Regulatory Safeguards

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Caught in the Crosshairs of Corporate Power. Part 2: Payday Lenders

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This is part two of a five part series.

When political candidates spend their time begging for cash from wealthy interests and legislating to prioritize private profits over the public good, regular people lose out. The corporations and superrich donors that dominate our elections have an outsized influence over who wins, what gets discussed in campaigns and what legislative ideas receive serious consideration.

The sweeping legislative package known as the For the People Act (H.R. 1) contains ethics, campaign finance and voting rights reforms that are essential to make our government work effectively and fairly.

To illustrate the need for reforms that reduce corporate influence and redistribute power to the people, Public Citizen compiled stories of five regular Americans whose lives have been impacted by corporate political power.

Corporate Power Spotlight: Payday Lending

“What seems initially like help turns out to be nothing but hurt.”

– Wayne Wright, 59, Jacksonville

Starting about a decade ago, Wayne Wright, 59, of Jacksonville, Fla., started using payday loans. He had already drained his savings and destroyed his credit score after being laid off from a computer programming job.

Wright was raising two teenagers on a single income and had switched careers, but there were times when money wasn’t lasting from one month to the next. “I had more month than I had money,” he said.

Wright, who was living in Nashville, Tenn. at the time, took out loans from storefront and internet lenders to make it from one month to the next, but quickly found himself stuck in a debt trap, repeatedly borrowing money to pay back the last loan, plus fees.

“What seems initially like help turns out to be nothing but hurt,” Wright said. “Unless something happens in your life to break that cycle, you’re stuck.”

These days, Wright works as a home health care nurse in Florida and is on far more solid ground financially. He was able to get out of the payday loan cycle after his sister loaned him $2,600 and let him pay back that money gradually.

“It took outside intervention to help me totally just get free from them and then I never got another,” Wright said.

Though he hasn’t taken out a payday loan since 2015, Wright said he’s still getting calls from online lenders aggressively pushing out loans with lines like “your first one can be free” and “you have a good record with us.”

Payday lenders, which often target low-income borrowers, are effectively banned in states that with firm caps on the interest rate that lenders can charge borrowers.

But this kind of lending remains legal in much of the country.

Wright believes there should be limits on the number of times borrowers can renew payday loans, which typically last two weeks.

Once that limit is reached, the loan can be converted into a loan that can be paid off in a fixed number of installments rather than renewed in perpetuity.

His advice to people who are considering taking out payday loans?

“Just don’t. Do whatever you got to do. Sell your couch instead. You can always buy another one.”

CORPORATE INFLUENCE AT WORK

Under Trump, high-rate payday lenders have been hard at work pushing to roll back safeguards for consumers, undoing regulations established during the Obama administration and curtailing investigations of the industry. The payday lending industry’s main trade group has held its annual conference– and a golf tournament – at the Trump National Doral Golf Club near Miami. The Consumer Financial Protection Bureau has proposed to eliminate safeguards for consumers seeking payday or auto title loans that require lenders to assess whether borrowers have the ability to repay their loans. The Washington Post reported that a payday industry lawyer seeking to get rid of regulations on the industry worked closely with an academic researcher to publish a study claiming that taking out repeated loans doesn’t harm borrowers. Though the CFPB spent more than five years of research and study on its payday-lending rules, the bureau has indicated that it may not fully defend the rule against a lawsuit from payday lenders and has done the industry’s bidding by formally proposing to roll back the Obama-era protections that would help people avoid getting caught in cycles of ever-increasing debt.

KEY FACTS:

The payday loan industry has:

  • Spent nearly $57 million on lobbying in Washington since 2008.
  • Contributed nearly $11.8 million in campaign money to Congress over the past 30 years, with money coming from PACs and individuals tied to the industry.
  • Contributed 64 percent to Congressional Republicans and 36 percent to Congressional Democrats.

SOURCE: Center for Responsive Politics.

Republicans and Democrats alike have been recipients of payday industry donations, and have both used their positions of power to benefit the industry. Former Rep. Kevin Yoder (R-Kan.) received nearly $324,000 from individuals and political action committees tied to the industry over his career. Sen. Richard Shelby (R-Ala.), the former chairman of the Senate Banking Committee, has received more than $218,000 in payday contributions. Former Rep. Jeb Hensarling (R-Texas), the former chairman of the House Financial Services Committee, received $202,000. Other notable recipients of payday contributions include Rep. Alcee Hastings (D-Fla.), Rep Steve Stivers (R-Ohio.) Former Rep. Mick Mulvaney, the current acting White House chief of staff and budget director who also served as acting director of the Consumer Financial Protection Bureau, received nearly $63,000 from payday lenders during his congressional races. As acting director of the CFPB, Mulvaney ended multiple investigations into high-cost lenders, including one involving World Acceptance Corp., a lender from which Mulvaney had received campaign donations.

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Caught in the Crosshairs of Corporate Power: How Americans are Harmed When They Lack a Voice in Washington

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This is part one of a five part series.

When political candidates spend their time begging for cash from wealthy interests and legislating to prioritize private profits over the public good, regular people lose out. The corporations and superrich donors that dominate our elections have an outsized influence over who wins, what gets discussed in campaigns and what legislative ideas receive serious consideration.

The sweeping legislative package known as the For the People Act (H.R. 1) contains ethics, campaign finance and voting rights reforms that are essential to make our government work effectively and fairly. The legislation would enact:

Comprehensive campaign finance reforms to end dark money and reduce the power of corporations and the wealthy to influence our elections. Under the bill, elected officials would be able to finance their campaigns from individual donations, with a match from the federal government.

Desperately-needed government ethics reforms to combat conflicts of interest by slowing the revolving door between public service and powerful business interests and strengthened oversight and enforcement of ethics laws and rules.

Voting and electoral reforms that would end gerrymandering, knock down barriers to voting and reaffirm the principle of one person, one vote.

Since Donald Trump’s election, corporate America has had a field day in Washington. Regulatory rollbacks and plummeting enforcement against corporate violators are leaving Americans more exposed than ever to profit-seeking predators. Meanwhile, massive tax cuts are allowing industry to get away without paying its fair share, and our meager social safety net programs have faced constant legislative threats.

To illustrate the need for reforms that reduce corporate influence and redistribute power to the people, Public Citizen compiled stories of five regular Americans whose lives have been impacted by corporate political power.

Corporate Power Spotlight: Higher Education

“It’s just one thing after another to hurt students.”

– Sanders Fabares, 39, San Diego

In 2003, Sanders Fabares was seeking to break into the film industry and wanted to get trained on how to use digital video production equipment. While looking at job ads, he saw an advertisement for an open house and barbecue event at the Art Institutes of California in San Diego.

At the time, he had limited knowledge of for-profit colleges. But after taking a tour, Fabares was impressed by the school’s sophisticated cameras and video equipment. A school’s recruiter boasted of a 95 percent job-placement rate, and pushed him aggressively to enroll, he said.

The job-placement rate was the main reason Fabares enrolled in the Art Institutes program, never considering that a school might not be truthful about such an important statistic. But the school’s former parent company, the now-bankrupt Education Management Corp., owned by Goldman Sachs and two private equity firms, later faced allegations of overly aggressive recruiting practices and exaggerating job-placement rates. The schools’ new owner has been closing down campuses.

Fabares found the Art Institutes program to be almost worthless, especially compared with the University of Arizona, where he had already studied to get a bachelor’s’ degree. With a high ratio of students to teachers, Fabares found it incredibly difficult to enroll in the classes he needed.

Fabares, now 39, and his wife, Jay, 36, met in a drawing class at the Art Institutes. They graduated with combined debt of about $96,000. They have made consistent payments but have only been able to cut their debt down to about $73,000 over the past 13 years, taking intermittent art jobs in Los Angeles and the San Francisco Bay Area before moving back to San Diego.

Fabares has filed a request for debt relief under the Education Department’s “borrower defense” program, which cancels debt for defrauded students. Four years after applying, he has yet to receive an answer. “If life throws you any curveballs under this debt, it’s going to make you default,” he said. “It’s doing to blow you out of the water. All it takes is a life change.”

Fabares currently works for a consulting firm that moderates companies’ online presence. The couple also works as caretakers for his elderly grandparents. Having a large amount of debt, “affected just everything we did,” he said. “We weren’t able to save hardly anything. We just were living paycheck to paycheck hoping something would pan out.”

Now Fabares is involved in efforts to hold for-profit schools and the Education Department accountable for their actions. He encourages former students from The Art Institutes to join the Facebook group “I Am AI” to meet others seeking justice.

Having attended rule-making sessions held by the Education Department, he has seen in person how lobbyists and for-profit colleges have fought meaningful oversight. “It’s just one thing after another to hurt students,” he said.

CORPORATE INFLUENCE AT WORK

For-profit colleges that saddle students with mountains of debt and worthless degrees have successfully lobbied Congress and the Education Department to block or weaken rules that protect students. As a result, millions of students and graduates around the country are burdened with debt and disillusioned.

KEY FACTS:

The for-profit college industry has:

  • Spent nearly $71 million on lobbying in Washington since 2008.
  • Contributed more than $13.6 million in campaign money to Congress over the past 30 years, with money coming from PACs and individuals tied to the for-profit college sector.
  • Contributed 53 percent to Congressional Republicans and 46 percent to Congressional Democrats.

SOURCE: Center for Responsive Politics.

Toward the end of the Obama administration, the Education Department started taking steps to rein in predatory for-profit college operators. Officials successfully cut off the flow of federal student loan money to some of the worst abusers. But under Education Secretary Betsy DeVos, the department’s efforts to protect students from predatory schools are being gutted. Several investigations into the for-profit college industry have been scotched, and DeVos has brought on several former for-profit college executives who are now overseeing the same companies where they once worked or represented. DeVos has made it more difficult for defrauded students to get their loans discharged and scaled back rules designed to weed out poor career-training programs at for-profit schools. Meanwhile, student debt continues to rise: According to the Federal Reserve Bank of New York, there is $1.46 trillion in outstanding U.S. student loans, with about 9 percent of that in serious delinquency, having had no payments in 90 days.

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Sifting Through the Wreckage: Deregulatory Actions in Trump’s 2018 2-for-1 Report

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In mid-October, the Trump administration released its annual report detailing deregulatory actions taken under the ill-conceived 2-for-1 executive order, which requires agencies to eliminate two regulations for any single new regulatory action.

Office of Management and Budget Director Mick Mulvaney, a noted deregulation devotee with an open ear for contribution-giving bank lobbyists, described the report’s release as delivering on President Trump’s promise to “[get] rid of Washington’s unnecessary, outdated, and duplicative regulatory burdens.” Neomi Rao, Administrator of the Office of Information and Regulatory Affairs and Trump’s deregulation point person, lauded the purported $23 billion dollars in regulatory costs to corporations saved in 2018. Mulvaney and Rao conveniently did not mention that the $23 billion cost savings represent projections over a “perpetual time horizon” rather than an annual estimate, making that number look much bigger than it is in reality. With all the time they spent patting themselves on the back for giving corporations even more handouts, neither official mentioned the extremely significant regulatory benefits that have been axed as part of the deregulatory frenzy of the past year.

Administration officials and anti-regulatory zealots justify wholesale deregulation by arguing that it serves to cut useless, outdated or burdensome regulations. The reality is starkly different; regulations serve to protect the public and set the legal framework to ensure basic liberties. Americans are harmed when safeguards are gutted. Here are just a few of the proposed or existing public safeguards included in Trump’s self-congratulatory deregulation report that have now been terminated:

  • Fracking regulations. Hydraulic fracturing, or fracking, is an industrial process used to extract natural gas from deep in the earth that involves pumping millions of gallons of chemicals into the ground. Not surprisingly, scientific evidence suggests that the practice has serious negative environmental and public health consequences. In 2015, the Bureau of Land Management (BLM) issued regulations requiring companies fracking on public lands to comply with a series of planning and review requirements – including disclosure of the types of chemicals that were being pumped into the ground. The rule was repealed by the Trump administration because it supposedly “imposes burdensome reporting requirements and other unjustified costs on the oil and gas industry.” The withdrawal notice paid little heed to action’s effect on the land, water or people around fracking sites.
  • Airline baggage fee transparency. It’s hard to plan affordable travel when your flight’s checked bag fees aren’t revealed until your final click. To address the problem, the Federal Aviation Agency (FAA) undertook regulation to require airlines to disclosure ancillary fees, including charges for checked bags, at all points of sale. The proposal would have required airlines to disclose exactly how much checked bags would cost before customers selected a fare. The Trump administration withdrew the proposal on the grounds that “existing regulations already provide consumers some information regarding fees for ancillary services.” Unfortunately for the flying public, the hidden fee status quo remains.
  • Online accessibility for people with disabilities. The internet is not one size fits all, especially for hearing or vision impaired Americans. Although the internet has become an integral aspect of everyday life, there is still no defined legal framework in place that governs website accessibility for people with disabilities. In 2010, the Justice Department proposed regulations defining the scope of the Americans with Disabilities Act as applied to the internet. The action was “withdrawn for further review” in October 2017.
  • Workplace injury recordkeeping. Federal law requires employers to keep a record of employee injuries. These records can be used to protect workers by discerning injury trends and ultimately prevent accidents. In 2016, the Occupational Health and Safety Administration (OSHA) established a rule that required large employers (over 250 employees) to electronically submit their injury records to OSHA each year. Trump’s OSHA justified a repeal of the requirement by claiming the reporting would jeopardize worker privacy and burden employers. Ensuring that workers return home to their loved ones was apparently not a pressing priority.
  • Protections against unsafe imported food. Foreign food imported into the United States must meet safety standards; otherwise it must be exported or destroyed. Sometimes, shady food importers engage in a practice known as port shopping, which is moving rejected food from one port to another in hopes of avoiding inspection. In the late 1990’s, the Government Accountability Office (GAO) and a U.S. Senate subcommittee identified the problem and then-President Clinton ordered the Food and Drug Administration (FDA) to take action. The FDA’s proposal was simple; the shipping container and accompanying documents for unsafe food imports should be labelled “UNITED STATES: REFUSED ENTRY.” Despite the common-sense nature of the regulation, Trump’s FDA withdrew the proposal without explanation.

The loss of these important regulations is just the tip of the iceberg. The lost protections span across a huge spectrum of American life and will have long-lasting impacts on the public. Disturbingly, the pace is likely to quicken. In the words of Administrator Rao, “we’re projecting even more reform in 2019.” That might please corporations looking to increase their bottom lines, but should worry Americans and their families who will be left paying the price.

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Immigration Rule Fails Administration’s Own Cost-Benefit Test, May be Trump’s Most Expensive Regulatory Move

Deregulation and rigorous cost-benefit analysis are core values for the Trump administration, except when it comes to denying immigrants the right to live and work in the U.S. According to the Department of Homeland Security’s (DHS) own conservative estimate, the costs of the administration’s proposed “public charge” rule vastly outweigh the benefits.

On September 22, the DHS announced a new rule proposal to alter the considerations officials take into account when deciding an immigrant’s eligibility for a visa or green card. Under the proposal, applicants that are likely to use public benefits such as Medicaid could be effectively denied from coming to or remaining in the country. According to the DHS press release accompanying the proposed rule, it is designed to “protect American taxpayers.” However, DHS’s own cost-benefit analysis estimates that the rule would impose $386 million to $1.1 billion in costs over ten years, while producing almost no quantifiable benefits. On top of that, the agency acknowledges that the rule would result in a reduction of over $2 billion in annual payments from federal and state governments to immigrants – explicitly conceding that the spending reductions will result in a host of negative health, income, housing, and educational outcomes.

Cost-benefit analysis is routinely conducted for major rulemakings based on Clinton-era Executive Order 12866. The E.O. directs agencies to evaluate the effects of proposed rules and propose or adopt rules only if the benefits justify the costs.

The estimated costs of the proposed rule change largely rely on direct costs on the immigrant population subject to regulation. It’s estimated that the total annual impact of new paperwork, time dedicated to application, credit checks and fees on immigrants applying under the rule would range from approximately $45 million to $139 million, annually.

On the other hand, the list of benefits associated with the public charge rule is sparse. The official accounting statement lists one quantifiable benefit; the new rule would save immigrants about an hour (or around $35) because they’d no longer be obligated to fill out one particular form. For other benefits, the analysis simply restates the intent of the rule. In the press materials accompanying the proposed rule, DHS suggests there is a benefit to the decreased government spending resulting from prohibiting immigrants from receiving public support, but its own analysis details the complete opposite – reductions in government assistance will lead to a host of costly social ills.

In government parlance, less government spending is referred to as a reduction in “transfer payments.” Transfer payments are payments from one group to another that do not directly affect total resources available to society and thus do not count as costs or benefits. DHS estimates that the public charge rule will reduce government spending by $2.2 billion annually and $19 billion over ten years. To reach those figures, DHS uses a laughably lowball assumption that about 2.5% of affected immigrants will disenroll or forego public benefits as a result of the chilling effect of the rule. The analysis concedes that past actions regarding the rule, during the Clinton administration, resulted in reductions in enrollment between 21 and 54 percent. In other words, the spending reductions would be much larger in the real world – as would the resulting damage to immigrants and society at large.  DHS touches on the real life effects that will result from the anticipated reduction in assistance payments:

“Disenrollment or foregoing enrollment in public benefits program by aliens otherwise eligible for these programs could lead to:

  • Worse health outcomes, including increased prevalence of obesity and malnutrition, especially for pregnant or breastfeeding women, infants, or children, and reduced prescription adherence;
  • Increased use of emergency rooms and emergent care as a method of primary health care due to delayed treatment;
  • Increased prevalence of communicable diseases, including among members of the U.S. citizen population who are not vaccinated;
  • Increases in uncompensated care in which a treatment or service is not paid for by an insurer or patient; and
  • Increased rates of poverty and housing instability; and
  • Reduced productivity and educational attainment.”

For better or worse, regulators are bound by the cost-benefit considerations of E.O. 12866. Yet DHS’s own analysis doesn’t even attempt to make a rational case that the millions of dollars of direct costs imposed by the rule, not to mention the billions of dollars of real world costs to hardworking immigrants and their families, are justified. DHS makes patently clear that in this case, the costs are far beyond any quantifiable benefit. See below for the accounting statement pulled directly from the rule proposal. The entire episode points toward the conclusion that DHS and the White House are only concerned with achieving political outcomes even if it completely violates their own wrongheaded policies on limiting regulatory costs. For their purposes, it seems the benefit of denying immigrants a chance to live and work in America outweighs any cost.

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USDA Moves to Increase Poultry Line Speeds

Last week, the United States Department of Agriculture (USDA) announced that it will issue waivers that allow poultry slaughterhouses to increase their line speeds from the already dangerous 140 birds per minute (BPM) to 175 BPM. Increased line speeds can lead to devastating ergonomic injuries for plant workers, food safety threats for consumers, a predicable spike in whistleblower retaliation, and greater animal cruelty. This action comes within days of remarks by OIRA administrator Neomi Rao that the administration plans to ramp up its deregulatory efforts.

Last year, workers and their advocates engaged in a successful campaign to block a petition by the National Chicken Council for line speed increases. Since that time, however, the USDA has proposed faster line speeds at hog slaughter plants. And its most recent action skirted the rulemaking process altogether (by simply announcing the criteria it would use to issue waivers, without the opportunity for public comment), walking back its decision earlier in the year to withstand pressure from the poultry industry for increased line speeds. Debbie Berkowitz of the National Employment Law Project responded, “This Action clearly undermines the rulemaking process, violates the Administrative Procedures Act, and is inconsistent with the agency’s own regulations.”

The Occupational Safety and Health Administration (OSHA) has been aware for more than 30 years that faster line speeds in slaughter plants result in more workplace injuries. In 1993 OSHA recommended that plants lower line speeds to reduce the high rates of musculoskeletal injury among meatpacking workers. Since that time, the Government Accountability Office has repeatedly echoed OSHA’s reports and the USDA’s own watchdog, the Office of Inspector General, has warned about heightened food safety threats under the pilot program upon which the increased line speeds is based.

According to OSHA, poultry workers are nearly twice as likely to suffer from serious injuries as other workers in private industry, and more than six times as likely to have a work-related illness. In 2013, the rate of carpal tunnel syndrome for poultry workers was more than seven times the national average, and poultry industry employers were more than four and a half times more likely than other industry employers to identify repetitive motion as the exposure resulting in a serious injury in 2013. These statistics are particularly alarming given that employers often underreport injuries to disguise the full extent of the problem, whereas workers underreport injuries due to fear of retaliation. Likewise, consumers can suffer from underreported food safety problems.

According to the Centers for Disease Control and Prevention (CDC), Americans consume more chicken than any other meat each year. Accordingly, poultry should undergo a rigorous inspection process with extensive oversight. However, Food-borne illness due to poultry is wide-spread. Over the last decade, more food-borne deaths were attributed to poultry than to any other category of food. In 2016, poultry accounted for the most food-born deaths (19 percent), largely attributed to Listeria and Salmonella infections. Not surprisingly, dismembering and gutting up to 140 BPM (let alone 175 BPM) leaves insufficient time for all but the most cursory examinations for contamination, which eventually finds its way to the consumer.

Worker and food safety problems are compounded by the meatpacking industry’s pervasive culture of intimidation and silence, as well as management that treats workers as expendable. Meat workers are disproportionately people of color and immigrants, and they face risks of termination and threats of deportation for reporting safety concerns or becoming permanently disabled due to injuries that occurred on the line. Unlike USDA inspectors, plant employees do not have viable legal channels to challenge whistleblower retaliation.

Senator Patty Murray (D-WA), ranking member of the Senate Health, Education, Labor and Pensions Committee and Representative Rosa DeLauro (D-CT), ranking member of the House Appropriations Subcommittee on Labor, Health and Human Services, Educations, and Related Agencies warned in a 2017 letter that “granting the [National Chicken Council] petition would further endanger an already vulnerable workforce.” In response to USDA’s latest maneuver, Rep. DeLauro told Politico, “It is unconscionable that the Trump administration would rush this process, without an ample opportunity for the public to weigh in … I urge the Trump administration to reverse course.” Indeed, the Trump administration must reverse course before it places more workers and the public in harm’s way.

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