Suthers payday donations spark interest in campaign finance restrictions
Tuesday, September 14, 2010 at 9:15 am
Colorado Attorney General John Suthers is unabashed about having taken campaign cash from the payday loan industry. The donations and his refusal to return them have spurred disgust among Democratic lawmakers and on the part of Suthers’ campaign opponent, Democrat Stan Garnett, who have suggested future laws might head off the kind of relationship Suthers appears to have entered into with payday lenders and their lobbyists.
“I knew the payday lobbyists would be donating to Suthers,” Denver Democratic Rep. Mark Ferrandino, sponsor of the payday regulations legislation, told the Colorado independent, “but giving $10,000 to his campaign while his office is [writing rules to regulate payday lenders]– something doesn’t smell quite right about that. I mean, when we’re working [in the legislature], we can’t accept donations. It seems strange that the attorney general can take them when they’re writing rules.”
In June, as the attorney general’s office was drafting rules that would give shape to regulations introduced and pushed through the legislature by Ferrandino, Suthers attended a private fundraiser with unnamed representatives of the industry at which he landed $9,175 in re-election campaign donations. He took in another $2,600 from the industry in the ten days that followed. Reports of the donations called into question the work of longtime Consumer Credit Division Assistant Attorney General Laura Udis, the author of the payday regulation rules. The donations also spurred consumer protection and government ethics groups to demand Suthers return the cash. They argued that Suthers’ actions amounted to a conflict of interest, or at least a potential conflict of interest, and that the timing of the donations made the kind of impression that would further erode public trust in government.
Suthers dismissed those arguments, saying he wasn’t directly involved in the rule-writing process.
Boulder District Attorney Garnett said that the “shrug” offered by Suthers in response to reactions to the donations demands a response.
“For an incumbent like Suthers to just shrug is unacceptable,” Garnett told the Colorado Independent. “Public perceptions matter, now as much as ever. It matters because his office is charged with regulating the payday industry. It maters that the lawyers in the A.G.’s office all work for him. The [payday industry] contributions matter.”
In a release, Garnett railed against the timing of the payday fundraiser for Suthers.
“Originally, I thought all the checks [to Suthers] had been mailed in. But this fundraiser provided seat-at-the-table-quality access, which I had not even imagined. It appears that the incumbent was prepared to give them exactly what they were paying for. I’m glad that public attention previously brought to this matter has resulted in a better set of rules for the borrowers.”
Like Ferrandino, Garnett in talking about the payday donations pointed to rules that restrict giving to Colorado lawmakers. “I would absolutely support any efforts to similarly restrict donations to the attorney general’s office during rulemaking,” Garnett said.
The contributions accepted by Suthers drew extra attention due to the course Udis steered in writing the rules.
In July, after Suthers attended the private payday fundraiser, Udis re-wrote proposed rules she drafted in June. Her July version marked a significant departure from her June version and tilted in the payday industry’s favor.
The new July rules allowed the industry to charge origination fees and not refund them when people paid off their loans. Suddenly consumer advocates saw a major loophole opening up in the protections they had celebrated passing in May. Under the July rules, lenders could begin to sell new cheaper loans to borrowers looking to pay off old loans and keep wracking up origination fees. The fear was not just that the industry would capitalize on the origination fee in certain instances but that it would rework products and services precisely to “churn loans,” leveraging the language of the rules to lead borrowers to particular products and services where lenders could charge origination fees.
“They’ll start calling borrowers every chance they have to offer new interest-free discount loans,” said Corrine Fowler, economic justice director for the Colorado Progressive Coalition, which helped draft House Bill 1351 with Ferrandino. “The lenders want that $75 on each $300 or $500 loan they can sell.”
At the August hearing on the rule-writing, Ferrandino’s regulation-legislation lead co-sponsor Sen. Chris Romer compared the rule-writing process clouded by the Suthers donations to a corrupt football game.
“Forgive the sports metaphor,” he said, “but it’s like the Broncos are beating the Cowboys. Then the Cowboys pay a ref $10,000 and suddenly we’re in overtime… It is awfully hard for people without money to win in the political process. Well, the people without money won the fight for once and now here we are again. It gnaws at the core of democracy. Please restore the public trust.”
Udis did restore the public trust, at least in Romer’s eyes. She said that in conducting review of the legislative record, she believed her July version of the rules went against lawmaker intent, so she proposed closing the loophole. The governor-appointed Council of Advisers on Consumer Credit approved her changes and, beginning in November, payday lenders will have to refund recalculated portions of the origination fees to borrowers.
Luis Toro, executive director at Colorado Ethics Watch, a government watchdog group that has been following the Suthers-payday story, said he certainly agrees with the motivation behind any new laws that would address the potential conflict of interest presented by the Suthers payday donations.
“Any new law seeking to limit those kind of donations would certainly match the spirit of other laws we have on the books in Colorado.”
Toro said present laws don’t just bar legislators from taking lobbyist cash during the session, they also bar the governor’s office from taking that kind of cash. He added, as a caveat, however, that rulemaking in some offices is “going on all the time” so it would be difficult to put a time period on any potential ban of campaign donating.
“The attorney general’s office, though, that’s different,” he said. “Aside from the consumer credit division, the attorney general’s office doesn’t do a lot of rulemaking.”
Still, a lot of the money payday lenders gave to Suthers came from Payday industry political action committees, which are not limited in their contributing the way lobbyists are by Colorado statutes. Suthers has accepted money, for example, from the Cash America International PAC and the Rent-a-Center for Good Government PAC. It’s unclear how much money Suthers received directly from payday lobbyists.