It might have only taken a few court fights and a Capitol Hill lobbying campaign, but payday lending companies managed to get a cut of the near-$700 billion relief fund set aside by Washington to help the country’s small businesses weather the coronavirus outbreak.
Records of who received loans under the Paycheck Protection Program released last week show that 35 companies that provide payday loans, car title loans, and other high-interest, low-dollar borrowing options netted millions of dollars in federal coronavirus aid—anywhere from $9 billion to $23 billion, in total. The Small Business Administration, which administers the PPP, does not release exact totals for each loan award.
The group of companies who benefited includes CashCall, Inc., a California-based company that was sued in 2013 by the Consumer Financial Protection Bureau for charging borrowers money they didn’t owe and was hit with a $100,000 penalty in 2017 when the District of Columbia’s Attorney General sued for charging interest rates of up to 169 percent on loans.
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None of that mattered in April, when the company received a loan worth $350,000 to $1 million.
Other small-business relief recipients include Montana Capital Loans, another California-based company who the state government’s business oversight commissioner recommended should lose its lending license in 2017 over rule violations; and Hutcheson Enterprises, an Alabama-based firm that manages over 300 loan offices across nine states.
Hutcheson received anywhere from $2 million to $5 million in PPP loans from the federal government. The company’s chief, Roy Hutcheson, told The Daily Beast on Wednesday that unless he got assistance, he was going to have to lay off a third of the company’s workforce. “We’re like any other business, we have employees, and the person down the street that needs the money—they’re no different than I am,” said Hutcheson. “I feel like we were as entitled to get a loan as anyone else.”
But there are many who disagree with that point, from lawmakers in Congress to consumer advocates, who find it outrageous that an industry that’s become synonymous with taking advantage of low-income Americans has earned access to emergency government-backed loans.
“It should go without saying, predatory lenders who charge working Americans up to 400% for payday loans should not be given taxpayer grants or near zero interest loans,” said Kyle Herrig, president of Accountable.US, a liberal watchdog group. “Congress must establish a fairer and more transparent system for getting relief to real small businesses,” said Herrig,” not predatory lenders looking for a handout.”
“It’s outrageous that payday lenders have access to these critical funds,” said Sen. Sherrod Brown (D-OH), the ranking member of the Senate Banking Committee who signed a May 6 letter with fellow senators urging SBA to reject payday lenders from accessing PPP funds. “Taxpayer money should not go to payday lenders who rip off working families and trap consumers in cycles of debt.”
At one point in time, at least, the people running the business rescue program seemed to agree. In April, a bipartisan group of lawmakers friendly to payday lenders pleaded with the Treasury Department to open up the lending program to consumer lenders; that same month, the SBA denied a payday lender called Payday Loan LLC a forgivable loan worth $644,000, on the grounds that giving this type of lender access to small-business relief funds was not in the “public interest.”
The company then filed a lawsuit against SBA in federal court over the denial of the PPP loan. It’s unclear what changed, but on May 11, Payday Loan LLC withdrew its suit after saying it received a “firm offer” for a PPP loan, and federal records show that it received one worth $350,000 to $1 million on May 3. SBA did not respond to a request for comment from The Daily Beast regarding its specific PPP guidelines around payday lenders and other high-interest lenders.
When it passed the CARES Act that set up the PPP in late March, Congress was in a hurry to provide much-needed relief to small businesses suddenly staring down a stalled-out economy and concerned they might not survive. The program undoubtedly helped hundreds of thousands of businesses keep employees on payroll, but millions of dollars also got snapped up by well-resourced entities like publicly-traded fast food chains, private equity-backed firms, the Church of Scientology, and organizations linked to Trumpworld luminaries like Jared Kushner.
Many of those firms who received loans returned them after facing public scrutiny—something that, to date, the payday lenders have not done.
Lawmakers are left frustrated that the program’s implementation, while successful in many respects, nevertheless froze out some small businesses—many of whom waited months to get a loan—at the same time it offered a slice of the pie to companies considered to be among the worst-behaving actors in the U.S. economy.
“What we need now is what we needed four months ago when this crisis first started: targeted assistance to our small businesses on main street to help keep people in their jobs and their doors open,” said Rep. Andy Kim (D-NJ), a member of the House Small Business Committee and the special panel set up by the House to oversee the coronavirus response. “We need to make sure that future action is laser-focused on exactly that, and that there’s enough transparency to hold the SBA accountable when money goes where it shouldn’t.”
Some $130 billion, which was appropriated after PPP funds quickly ran out in April, remains in the program’s coffers. Lawmakers have talked about establishing stricter guidelines around which organizations might be eligible for relief now, though no clear plan is on the table. The office of Sen. Marco Rubio (R-FL), the chair of the Senate Small Business Committee, did not respond to a question about whether the payday lenders’ access of PPP meant that any changes to the program were necessary.
Thus far, the payday lending industry has clearly found success in pressing its case on the Trump administration and Congress in order to pry loose taxpayer dollars from the PPP pot. The House members’ letter to Treasury on behalf of the industry came a month after two major payday lending companies were lobbying lawmakers regarding its interests in the program, as The Daily Beast reported in May.
Some figures in the industry have also openly talked about the Trump administration’s friendliness to the sector and tied their financial backing of the president with an expectation that their interests would be heard. In 2019, the Washington Post reported on an industry webinar in which participants spoke about the importance of donating to the Trump campaign and bragged that their contributions were able to secure them a White House audience. One of the webinar’s participants, Speedee Cash, received a PPP loan worth $150,000 to $300,000.
