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4/11/10 Why do I pay only $474 in Virginia income tax?

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3/30/10 Augusta Free Press audio show on VOP's state budget proposals

3/15/10 New Yorker audio slides on Martinsville, site of VOP's newest office

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11/25/09 Charges dropped against Joe Szakos, the Anthem Blue Cross customer arrested for questioning rate increases

Great New Books on Organizing:

During the 2008 General Assembly, the payday lending issue brought out the best and worst in Virginia’s legislative process. Virginians ended up with a mixed result — a limited reform. This reform is described in the fact sheet on page 14, prepared by the Virginia Partnership to Encourage Responsible Lending (VaPERL).

Delegate Glenn Oder, one of those who worked hardest to pass a compromise bill, described it in these words: “I believe that what we still have before us is a bill that, if passed, would go a long way toward creating some of the most stringent reforms in the nation and perhaps even continue to break the cycle of debt.” Delegate Oder was describing a compromise.

The process leading up to the bill gives us a good look at how our laws are made.

From the beginning, the 2008 struggle over the payday lending issue was a struggle for the hearts and minds of Virginians. Staunton City Councilman Bruce Elder knew that in September of last year when he said, “What we have done tonight is we have thrown a pebble in a pond. The ripples by the time they reach Richmond should be a tidal wave.” The ‘pebble’ was a resolution calling for a 36 percent cap on payday loans, and by the time the General Assembly met, 67 other jurisdictions had joined Staunton in passing such a resolution.

The General Assembly created the loophole that allowed payday lending in Virginia in 2002. At the 2007 General Assembly, VaPERL led the first major effort to fundamentally reform payday lending. After no legislation passed during that session, VaPERL’s members — religious leaders, VOP, community activists, and others — continued to push for a decision at the 2008 legislative session. Other groups joined in, including Virginians Against Payday Loans, led by a Hampton Roads businessperson.

These efforts made a huge difference. The leadership of the Republicans in the House of Delegates, generally seen as the most conservative power block in the General Assembly, threw their support behind a solid 36 percent cap on payday loans. At least one of these leaders had stated a few months earlier that state government had no business setting interest caps at all.

However, the most powerful Senate Democrat — Majority Leader Richard Saslaw — was also the most powerful supporter of the payday lending industry.

Payday lending was not a partisan issue, as shown by the fact that the two highest paid payday industry consultants were Jay Smith, formerly special assistant to Republican Governor George Allen, and Daniel Drummond, a Democrat who serves on the Fairfax City Council, and former communications director for Democratic Congressman Jim Moran.

Where was public opinion in this process? Did what Virginians thought make a difference? VOP members and organizers found that almost everyone they talked to supported a 36 percent cap, if not total abolition of payday loans. Certainly 67 city and town councils and county boards of supervisors would not have passed the 36 percent cap resolutions if they didn’t think they had public opinion on their side.

Given the result, you may wonder if public opinion made a difference to the General Assembly. But the payday lending industry was pretty sure it did — so sure they spent almost $4 million to give the appearance that public opinion on the issue was divided. As Drummond told the Richmond Times-Dispatch their message was “people who wanted a choice of financial services weren’t getting their voices heard” — so apparently those “voices” needed a $4 million amplifier.

According to the Richmond Times-Dispatch’s analysis, pro-payday lending forces spent about $3.8 million to defend their industry from serious reform. Some of this money went to the kind of lobbying most of us usually think of. For example, payday lobbyist Reggie Jones went to a national legislators’ meeting in Boston, and spent $786 treating Virginia legislators and others to a meal there. But most of the funds were spent on what is called “astroturf” campaigns — campaigns that look like grassroots action, but really aren’t.

According to the Secretary of the Commonwealth, Jay Smith received $1,948,706.09 from Community Financial Services Association of America, the national organization of payday lenders. According to the Richmond Times-Dispatch, this money went for “radio, television, print and Web advertising.” Jay Smith is a partner at Capital Results, a Richmond-based firm that claims to use a “combination of lobbying, grassroots advocacy, public relations and other types of communications” on behalf of its clients.

Another pro-payday lender group, Virginians for Financial Choice, spent $1,184,866.43 on similar activities. The funds went to Daniel F. Drummond. Drummond, according to the website of the Virginia Public Access Project, was working for Powell Tate, a public affairs firm in the Washington, D.C. area.

Here’s a quote from Powell Tate’s website: “At the start of any public education assignment, we work with clients to define the win. Whom do we want to reach? What do we want them to know and understand?”

The “win,” for the payday lending industry, was to be able to continue the profitable cycle of preying on its victims. The “win,” for VaPERL, was to break the cycle of debt for those who use payday loans. It’s not easy to say who did win.

It is easy, though, to see what each side brought to the table. The payday lenders brought almost $4 million to the table, along with a message that desperate Virginians have a “right” to be preyed on. VaPERL and its allies brought the concerns of thousands of Virginians, including public officials, clergy, social service agencies and victims of predatory loans, and an age-old message of fairness in lending.

Money on one side, people on the other. It’s not a new story.

As Rev. C. Douglas Smith, the executive director of the Virginia Interfaith Center for Public Policy, said at the beginning of the 2008 session, “It’s this constant David and Goliath down at the General Assembly. But the faith community knows how that story ends.”