened to picket outside. She said CFSA decided to cancel the event rather than endanger the children. "We really did not want young people to be exposed to this ugliness," she says. "It's sad that they would put children in harm's way for a political point."

Moore, who says her group had already spent $40,000 on the rally when it was cancelled, claims that it had nothing to do with the council vote. Did she know about the vote? "Of course I did!" she says, but insists that the DC rally was simply part of the industry's larger community outreach efforts. DC council member Mary Cheh, an original sponsor of the payday bill, isn't buying it. "We're not fools. The timing was exactly right for them to carry on their political campaign," she says.

In the run-up to the DC Council vote on payday lending, the industry continued to reach out to local black organizations. Check 'n Go, a major payday lender, donated a whopping $100,000 to the Anacostia Economic Development Corp., to help minority entrepreneurs. The group is headquartered in the ward of former mayor and now council member Marion Barry, who had been one of the original cosponsors of the payday lending bill. Barry ended up as the lone vote against his own bill, which passed 12-to-1.

Not everyone in the civil rights establishment has signed on with the payday lenders. The NAACP has been active in fighting the industry. In 2003, NAACP chairman Julian Bond told a Utah newspaper, "A drive through any low-income neighborhood clearly indicates people of color are a target market for legalized extortion. Visits to payday stores—which open their doors in low-income neighborhoods at a rate equal to Starbucks opening in affluent ones—are threatening the livelihoods of hardworking families and stripping equity from entire communities." But Corbett says that the industry has succeeded in diluting the black community's response to predatory lending. "Their strategy is to divide and conquer," he says. "If you've picked off Al Sharpton, you've won."

Photo from flickr user pagedooley used under a Creative Commons license.

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