Congressman defends payday lending industry

Introduction

A congressman who has been criticized for being too close to the financial industry Thursday declared that his broad support for payday lending firms is about “trying to make sure individuals have dignity and aren’t ripped off.”

Rep. Gregory Meeks, D-N.Y., spoke to a breakfast meeting at the National Press Club for Master Your Card, MasterCard’s “public education” effort to show consumers, small businesses and governments more ways to use electronic payments.

Meeks was dubbed a member of the “banking caucus” in a Center for Public Integrity investigation released in April. Just before he spoke, the group heard from Rep. Steve Stivers, R-Ohio, another “banking caucus” member and former megabank lobbyist.

Meeks told the crowd that efforts to tighten oversight of high-cost, short-term loans targeting poor people will “take options off the table,” driving consumers to neighborhood loan sharks.

“If you’re focused on that market, you’ll make money,” Meeks told the group, mostly employees of financial companies and industry-supported nonprofits focused on “financial inclusion.”

The event marked the rollout of a paper written for MasterCard by an MIT professor and subtitled “How emerging electronic payment technology can provide financial services to underserved communities.”

Financial access and financial inclusion have become buzzwords in the industry as companies strive to cultivate new revenue streams in the wake of the 2008 economic meltdown. Financially underserved people already provide $89 billion in fees and interest income for the industry, according to a 2012 study by the Center for Financial Services Innovation, one of the breakfast’s sponsors.

Ten million American households lack bank accounts, either by choice or because of banks’ background-check systems and other barriers to access. The group skews poor and non-white; many live in in inner cities or rural areas that lack bank branches.

If the industry can “mainstream” more of them — for example, by encouraging them to use electronic payments instead of cash — these people will provide billions more in new revenue. Thursday’s “expert briefing” breakfast was titled “Electronic Payment Technology: A Gateway to Mainstream Financial Services for the Underserved.”

The Center identified Meeks, Stivers and nine other House members as the financial industry’s go-to lawmakers on the Financial Services Committee. The members work closely with Washington’s 2,000 financial lobbyists, writing letters, proposing industry-friendly legislation, holding hearings and threatening agency budgets as they pressure regulators to ease up on banks.

Meeks has raised $1.2 million from the financial industry since the 2010 election cycle including $6,500 from MasterCard. Stivers has raised $2.6 million including $2,000 from MasterCard.