By Nikita Stewart
Washington Post Staff Writer
Tuesday, September 18, 2007

Payday lenders urging the D.C. Council to reject a measure today that would limit their fees have persuaded customers to send hundreds of e-mails and letters pleading for the council to reverse its initial support of the legislation.

In recent weeks, the industry has also sought to become more visible by sponsoring an event for high school students and giving a $100,000 contribution to a Southeast nonprofit organization to help expand a program for minority business owners.

Payday lenders say the annual percentage rate allowed in the measure would add up to 92 cents per $100 borrowed, not enough for the city's 48 stores to continue operating. Payday lenders currently can charge up to $16.11 per $100 and tack on fees and more interest if the borrower does not repay the loan.

In July, the council gave preliminary approval to the bill in a 12 to 0 vote despite pleas by council member Marion Barry (D-Ward 8) to delay the vote and consider alternatives to capping the percentage rate.

Such a lopsided vote usually would dissuade the losing side, but the payday lending industry is not giving up. "I've received I don't know how many e-mails and how many letters," said council member Kwame R. Brown (D-At Large). "I thought it was over. I see a 12-nothing vote again."

Lyndsey Medsker, a spokeswoman for the Community Financial Services Association, said the group opposes the measure, which it believes is effectively a ban on an industry that does about 700,000 transactions a year in the District.

The group wants the council to remove the 24 percent cap on interest but favors limiting the number of times that customers can extend loans and establishing an extended payment plan for borrowers who do not repay their loans within two weeks. Barry, who co-sponsored the legislation, said he did not know whether he would propose such alternatives today in the form of amendments.

Said Medsker: "On a national level, no state legislature has ever really considered banning the industry. This year, there were bills proposed, but nothing ever made it out of committee."

A month ago, the payday lending industry began its hard-hitting campaign with commercials on television and radio and in newspapers. In the ads, customers speak highly of the loans that helped them get through emergencies, in contrast to the former customers who spoke to council members at a hearing in June about getting trapped in a cycle of debt.

The industry also launched an e-mail crusade, encouraging customers to log on to a Web site and send e-mails with this message: "I support reforming the payday lending industry, but I do not support eliminating it. As a citizen of the District of Columbia, I urge you to support consumer access to short-term credit."

Some council members wondered why they received e-mails from the same address on Pennsylvania Avenue SE. It was the location of one of the stores. Medsker said customers were entering the store's address instead of their home addresses but said every e-mail was from a different person.

The Center for Responsible Lending and council member Mary M. Cheh (D-Ward 3), who also sponsored the measure, have countered the industry with data showing that borrowers generally stay in debt. Three former employees of Check 'n Go, which has 16 stores in the District, said at a news conference last week that company policies trapped customers into loans they could not afford.

Yesterday, Check 'n Go, a payday lender, issued a statement saying that "former employees and the Center for Responsible Lending (CRL) have colluded and conspired to tarnish the company and the entire payday loan industry."

The industry is trying to improve its image not only among council members but also among community leaders, said Willie Green, senior adviser of community and minority affairs for the Community Financial Services Association.

Green said a common criticism from community leaders was that the industry does not give back to the community. So the association recently encouraged its members to make monetary and volunteer contributions, he said.

The industry has been rebuffed by several community leaders, Green said. "We get criticized for not reinvesting back into the community. But then, when we try to reinvest in the community, you say, 'Oh, that's just smoke and mirrors,' " he said.

On Friday, the office of D.C. Schools Chancellor Michelle A. Rhee pulled the plug on the Community Financial Services Association's "Youth Learn and Save Rally," a financial literacy workshop for high school students that was to be held at the FBR branch of the Boys & Girls Club.

Mafara Hobson, a spokeswoman for Rhee, said officials at the high schools did not know that the association was embroiled in a political debate. "Once it was brought to our attention, we immediately called the schools," she said. "It was not acceptable."

A planned donation of $10,000 to expand a Boys & Girls Club financial literacy program at Ballou Senior High School is now up in the air, said Kathleen Moore, director of partnering and program development for the association. Participating students would receive $100 savings bonds, she said.

Unlike the school district, Albert "Butch" Hopkins, who heads the Anacostia Economic Development Corp., said that there is nothing wrong with accepting a contribution and that he considered it separate from the political debate.

His organization received $100,000 from Check 'n Go to help minority entrepreneurs. Hopkins said he supports payday lending with the reforms proposed by the industry. "If they give you a bed of thorns, you take the rose. Why not take the rose?" he asked.