Tanking an Offensive Stance on Predatory Lending: Cap the Rate
400% is Too High A Montana Case Study Christina Barsky Northern
Plains Initiative / RDI 17 May 2011 Rapid City, South Dakota SDIBA
Conference
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What are Payday Loans?
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Payday or deferred deposit loans are small- dollar, short-term
unsecured loans that the borrower promises to repay on their next
payday (usually within 2 weeks). Upon receiving the loan the
borrower usually provides a post-dated check or bank account
authorization for the loan amount + finance charge to repay the
loan upon maturity. On average, a payday loan borrower flips their
loan 9 times.
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That Means That $300 payday loan cost: $750
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What are Payday Loans? Loan Amount + Finance Charge / Interest
Rate =
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The Montana Story
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History of Payday Lending in MT Modern payday and car title
lending were established under legislation passed in the 1999 &
2001 state legislative sessions. Rep. Jeff Mangan (D-Great Falls)
carried both the Montana Deferred Deposit Loan Act (1999) and the
Montana Title Loan Act (2001).
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History of Payday Lending in MT Both bills allowed lenders to
charge up to 25% of the principal loan amount in interest. The
maturity and APR for payday loans can rage from 2 days to 31 days
and can be anywhere from 300% to 4500%. The most common term for a
payday loan is 2 weeks, which would result in an APR of 650%. The
average APR charged on payday loans in MT was well over 400%.
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History of Payday Lending in MT During every legislative
session from 2003 2009 legislators brought bills to cap the rate on
payday loans. In every instance, the bills faced intense opposition
from industry lobbyists and died on close votes in committee.
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400% is Too High Cap the Rate A campaign for I-164, a citizens
initiative to cap the triple-digit interest rates charged by
Montana payday and title lenders. Overwhelming success despite
significant challenges I-164 passed with nearly 72% of the vote,
receiving a majority in all of Montanas 56 counties and in every
house district.
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Key Campaign Strategies Diverse Coalition Clear (non-jargony)
Language Friends, Friends, Friends Earned Media Planning (and
sticking to it!) Preparation for Opposition
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Key Campaign Strategies Committed statewide coalition of
supporters.
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Key Campaign Strategies Strong, influential, concise ballot and
voter information language.
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Ballot Language Under Montana law, deferred deposit (payday)
lenders may charge fees equaling one-fourth of the loan, which, as
an annual interest rate could range from 300 percent to 650
percent. Title lenders may charge similar interest rates. I-164
reduces interest, fees, and charges that payday lenders, title
lenders, retail installment lenders, and consumer loan licensees
may charge to an annual interest rate of 36 percent. It prohibits
businesses from structuring other transactions to avoid the rate
limit. It also revises statutes applicable to pawn brokers and junk
dealers.
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Key Campaign Strategies 1,000 friends initiative. Recruitment
of people from across the state to publicly endorse I-164 and
assist in letter writing, campaign events, and serve as media
spokespeople.
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Key Campaign Strategies Earned media that stressed both
statewide coverage of key events and local coverage with guest
opinions.
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Key Campaign Strategies Strategic planning ensured strong
budget compliance and training particularly helpful in keeping with
tight schedule and overcoming legal challenges launched by
opposition.
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Key Campaign Strategies Preparation for opposition. Along with
planning great care was taken to ensure scrupulous records were
kept proved most successful legal defense.
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Capping the Rate? Are we Sure? In late 2009 the Coalition began
working with M+R Strategic Services a consulting firm that guided
and focused the I-164 initiative. In January 2010 the Coalition
brought in Lake Research Partners to conduct opinion polling on the
payday lending issue ensuring the timing was right.
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Lake Research Polling Results A total of 75% of respondents
voiced their support of an interest rate cap while 16% opposed it.
Impressively, 63% of respondents strongly supported a cap, while
just 9% strong opposed. These results encouraged the Coalition to
move ahead on drafting ballot language and filing with the
Secretary of State. Montanans Support 36% Interest Cap
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Signature Gathering On 23 April 2010 ballot language and
petition forms were approved by the SoS. This marked the beginning
of signature gathering. This gave the Coalition 8 weeks to collect
the 24,337 signatures and 5% of voters in 34 legislative house
districts required of initiatives seeking ballot placement in
2010.
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SignatureSuccess The Campaign submitted over 37,000 signatures,
27,421 of which were deemed valid after review. The Campaign
received enough signatures to qualify 54 house districts (well more
than the required 34).
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Staff and Volunteers The Campaign had nearly 100 volunteers
contribute to signature gathering: Including 12 legislators and
candidates! Everyone who gathered signatures received training on
the issue and messaging as well as the laws and procedures for
petitioning. The time spent on training and documentation was an
investment that yielded a better quality in signatures and provided
necessary documentation for the Campaign when petitions came under
challenge from the opposition.
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Challenges Turf accessing locations for signature gathering.
Bad Actors other signature gathers for other initiatives that were
rude, aggressive, and sometimes illegal in their practices made
access to locations difficult and voters wary. Weather it was,
after all, spring in Montana.
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Challenges To overcome these challenges the Campaign: Clearly
identified petitioners for I-164 with nametags, buttons, and
sandwich board signs/clipboard signs. Campaign provided signature
gatherers with letters/memos from legal counsel that clarified the
rights of petitioners. Staff from the Campaign met with postmasters
and eventually had Sen. Baucus follow up to allow access to USPS
facilities for signature gathering. Encouraged signature gatherers
to have backup plan seek locations with awnings, indoor locations,
etc.
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Conclusion Though the opposition sunk $100,000 on a decline to
sign campaign in the final days of signature gathering, the
Campaign was successful in qualifying I-164 for the ballot (with a
final push for signatures in the rural areas throughout Montana
whereas much focus had previously been given to the 7 urban centers
throughout the state).
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Conclusion The rigid schedule (8 weeks) to gather the required
signatures to qualify I-164, the energy spent training and tracking
results paid off in the Campaigns ability to address needs, shift
resources and identify opportunities. The highly structured
approach certainly led to success.
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Fall Campaign After I-164 qualified for the November ballot
energy shifted to the general election. Major resources were
focused on media and defense. Results were 71.75% of Montana voters
voting to cap the interest rate on payday loans at 36%
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Fall Strategy Statewide and local earned media coverage (print,
radio, TV). Letter to the Editor, Opinion, Editorial Board,
televised debates, kickoff events, get-out-the-vote. Result: at
least 120 news stories (print, radio, TV), 23 LTE, and 11 opinion
pieces.
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Fall Strategy The Campaign spent $150,000 on TV advertising and
$10,000 on radio and placed color ads. Television ads bought us 150
gross ratings points for 3 weeks. The poor economy and low-profile
election year helped the Campaign get more bang for its buck.
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Fall Strategy In an effort to drive up turn out in the American
Indian community (who the Campaign believed would be supportive of
I-164) the Campaign executed a number of Native-targeted
advertizing pieces: 1,000 copies of Native Montana Magazine Print
ads and a 60-second radio spot featuring prominent Native American
leader and state Superintendent of Public Instruction Denise
Juneau.
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Fall Strategy The campaign utilized Facebook, listservs, a blog
presence, and a traditional website among other social media
outlets. The Campaign had more than 1,000 people in the Constant
Contact email listserv which, to this day, is still used to pass
information.
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Fall Strategy Defense Because the opposition likely understood
that I- 164 would be approved by voters if it made it to a vote,
opponents spent most of their time and money filing complaints.
Complaints took 2 main forms: Campaign finance complaints Legal
complaints Fortunately, all complaints and legal challenges were
defeated (even in the Supreme Court) and I-164 went to the
vote.
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I-164 Passes in November Election An overwhelming number of
Montanans voted in favor of capping interest rates on payday loans
at 36% in the November elections. As the January 1 deadline for
implementation of new regulations approached, the lending industry
launched a new media campaign highlighting the loan shop closures
and job loss indicating potential legislative action. Happily no
action was taken in the 2011 legislative session.
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New Challenges While payday loan interest rates are capped in
Montana at 36% and for all Active Duty Military (by the DOD
Military Lending Act), Montanas 7 reservations are not protected by
these acts. The next steps to ensure consumer protections is the
adoption of Tribal resolutions throughout Indian Country.
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Contact Christina Barsky Northern Plains Initiative / RDI
[email protected] 406/454.5717 Join us -- September
13-15 2011 Great Falls, Montana
