Column: Now we know what was fueling push to expand Florida's disastrous payday lending model

Published Jul. 29, 2016

The push to spread Florida's disastrous model of payday lending nationally died when two of its chief backers — Reps. Debbie Wasserman Schultz and Patrick Murphy — pulled the plug and instead endorsed the Consumer Financial Protection Bureau's plan to rein in this predatory industry.

We now know what was fueling the Florida push in the first place.

To recap, nearly the entire Florida congressional delegation signed a letter to CFPB director Richard Cordray last year urging his agency to adopt the "Florida model" of payday lending.

Soon after, Rep. Dennis Ross, a Lakeland Republican, authored legislation that would delay the consumer bureau's efforts to reform the payday lending industry for years and encourage states to adopt Florida-style payday lending laws.

Consumer groups were justifiably up in arms over the bill, penning a letter telling Congress that it would weaken CFPB's "ability to protect all consumers against high-cost payday, car title and installment loans" and "allow the payday industry to avoid federal regulation altogether."

Despite opposition to the legislation by groups ranging from the Center for Responsible Lending and Consumers Union to the NAACP and National Council of La Raza, many members of Congress from Florida signed on to co-sponsor the bill.

An industry astroturf advocacy group (a fake "grassroots" group) even popped up in an effort to defend Florida payday lending from criticism.

There was just one problem with this well-organized push to expand Florida's model of payday lending to the rest of the country: The "Florida model" has been a disaster. In fact, it has been a payday lender's dream.

Florida's law is riddled with loopholes favoring lenders, allows massive interest rates averaging more than 300 percent, and results in most borrowers taking out new loans to pay off old loans time and again, with the average consumer taking out nine loans and one in three taking a dozen or more each year.

Perhaps that is why the effort to defend and expand Florida's payday lending model was so perplexing.

Why on earth would so many Sunshine State elected officials — from both parties, no less — be going to such great lengths to defend an almost universally despised industry that was trapping so many of their own constituents in crippling cycles of debt?

The answer seemed obvious. Money.

According to an exhaustive analysis of federal and state campaign finance figures maintained by the Center for Responsive Politics and the National Institute on Money in State Politics, the payday lending industry has contributed more than $2.5 million to Florida politicians and political parties since 2009.

While money seemed to be an obvious motive, questions remained. Payday lenders contribute millions of dollars to politicians all over the country, so what makes Florida special?

Well, for one thing, other states do not have the MacKechnie family.

Of the $2.5 million doled out by payday lenders in Florida, nearly $1 million came from members of the Tampa-based MacKechnies and their payday lending company, Amscot Financial.

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Ian MacKechnie Sr. told the Tampa Bay Times just last week that Amscot Financial would consider expanding nationally if the CFPB's new push to regulate payday lenders matched Florida's model.

And that, ladies and gentlemen, is the smoking gun.

Florida's entire political establishment worked overtime in an effort to stop federal regulators and expand the disastrous "Florida model" — all because a family of payday lenders who have showered these politicians with cold, hard campaign cash wanted to expand the reach of their payday lending company across the country.

Nearly 20 years ago, Amscot pleaded guilty to civil racketeering charges. As part of the plea agreement, MacKechnie Sr. was banned for life from selling auto insurance in Florida. As a result, an untold number of consumers were protected from the MacKechnies' auto insurance operation.

Now, thanks to the Consumer Financial Protection Bureau's decision to pursue tough new national rules reining in the worst abuses of payday lenders rather than expanding the disastrous "Florida model," millions of Americans will be protected from the MacKechnies' legal loan sharking operation.

That is progress even payday lenders cannot buy.

Karl Frisch is executive director of Allied Progress, a national nonprofit grassroots advocacy organization that has campaigned to reform the payday lending industry.