When the Consumer Financial Protection Bureau put out its proposal to overhaul payday lending rules in March, the move was cheered by consumer advocates as a much-needed crackdown on an industry that preys on the poor.

But the final product wasn’t a surprise to at least one nonprofit group.


While Elizabeth Warren and other progressives decry the influence of big banks and lobbyists in writing legislation, in this instance, the agency created by Warren to protect consumers from abusive lending leaned heavily on consumer activists as it drafted regulations for the $46 billion payday loan industry. The Center for Responsible Lending spent hours consulting with senior Obama administration officials, giving input on how to implement the rule that would restrict the vast majority of short-term loans with interest rates often higher than 400 percent. The group regularly sent over policy papers, traded emails and met multiple times with top officials responsible for drafting the rule.

At the same time, the group’s financial services business, Self Help Credit Union, was pushing CFPB to support its own small-dollar loan product with a much lower interest rate as an alternative to payday loans.

Companies and trade associations regularly spend tens of millions of dollars to lobby Congress and the executive branch to push their agenda, but the Center for Responsible Lending efforts to overhaul payday lending rules is a revealing example of how nonprofits and consumer groups also work back channels in Washington to influence the outcome of laws and regulations.

The proposal is of particular significance because it is expected to be a model for how the nascent consumer agency drafts rules. A “notice of proposed rulemaking” from CFPB is expected in the coming months.

The agency has long been under fire from industry and conservative groups, including in an ad that aired during the Republican debate last week. CFPB’s collaboration with the Center for Responsible Lending on payday lending rules could fuel attacks that the agency has an anti-business bias.

For more than a year before CFPB put out its proposed rule to crack down on payday lenders, the Center for Responsible Lending and other advocacy groups, such as the National Consumer Law Center, worked with the agency to help craft the proposal, according to emails and documents released by CFPB to comply with a recent Freedom of Information Act request filed by the payday lending industry trade group Community Financial Services Association.

The emails between CRL and CFPB staffers document regular meetings and close collaboration. In November 2013, as it was researching regulations, CFPB requested data from the nonprofit on payday lenders “to help focus these efforts.” The next month, a staffer for the Center for Responsible Lending requested a copy of the agency’s overdraft analysis “so that CRL could make sure ours was as parallel as possible.”

That spring, David Silberman, associate director for research, markets and regulations at the CFPB, requested an outline on payday lending from CRL President Mike Calhoun. Calhoun replied, “Feel free to improve it!”

Their familiarity grew over the months. “It’s been almost three weeks. Starting to have withdrawal pains,” Silberman wrote in April 2014 as he asked to set up another meeting.

At the same time, Self Help Credit Union, which is affiliated with CRL, was talking with CFPB officials about a new product it dubbed the “just right” loan. The credit union, which reported $25.8 million in profit last year and has 22 branches, exchanged emails in fall 2014 and later held a conference call that December with CFBP staffers to discuss the payday lending alternative. CRL and Self Help are separate 501(c)(3) organizations, but have a legal affiliation.

CFPB spokesman Sam Gilford said agency officials engage with people on all sides of an issue.

"That outreach includes discussions with consumer advocates, industry trade groups, individual financial institutions, academics, state, tribal and local governments, and others," Gilford said in a statement. "The request by CFSA was for the Bureau’s correspondence with a specific consumer organization and its affiliates, so the documents do not provide context regarding similar dialogue with other stakeholders. Nor do they reflect the broad range of ongoing engagement that we have with all of our stakeholders."

“That outreach includes discussions with consumer advocates, industry trade groups, individual financial institutions, academics, state, tribal and local governments, and others,” Gilford said in a statement. “The request by CFSA was for the Bureau’s correspondence with a specific consumer organization and its affiliates, so the documents do not provide context regarding similar dialogue with other stakeholders. Nor do they reflect the broad range of ongoing engagement that we have with all of our stakeholders.”

He also said in the statement: “Perhaps the only real takeaway from these documents is that we respect the work that consumer advocates do and we value their insight into the challenges facing consumers in today’s financial marketplace.”

CFSA officials met at least three times with CFPB Director Richard Cordray since 2012, according to his public calendar. J. Patrick O’Shaughnessy, head of payday lender Advance America, is currently serving a three-year term on the CFBP’s Consumer Advisory Board. And Edward D’Alessio, executive director of the Financial Service Centers of America, and D. Lynn DeVault, board member of Check into Cash and CFSA, participated in the CFPB field hearing in March on payday lending. The Center for Responsible Lending’s head Mike Calhoun was also a panelist at the hearing.

CRL’s Gary Kalman said the nonprofit has been working on trying to change payday-lending rules for more than a decade and that it has a unique perspective to offer.

“I think it is fairly typical for agencies to reach out and to talk to a variety of stakeholders to make sure that they get all the information they need to make a rule,” Kalman said.

And, while CRL supports portions of the rule that would require lenders to undertake an “ability to pay test,” it also opposes language in the rule that would give certain lenders legal immunity.

CRL’s Kalman said the group wasn’t pushing for any particular product as it interacted with the CFPB.

“We haven’t gone in and said, ‘You should look at this product and this is what it should be,’” Kalman said. “What we’ve argued for is much looser than the Self Help product,” referring to the requirements for loans.

CRL’s influence at the consumer agency went beyond meetings and proposals. One of its executives, Leslie Parrish left CRL in 2013 to join the CFPB as program manager for payday and small-dollar loans. After two years in the job, she returned to the nonprofit. Janneke Ratcliffe, assistant director of financial education at the CFPB, also worked for Self Help Credit Union.

Payday lenders certainly aren’t underrepresented in Washington. The industry spent roughly $3 million on lobbying last year and is on track to spend a similar amount in 2015. The American Action Network paid for the ad during the Republican debate on Fox Business Network last week demonizing the agency. A number of left-leaning groups recently pressed CFSA, the payday lending trade association, to stop using a study to defend its business practices over questions about its findings being manipulated.

While CFPB has also held many meetings with industry representatives, several payday lending officials said their interactions with the agency have been very different.

Dennis Shaul, head of the trade association representing payday lenders in Washington, said, “what I found most surprising is the degree of familiarity between the personalities.

“Regulators ideally have some distance from all of those who might intervene on behalf of a point of view,” said CFSA's Shaul.

Advance America’s Jamie Fulmer agreed, saying it “put in very stark terms the closeness of the relationships" and the email traffic also "highlights the coordinated research."

“It’s a different relationship and it appears like they aren’t taking the industry’s perspective with the same level of interest as the advocacy groups," Fulmer said. "I imagine some of that is not surprising, but I think it is troubling.”