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
What are Payday Loans? • Payday or deferred deposit loans are small-dollar, short-termunsecured loans that the borrower promises to repay on their next payday (usually within 2 weeks). • Upon receiving the loanthe 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.
That Means That $300 payday loan cost: $750
What are Payday Loans? Loan Amount + Finance Charge / Interest Rate =
400% is Too High – Cap the Rate The Montana Story
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).
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%.
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.
400% is Too High – Cap the Rate • A campaign for I-164, a citizens’ initiative to cap the triple-digitinterest 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 Montana’s 56 counties and in every house district.
Key Campaign Strategies • Diverse Coalition • Clear (non-“jargony”) Language • Friends, Friends, Friends • Earned Media • Planning (and sticking to it!) • Preparation for Opposition
Key Campaign Strategies • Committed statewide coalition of supporters.
Key Campaign Strategies • Strong, influential, concise ballot and voter information language.
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.
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.
Key Campaign Strategies • Earned media that stressed both statewide coverage of key events and local coverage with guest opinions.
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.
Key Campaign Strategies • Preparation for opposition. Along with planning great care was taken to ensure scrupulous records were kept – proved most successful legal defense.
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.
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
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.
Signature…Success • 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).
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.
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.
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.
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).
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 Campaign’s ability to address needs, shift resources and identify opportunities. • The highly structured approach certainly led to success.
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%
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.
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.
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.
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.
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.
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.
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), Montana’s 7 reservations are not protected by these acts. • The next steps to ensure consumer protections is the adoption of Tribal resolutions throughout Indian Country.
Contact Christina Barsky Northern Plains Initiative / RDI ChristinaB@RuralDynamics.org 406/454.5717 Join us -- September 13-15 2011 Great Falls, Montana