Thirteen
Past Due
COLUMBUS, OHIO, 2002–2008
Bill Faith didn’t mince words when his fellow activists in Dayton asked him at the start of the 2000s about Dean Lovelace’s plan to introduce a local law to restrict the city’s predatory home lenders. “I told them, ‘No offense, but you don’t have the capacity, you don’t know what you’re doing,’” Faith said. The states and the federal governments have agencies in place to monitor lenders, he told them; cities don’t. But Faith was also the state’s most prominent housing advocate, so when his allies in Dayton moved ahead anyway, he did what he could to help. Faith shrugged when we met in his offices a few blocks from the state capitol in Columbus in the fall of 2008. “I figured if it got attention for the issue, that’d be a good thing,” Faith said. The city councils in Cleveland and Toledo would pass bills similar to Dayton’s.
In theory, Ohio was a strong home-rule state that granted municipalities broad powers over the regulations inside their borders. In reality, though, the mortgage industry had the cash and the clout to convince the Ohio state legislature, one year after Dayton’s legislation, to pass a law stripping Dayton, Cleveland, and Toledo of the authority to regulate the mortgage lenders operating within their city limits. The boilerplate anti-predatory language its sponsors added to the bill was largely lifted from the 1994 HOEPA statute, and therefore already law, but that didn’t prevent Governor Bob Taft, a Republican, from patting himself on the back. This bill, Taft declared when signing the measure into law, proves that in Ohio “we will not tolerate predatory lenders, or loan sharks, who take advantage of senior citizens, people with limited incomes, or people with bad credit histories.” More revealing, though, were the reactions of partisans to its passage. “We certainly think it’s a good bill,” said Dayna Baird, the head of the Ohio Consumer Finance Association and the chief lobbyist for large lenders such as Household and CitiFinancial. In contrast, Jim McCarthy in Dayton dismissed the new law as a “canard” and Bill Faith dubbed it “the most arrogant bill I’ve seen in all my years in Columbus.
“There’s this subprime problem going on all over the state and what do our legislatures do?” Faith asked. “They pass a bill that says to the cities, ‘We’re going to preempt you from doing anything about predatory lending, that’s the state’s job, but, oh, by the way, we’re not going to do anything about the problem.” If there was the occasional tale of a borrower harmed by a particularly noxious subprime loan, legislators were told, that was the work of a rogue agent whose misdeeds had been exaggerated by a press corps on the hunt for the sensational. Politicians on both sides of the aisle, it seemed, were inclined to extend the benefit of the doubt to any lender willing to work with borrowers of modest means.
The bill, passed during the 2002 legislative session, did create a sixteen-person Predatory Lending Study Committee that would travel the state to assess the problem. When they hit Dayton, so many people wanted a turn at the microphone that, despite a strict five-minute limit on speeches, the meeting lasted three hours. The committee chairman Chuck Blasdel, a Republican state legislator who had been the primary sponsor of the preemption bill, told the Dayton Daily News that he was very moved by some of what he had heard that evening, but he warned against any new laws. Tighten regulations, he said, and watch credit dry up in those communities most in need. A year later, Blasdel’s task force made its recommendations but they quietly died in committee.
Among his fellow activists, Bill Faith, the executive director of the Columbus-based Coalition on Homelessness and Housing in Ohio, or COHHIO, is celebrated for his ability to get along with legislators on both sides of the aisle. Around the state capital, you’re as likely to spot Faith out with a Republican legislator as a Democrat, and over the years he would describe any number of conservative legislators as his friends. Ron Bridges, a lobbyist for AARP, only wishes he could be more like Faith. The AARP was a key ally in the fight against predatory lending and more than once Bridges joined Faith as he tried to work on Blasdel. “I was always two seconds away from wringing the guy’s neck because I see all the people getting hurt,” Bridges said. “But Bill sees the same thing, which is why he makes sure to get along with guys like Blasdel. He sees the bigger picture.” Apparently, though, that means sometimes missing the smaller details. A few years later, Faith and Bridges were on the verge of finally besting the mortgage industry and Bridges looked down to discover that his friend had just spent an hour meeting with the Ohio Senate leadership while wearing two mismatched shoes.
Bill is different than most activists,” Mike Toman, a partner in the lobbying firm The Success Group, is explaining to me at his office a block from the state capitol in Columbus. “He knows the inside game.” To Toman and his partner, Dan McCarthy, lobbying is best left to the professionals—but Faith is one of those rare social justice crusaders who not only understands how to sell a story to a member of the legislature but also has an innate sense of who to approach and when.
“Most activists want to be right,” McCarthy said. “But Bill wants to get things accomplished.”
“He’s still an activist,” Toman said. “He has that passion.”
“But he understands how to make a deal,” McCarthy said.
And then both more or less said in unison: Bill Faith likes to win.
Faith is a beefy man with a bearish physique and white gray hair that seems perpetually unkempt, as if he is suffering from an incurable case of bed-head. He wears a goatee and has a husky, heavy person’s voice that can sometimes makes him sound a bit like John Madden. He’s a talker, so much so that his friends joke that they don’t dare call him unless they know they will be in the car for at least an hour. He smokes, he swears, and he obviously drinks; when we met at the bar at Mitchell’s, a stylish steak house one block from the capitol, a Ketel One and cranberry cocktail appeared in front of him without him needing to ask for it. He wore a sport coat and tie that night, a common occurrence for someone who runs a statewide nonprofit with a multimillion-dollar budget, yet somehow the outfit seemed wrong on him. It might have been the quizzical, boyish way he examined the toast points and goat cheese that accompanied his beet salad (he may be a regular at the bar but he runs a housing advocacy group, and if he eats at Mitchell’s, it’s a rare treat because someone else is picking up the tab); it might have been the informal “How ya doin’?” greeting he gave most everyone, from the retired Senate president having a drink in the bar area to the hostess showing us to our seats.
His mother would drag him to civil rights protests as a kid. His father, a Presbyterian Republican raised in rural Indiana, was unhappy she was bringing their son to places where they were often the only whites in the room aside from the media. His mother was devastated when Martin Luther King, Jr., was assassinated. His father considered the civil rights leader a communist who had brought tragedy upon himself. Faith grew up in the People’s Republic of Youngstown, a staunchly pro-union town and firmly Democratic, but that’s only because his father was a farm implement salesman dispatched to eastern Ohio to grow the market there. “A lot of my relatives still live in rural Indiana and rural Illinois,” Faith said. “So I know those people. I can talk to them.”
Faith was never much of a student. He dropped out of college at the end of his freshman year, but a year back in Youngstown was all he needed to get serious about his studies. “I didn’t want to work in the mills,” he said, “but that’s exactly where my life was headed.” He was accepted into Ohio State in the mid-1970s, where his future started to take shape. He read about the Catholic Worker movement and imagined himself as a social worker. He liked the fit and even converted to Catholicism. “I was looking at this small sliver of the Catholic Church and ignoring the other ninety percent,” he said. “The first nun I met wore jeans.”
Faith’s first job after college was at an institution for the mentally ill called Orient, located about thirty miles from Columbus. Orient was a shock to his system. One resident there spent his days chewing his shirt; another, he said, the staff simply tied to a chair. The entire facility reeked from urine. “It’s a lot better than it used to be,” the facility’s superintendent assured him. After Faith discovered that his immediate boss was stealing money from patients, he began surreptitiously removing incriminating documents from work, and eventually a complaint he filed with the state attorney general’s office led to the man’s removal. Faith left Orient after two years to help open an alternative community for the mentally disabled that he and his fellow idealists called The Ark. Among the residents there was a man with Down syndrome named Richard Wilson, who had lived at Orient for four decades. “He lives in this godforsaken place for forty years but he loves life,” Faith said. “He had no reason to but he had this great attitude. He was a kind of life guru for me.”
Faith lived the life of a committed leftist coming of age during the first half of the 1980s. He got involved in the peace and sanctuary movements; he joined the Committee in Solidarity with the People of El Salvador (CISPES). Now on the other side of fifty, he sometimes wonders what his younger self might have been thinking. One time he traveled to Washington to join a group of Catholic workers who had chained themselves to the Pentagon to protest U.S. policy in Central America. It might have felt cathartic to speak truth to power, Faith said, but they had no real strategy other than voicing their collective outrage. On the other hand, he had good things to say about the two weeks he spent in the D.C. city jail on trespassing charges. “When does a guy like me ever get to see the inside of a place like that?” he asked.
Back in Columbus, Faith got involved with a group trying to feed and house the homeless. While he was working behind the steam table at one of the soup kitchens, a man pulled out a shiv and slashed Faith’s face from ear to lip. What most amazed the people who worked with Faith is that, despite the hundred-plus stitches it required to close the wound, he took his regular turn serving just days later. Faith said he was fine with it (“Maybe he just wasn’t on his medications that day,” Faith had told the Cleveland Plain Dealer when that paper profiled him as its man of the year in 2003) until the guy tracked him down years later to offer an apology. “I kinda had a fantasy vision of shooting him between the eyes,” Faith said.
When Greg Haas thinks of his friend back then, he imagines him wearing denim—a denim jacket, a denim shirt, and of course jeans. Faith favored sandals and wore his hair in a fierce bush of curls. The two met when Faith was helping to organize a series of protests at city hall aimed at establishing shelters for the homeless around Columbus and Haas was running the mayoral campaign of an old-school social services Democrat. Faith might have looked like every other protester, Haas said, but even then he stood out from the crowd. “Rather than humiliate people, or just hit them in the face with an issue, Bill seemed to be someone searching for a solution,” he said. It was Faith, Haas said, who hammered out a compromise with the city’s social services director—find a community willing to take a shelter, the agency head said, and we’ll provide the funding—and Faith, after calling what seemed like every landlord and bureaucrat in town, made it happen.
That fight was winding down when Faith was offered a job running the Coalition on Homelessness and Housing in Ohio. He moved out of the Ark and started wearing a tie to meetings, and eventually added a sport coat to his wardrobe. He focused on affordable housing and the homeless through most of the 1990s but by the end of the decade he started talking about predatory lending as well. He thought he had a simple and elegant solution to the problem: Simply apply the state’s existing consumer protection laws to the mortgage business. How could it be, he asked, that Ohio protects its citizens from getting ripped off when they plunk down $25 for a toaster but not when they sign papers committing themselves to an $80,000 loan?
Faith shifted strategy after the 2002 legislative session. If the legislature refused to intervene, Faith said, he would “pound the issue in the court of public opinion” until elected officials relented. He began contacting reporters he knew, hoping to get them interested in the issue. He offered the same message to each: The poverty industry is far more pervasive than you think. “I kept telling them, ‘Don’t talk about black folks,’” Faith said. “There are these loan sharks in the suburbs. There are loan sharks in the town squares of rural areas.”
While he was working the phone, he learned that two reporters at the Columbus Dispatch, Jill Riepenhoff and Geoff Dutton, were already starting to look at the dramatic spike in foreclosures in the Columbus area. He might have made a pest of himself during the nine months he worked with the pair on their series but it seemed well worth it. The resulting series, “Brokered Dreams,” published in September 2005, seemed to have exactly the kind of impact Faith was hoping for. “All of Columbus read it,” AARP lobbyist Ron Bridges said of the Dispatch series. “Or at least all of political Columbus read it.” Bridges, who is black, grumbled that it wasn’t until a series of articles showed that the problem had spread to the white suburbs and rural areas that the legislature felt it needed to act, but when I visited him in his office several years later he still had a small stack of reprints right behind his desk.
The two reporters didn’t completely ignore the center of town, of course. Dutton’s “Flipping Frenzy” piece revealed how wealthy investors with money in a New York–based hedge fund called Stillwater Capital Partners profited from subprime in Columbus, and that kept him running around some of Columbus’s poorer neighborhoods in search of vacant properties and the “straw buyers” whose names and signatures were needed to bid up the prices of these boarded-up messes. But the shock in the series was its finding that foreclosure filings had risen faster in the state’s suburban and rural counties than in urban ones. “Foreclosures were predictably concentrated in poor, inner-city neighborhoods,” Dutton wrote. “But, surprisingly, clusters of dots circled the outskirts of the city, in the newest subdivisions of suburbia.” Even a small Amish community in the northeastern corner of the state felt so under siege that the county posted public service billboards on the more popular horse-and-buggy routes. “You can be robbed when you are away from home,” the signs read, “or you can be robbed over pie and coffee. Be skeptical of door-to-door mortgage salesmen.”
In her reporting, Riepenhoff focused on a single subdivision on the city’s far western suburbs, called Galloway Ridge. It had been developed by Dominion Homes, a publicly traded real estate development company that built subdivisions in central Ohio and Kentucky. Galloway Ridge was a relatively new development but one in six homes were already in foreclosure or part of a bankruptcy proceeding. When Riepenhoff asked the executives at Dominion for an explanation, they blamed it on the irresponsibility of their buyers. “These people are not of the same credit quality, the same earnings level, the same understanding of credit as people in other parts of town,” company CEO Douglas G. Borror told the Dispatch.
However, the credit counselors, bankers, appraisers, and others in the real estate industry appearing in Riepenhoff’s article offered an alternative explanation for the high rate of foreclosures: a lack of checks and balances in the company’s sales transactions. Five years earlier, Dominion had created a new division, Dominion Homes Financial Services, to act as a mortgage broker for those looking to buy any of the properties they built. That meant a single company was constructing the homes, setting the prices, and playing a large role in establishing the loan terms. Dominion even went one step further by helping those without any money raise a down payment—or, as Riepenhoff wrote, the home builder “found a way around a federal law barring sellers from giving money directly to buyers for a down payment.”
A California-based nonprofit called the Nehemiah Corporation of America was the key. Dominion would send a prospective buyer to Nehemiah, which would send Dominion borrowers the 3 percent down payment required to qualify for a loan through the Federal Housing Administration (FHA). Then, within a few days, Dominion would donate that amount of money to Nehemiah, plus a service fee. (For years HUD, which oversees the FHA, has tried to block this practice but the agency had never prevailed in the courts.)
What was the harm if a sizable corporation wanted to devote a portion of its profits to helping people of modest means raise a down payment for a house? For one thing, it wasn’t a gift; Dominion officials admitted to Riepenhoff that they simply passed along the cost of the down payment to the buyer, just as it would the cost of a specially ordered stove. Moreover, there were risk-management studies that led the government to impose the 3 percent requirement in the first place. A 2002 HUD study of Nehemiah-assisted loans in four cities found default rates higher than 19 percent. At 11.5 percent, the Dominion default rate was much lower but it was still twice as high as the Ohio average and more than two and a half times the national average.
The paper found that Ohio’s mortgage default rate had reached nearly 6 percent—tops in the country in 2005. The surge had started in 1999, shortly before Faith and the people in Dayton began clamoring for someone in power to act. That year there had been 31,000 new foreclosure filings in Ohio but by 2005 there would be more than twice that number: 64,000. The list of culprits the Dispatch series singled out was long and included mortgage brokers who put borrowers in loans they could not afford and unscrupulous appraisers inflating the worth of a property. The series also included a chart of Ohio’s ten largest subprime lenders, a roster that included Countrywide, H&R Block, Citigroup, and Wells Fargo. “I think a lot of Columbus was in shock while that series was running,” Ron Bridges said.
People inside the Dispatch weren’t the only ones to notice this creeping menace, of course. Almost as soon as she took office in 2004, Joy Padgett, a state senator representing a predominantly rural district in central Ohio, began to hear from residents worried they were going to lose their home after refinancing with an unscrupulous lender. “At first, I thought they might just be isolated incidents,” Padgett said, but the consistency of the calls and the volume convinced her otherwise. Researching the law, she discovered the same loopholes that others had spotted years earlier. At the start of 2006, she introduced the Homebuyers Protection Act, which would broaden the state’s consumer protections laws so that they covered mortgage brokers, loan officers, and nonbank lending institutions. The bill also empowered the attorney general’s office to prosecute appraisal inflation and other practices that are often part of mortgage fraud. Padgett was a Republican representing a conservative district, but Faith, the left-leaning homeless advocate, finally had his champion. “She ended up becoming a good friend,” Faith said.
As 2005 was turning into 2006, Bill Faith was missing a key component in the narrative he was trying to construct. Martin Eakes and his allies had Freddie Rogers, the widower and single parent who drove a bus for the Durham public schools. Bill Brennan and Howard Rothbloom put forward several older women whose plight came to serve as the public face of predatory lending in Atlanta at the start of the 1990s. Bill Faith had a raft of sobering statistics on his side and an ominous sense of a pending crisis, but it wasn’t until a lawyer named Rachel Robinson at the Equal Justice Foundation told him about Martha and Larry Clay that he found those Faith dubbed “predatory lending’s poster couple.”
The Clays, who lived in a white working-class neighborhood in Columbus that locals call the Bottoms, were both blind. Their home had cost $15,000 when they purchased it in the mid-1980s. Larry Clay had worked as an X-ray technician at a nearby hospital for thirty-nine years but that facility closed its doors in 2002 when he was in his mid-sixties. After that the couple lived on a monthly $1,700 disability check. They attended services at a nearby church, where Larry Clay sang several times a week and volunteered at its soup kitchen. Martha Clay had recently survived ovarian cancer. By the time Bill Faith learned these and other facts about the Clays, they had been talked into so many refinancings that the couple owed $80,000 on a home the county assessor claimed was worth only $37,000, and they were facing eviction. The closing costs and broker’s fees on the last four refinancings alone added up to $20,000. As Martha Clay described it, they had been paying 7 percent interest on a $72,000 home loan but then the same mortgage broker who had put them in that loan only eight months earlier told them he could get them a better rate. But then the Clays ended up signing papers on an $80,000 loan carrying a 10 percent interest rate. So whereas the couple had been paying $480 a month on their home prior to that final refinancing, their new monthly bill was $702. For his troubles, the mortgage broker paid himself a $3,200 fee.
“Both blind, from a poor white neighborhood in Columbus, scammed into mortgages six different times,” Faith said. “Good religious people. He sings in the choir. I mean, she’s got cancer and they’re doing this to her.” Faith couldn’t suppress the sly grin tugging at the corner of his lips. Despite the great sympathy he felt for the Clays, he’s a political pragmatist who recognizes an opportunity when it is presented to him. “A legislator can argue with me,” he said. “But what are they going to say to the Clays? ‘You should have known better?’ ‘You should’ve read the documents closer?’” The Dispatch told the Clays’ story in a page-one article that appeared on a Sunday in February 2005, and Faith arranged it so the couple testified in both the Ohio House and Senate when it came time for the appropriate committees to debate Joy Padgett’s bill.
The Republican leadership proved critical to its passage. It helped that Faith had a good working relationship with both Bill Harris, the president of the senate, and his top lieutenant, Jeff Jacobson. Both Harris and Jacobson had sided with the industry in 2002 (the Ohio Association of Mortgage Bankers gave Harris its “Legislator of the Year” award that year) yet both joined the reform side in 2006. “I think they recognized that what they were hearing from all these mortgage guys was a bunch of crock,” Faith said. Perhaps, but Ron Bridges was inclined to give Faith some credit for helping to nudge them along. Bridges joined Faith when he visited Jacobson, who represented the Dayton suburbs, to talk about Padgett’s bill. “Do you want your mother, because she walks into the wrong door on High Street, you want her to lose her home?” Faith asked him. Not for a moment did Bridges think this powerful senator’s mom might find herself in that predicament, but it didn’t matter. “He got that this was about protecting people’s mothers from falling prey to these people,” he said of Jacobson. So strongly did Harris and Jacobson back Faith on this bill that when their Republican counterparts in the House tried to water it down, the pair bullied them into backing off.
At Faith’s suggestion, the signing ceremony, held in June 2006, took place in the Clays’ backyard. “That was a great day in our lives,” Martha Clay said. For the occasion she wore a turquoise pantsuit with a green top and a gold heart necklace and Larry Clay donned a sport jacket and tie. Several of the Clay grandchildren also attended. During the signing itself, Governor Taft, as he had done in 2002, congratulated himself for a job well done. With Faith standing behind him, the governor said, “It shouldn’t take a miracle to allow our homeowners to stay in their homes and enjoy the American dream.”
The bill, which took effect on January 1, 2007, would do some good as the problems in Ohio and elsewhere got worse. The law would give prosecutors additional tools to go after those who had abused borrowers. By the start of 2009, Faith said, the Ohio attorney general had filed multiple suits under the new law.
Still, the victory felt hollow and it would come to feel more so in the coming months. “We knew at the time we were too late,” Faith said. No one on his side of things was particularly surprised, he said, when “six months later the wheels fell off” and Ohio’s problems transmogrified into a worldwide calamity.
Not long after the signing ceremony, Bill Faith made the three-hour drive to Youngstown to visit his mother. He hoped to do a little boasting, he admitted, or at least get some rest, but instead she started lobbying him. She told him about people she knew from church who had gotten themselves into a deep financial hole using the services of payday stores, and she mentioned people they both knew from the neighborhood who had gotten themselves in trouble the same way.
“I have this big win and my own mother, she’s on me about dealing with this other thing,” Faith says. “I’m all excited, ‘We did it,’ and she’s like, ‘That’s nice but what about payday lending?’” he said. He hacked out a throaty smoker’s laugh, shot me a glance, and asked, “Ya know?” With time, the payday lenders would grow to despise Faith with nearly the same intensity they normally reserved for Martin Eakes.
There’s something monomaniacal about Bill Faith. He burrows so deeply into an issue or a project that it’s as if the rest of the world ceases to exist. His wife of more than twenty years, Barb Poppe, describes it as “the zone.” It doesn’t make a difference if her husband is working at the computer or deep into a document or just playing cards. “When he gets in the zone, that’s what he totally focuses on,” Poppe said. But that also means Faith can miss a lot while he’s concentrating on something else. For the longest time this advocate for the poor was oblivious to all the payday stores opening in and around Columbus. To the extent he even understood what a payday loan was, he figured it was something people took out once in a blue moon. “I’m embarrassed to say that the cycle of debt and people getting sucked in was something that never even occurred to me,” Faith said.
Before his mother brought up the problem, Dan McCarthy, his lobbyist friend, and Tom Allio, a political ally running the social action arm of the Catholic Diocese of Cleveland, did. McCarthy had never taken out a payday loan, but he knew his sister had because she put him down as a reference and lenders started calling him at work whenever she was late on a payment. It got so bad, McCarthy told Faith, that he had written a big check just to make the phone calls stop. McCarthy, who had worked with Faith on the predatory lending bill, had even half joked with his friend on the night they finally won, “Now we go after the payday lenders.”
For Allio, payday had become his issue a couple of years earlier when he first learned about a woman named Peggy Daugherty. Daugherty, traveling back and forth from central Ohio to Cleveland to get medical attention for her daughter, had borrowed $300 to pay for work on her car. By the time a friend intervened, Daugherty, a middle-aged woman living on a monthly disability check of about $900 a month, owed money to five different stores and had already spent more than $1,000 in fees. To Allio, payday was nothing but an extension of the predatory subprime mortgage lending problem, and in fact he had irritated Faith no end by suggesting they add a payday rate cap to the predatory lending bill.
“We already were up against the entire mortgage industry,” Faith said. “At that point we didn’t need a whole new set of enemies lining up against us.”
Faith had promised Allio he would turn his attention to payday finance as soon as the mortgage fight was over, but months passed without Faith making any commitments. “I was still dragging my feet,” Faith said. “So now Tom is getting even more pissed.” It was no longer a question of what he thought of payday loans. A woman on his staff was getting calls at work because of a sibling who was past due on some loans and he heard from another friend whose sister had also gotten herself into a deep hole using them. “Once you start looking into this thing, you see it’s a really ugly world,” Faith said. But Faith, ever the pragmatist, wanted to see if they stood a chance before jumping into the fight. He checked in with a few friendly legislators and he set up a meeting with the governor-elect, a Democrat named Ted Strickland. Strickland, who would take office at the start of 2007, asked him to wait, but he also made it clear he would sign something if it reached his desk. Faith had similarly encouraging signs from the others, so he informed Allio he was on board.
The group called themselves the Ohio Coalition for Responsible Lending—a self-conscious nod to the Center for Responsible Lending. Jim McCarthy and Dean Lovelace were members, as were a long list of labor leaders, housing activists, community organizers, legal aid attorneys, and those representing faith-based organizations around the state. “To many of us this wasn’t just an economic issue but a moral one,” Allio said. “The high interest rates they charge is a modern-day form of usury. I don’t care what the text, whether it be Jewish or Catholic or mainline Protestant, there’s clear statements in each against usury and the need to offer fair interest rates.” The group decided that its aim would be to cap the interest rates that payday lenders could charge and limit the number of loans a person could take in a given year. “We had people calling the office every day who are like, ‘I’ve got five, six, ten payday loans, I’m trapped,’” said Nick DiNardo, a legal aid attorney in Cincinnati. “And there was nothing we could really do short of helping them if the collections got too aggressive.” It fell to Faith to find a lead sponsor for their bill.
The new governor was a Democrat but the Republicans still controlled both the Ohio House and Senate. So instead of starting with a good liberal, Faith surprised his allies by first approaching a conservative legislator named Bill Batchelder. With Leonid Brezhnev eyebrows, oversized Mars Blackmon glasses, and a tendency to quote Adam Smith, Batchelder hardly seemed to fit the bill of consumer champion. But if they could first muster Republican support, Faith reasoned, some of the bipartisanship good feeling they had nourished during the mortgage fight might carry over to payday. Besides, the two got along famously. Unlike most every other lobbyist traipsing through his office, Batchelder told me, he always found Faith a man of conviction “who was actually looking to engage you in a serious policy debate.” If some of Faith’s allies were inclined to describe Batchelder as one of the legislature’s “cavemen conservatives,” that was all right with Batchelder, who reacted to the characterization with a burst of delighted laughter.
Batchelder and Faith might disagree about most everything but he was an easy sell on payday lending. Batchelder told him he was happy to sponsor the Coalition for Responsible Lending’s bill, not despite Adam Smith, the first apostle of laissez-faire, but because of him. “The rates lenders charged were a moral question for Smith,” Batchelder said. “Smith pointed out that if you charge too much, you damage a society. And he’s right. You can’t charge people these kinds of interest rates without hurting their situation and society.” In October 2007, Batchelder and Robert Hagan, a liberal Democrat from Youngstown, introduced a bill that would impose a 36 percent rate cap on the interest rates payday lenders could charge.
In Washington, D.C., Steven Schlein reacted to the news with an indifferent shrug. After four years with the payday lenders, he had learned not to get too worked up over every dispatch from the hinterlands. “Every year a bunch of states put payday into play,” Schlein said. “But then in the end you have few actual fights.” They had lost legislative battles in Oregon and New Hampshire over the previous few years but mainly they ended up with a compromise that the big chains could live with. “Ohio didn’t seem one of the places we should worry about it,” Schlein said.
In Spartanburg, Billy Webster was similarly unconcerned. The market was too important and the industry too strong in Ohio to lose. Check ’n Go was based in Cincinnati and the Davis brothers several years earlier had had the foresight to spend the money necessary to lure away a top Ohio Senate staffer to run its governmental affairs office. There was also CheckSmart, based in Columbus, a chain of 175 payday and check-cashing stores that had just been sold to a large New York–based private equity fund for $268 million. After writing a check that big and with half of its stores in-state, CheckSmart’s investors weren’t going to sit idly by. “We were told time and time again,” Webster said. “With Check ’n Go and CheckSmart there, there was no way Ohio would be in play.”
The Coalition for Responsible Lending held forums across the state and organized small delegations to meet with individual legislators and with the editorial boards of all the big daily newspapers. A local research group, Policy Matters Ohio, released a report demonstrating that payday had become widespread even in the state’s suburban and rural areas. When, in the autumn of 2007, Marc Dann, the state’s Democratic attorney general, announced he would be holding hearings investigating the lending practices of the state’s 1,600 payday stores, the search was on for customers and employees, or at least former employees, willing to talk about their experiences.
The first of three hearings was held in a large Baptist church on Cleveland’s east side. The industry might have been confident about a victory but they were hardly complacent. Its supporters showed up in full force, wearing yellow “I Support Payday Lending” buttons and made sure their perspective was voiced. They pointed to the list of “best practices” their trade association had developed, including a twenty-four-hour rescission policy and a once-a-year extended payment plan for customers who get themselves into financial trouble with a payday loan. Payday’s critics, many of whom sported buttons showing a shark’s snout biting into a large stash of cash, dismissed these voluntary policies as not worth the paper they were printed on. One of the more moving speakers in Cleveland was a man named Charles Mormino, who told the crowd about a family member with psychiatric problems (he was no more specific than that) who had gotten into trouble with a trio of payday stores. He settled up her debts at all three and then sent a certified letter to each alerting them to the family member’s problem. But all three—Advance America, CheckSmart, and ACE Cash Express—continued to do business with her.
A former payday manager named Tom Kirk spoke at the attorney general’s hearing in Columbus. On paper, Kirk said, the payday lenders were generally responsible citizens. There were in fact rules at the company where he worked against lending to a customer carrying loans at multiple stores, and there were policies to protect borrowers from overzealous collections. The rub was that employee bonuses were based largely on volume. “The policy manual of the company I worked for was good,” Kirk said. “The problem is that the district manager and the store managers and the store personnel don’t always follow it.”
Those who supported the Batchelder bill might have felt encouraged by their organizing efforts if not for one failing: They seemed to be getting nowhere in their hunt for legislators willing to join their crusade. Particularly baffling was the reluctance of House Democrats to commit to their cause. “Several of the legislators were not friendly, verging on hostile,” said Jeff Modzelewski, an organizer for BREAD, a church-based group in the Columbus area, who met with all twelve legislators representing the capital and its suburbs in the statehouse. Even Joyce Beatty, the House minority leader, a black woman representing central Columbus, proved frosty. “We figured she would be strongly enthusiastic,” Modzelewski said. “She represents a black, poor urban district with inner-city problems. But meeting with her—she was among the worst. I’m there with twenty church members and she’s talking to us like we don’t know what we’re talking about.”
There are people in the black community, of course, with a favorable view of the poverty industry. In South Carolina, I spent an evening with Willie Green, the former pro football player who had proven brave or foolish enough to appear on 60 Minutes Wednesday. Green, who by this time had gone to work for Advance America, spoke rhapsodically about the critical role these fringe financial institutions played in the life of the black community. “Check-cashing stores and pawnshops and payday lending stores, those are the poor man’s institutions,” Green said. “You go to any poor black person, and I guarantee you, they’ve borrowed money from a payday person, a title loan person, or a pawnshop. That’s what you do if you don’t have the luxury of going into a bank and borrowing money.” Green’s father, a janitor at a movie theater in Athens, Georgia, had raised nine kids on $85 a week. “He used to play golf on Saturdays and Sundays and then go to the pawnshop,” Green said. “He’d pawn his clubs and he’d pay for my school, or whatever I needed to succeed in life. And then he’d go get his clubs at the end of the week when he got paid.
“He made that sacrifice for us. If my dad had not had the ability to use a pawnshop, I wouldn’t be where I am. I wouldn’t have been able to go to college. I wouldn’t have been able to play professional sports.”
But Joyce Beatty was another story. The Cleveland Plain Dealer revealed that CheckSmart, the company that had just been sold for more than a quarter of a billion dollars, put Beatty’s husband, himself a former legislator (she had taken his seat in the legislature), on the CheckSmart payroll. Even the whiff of controversy was all the motivation many in Beatty’s caucus needed to make up their minds about the evils of payday lending. “A lot of wavering Democrats suddenly had very strong opinions,” said Jim Siegel, who covers the state legislature for the Dispatch. Even Beatty came out in support of meaningful payday reform, as if to show that she was not in bed (so to speak) with the industry. Now all they had to do was convince enough Republicans that there was a compelling reason to add to the state’s job loss and shutter an industry that employed several thousand people across Ohio.
In the eight years he served in the Ohio House of Representatives, Chris Widener remembers a gavel being used during a committee hearing only a few times—and all of them were in the winter and spring of 2008, when his committee, Financial Institutions, was debating payday lending. Widener is an architect by profession, thorough and precise, a thin man with blue eyes, metal-framed glasses, and a receding hairline. He believed that any person wanting a chance to speak should be given one and so he held four hearings on the issue, one of which lasted nearly seven hours.
The crowds were large and often raucous. What Chris Browning remembers about her time in front of Widener’s committee was the hissing and the jeering that accompanied her testimony. She told the committee about the GM pensioner who had borrowed money from her store for 115 consecutive months—and people wearing yellow “I Support Payday Lending” buttons and yellow shirts booed and yelled out things like “liar” and “bullshit.” She declared that “repeat borrowers are the payday loan institution’s bread and butter,” which prompted more catcalls and cries. “Widener’s banging that gavel of his and telling people they’ll be quiet or he’ll remove them but it’s not making much difference,” Browning recalled.
An unhappy Allan Jones took his turn at the witness table. He had better things to do than try to explain his business to people who didn’t understand it, yet suddenly he had been told that he needed to worry about shutting down all his stores in one of his best markets. “It’s like overnight we’re hearing we might lose Ohio,” he recalled. With foreclosures starting to spike across the country and the economy starting to teeter, he was worried that payday would end up collateral damage. “Payday didn’t cause any of this but I realized we were being used as an easy scapegoat,” he said. You might not like how I make my money, he told the committee, but the people you’d be hurting if you imposed this cap “were the ones who without us couldn’t pay the electric company or the repair shop if their car breaks down.”
Bill Faith listened in amazement to this heavyset man from Cleveland, Tennessee, who had flown to Columbus in his private jet to lecture the Ohio state legislature about the plight of the working man. “We provide them an essential service to help them when they’re most in need,” Jones said earnestly. Who is this guy, Faith asked himself—and then quickly realized it was his best friend. “I just wanted him to talk and talk and talk,” Faith said. “Because the more he talked, the more he offended everybody.” Faith had the opposite reaction when Lynn DeVault, a Jones underling serving as the president of the payday trade group, took her turn at the microphone. Rather than dismissing the critics as pointy-headed elitists, she acknowledged the payday horror stories but then blamed them on mom-and-pop shops refusing to adopt the industry’s best-practices pledge. Our customers like us, she said, and if that wasn’t quite true, they certainly didn’t dislike them so much that they did something about it. Only about a dozen people a year typically filed a complaint about a payday lender with the state—a small number when compared to those filed against check cashers and others in the poverty business. “Customers are intelligent people who choose the lowest-cost alternative for themselves at a particular point in time,” DeVault told the committee. They can pay us $15 to borrow $100—or they can pay the bank $35 every time they bounce a check or blow $50 paying a utility company a restore-service fee because they were two payments late on their electricity bill.
Terrence Jent, who had worked as a regional director for Check ’n Go, offered a very different perspective than Jones or DeVault. Jent had started as a store manager in his last semester of college and quickly worked his way up from district manager to regional manager. What bothered him about his four years in the industry, it seemed, was the aggressiveness with which they pursued someone who was late in paying them back. “You will receive harassing phone calls three to four times a day,” he told the committee. “All of your personal references will receive phone calls each day. You will be visited at work in an attempt to embarrass you into paying your loan. You will be visited at your home so that you understand that the payday lender knows where you live.”
Yet the hearings, while raucous and often dramatic, weren’t swaying opinions. Widener regularly polled committee members, as did Jim Siegel over at the Dispatch. Both were hearing the same thing. Republican members might be willing to do something about payday but nothing so radical as a rate cap. “They were telling me, ‘We might have to do a bit of tinkering, we might need to put on some kind of limit, but we don’t want to shut an industry down,’” Siegel said. Widener was searching for a compromise that set aside the rates the payday lenders charged but limited people to two loans at any given time or perhaps eight loans a year. “At that point, it didn’t look like anyone was passing anything,” Siegel said.
Steven Schlein might want to claim the role of underdog but in Ohio the payday lenders were anything but outmanned. Schlein’s group, the Community Financial Services Association, had six lobbyists on the payroll during those months they were debating a payday cap (including Chuck Blasdel, the former state representative who had done the bidding of the subprime mortgage lenders in 2002 and 2006). A group calling itself the Ohio Association of Financial Service Centers had its advocates, as did the individual chains. Cash America, with 139 stores in the state, hired two lobbyists. Rent-A-Center, with fifty-three stores in Ohio offering payday loans, hired four. “You could see it just sitting there,” Faith said. “It’s like each little delegation sitting in the crowd had their own lobbyist.”
In the end, though, the rival lobbying seem to carry less weight than the gathering economic cataclysm that was threatening to engulf the state. The Republicans had already lost the governorship and they were scrambling to maintain their majorities in the Ohio House and Senate. The Speaker of the House, Jon Husted, wanted the party to be on the side of reform. So one day in early April, with the hearings over, Husted held an impromptu press conference with a small gaggle of Columbus reporters.
“I sense growing support for a rate cap in our caucus,” Husted announced. That of course wasn’t what they were hearing or what Widener had been telling them, but the Speaker was sending a message. He wanted to see a rate cap passed and he wanted it to happen quickly.
Strickland, the new governor, also turned up the heat after Bill Faith ran into him in the hallways of the capitol. The two had known each other for years, and when Strickland asked Faith how it was going, Faith told him he could use his help on the payday lending bill. That day Strickland’s staff penned a letter with Faith’s help. “It is my hope,” the governor wrote, that the legislature would approve a 36 percent rate cap and that “I would have the opportunity to sign this policy change into law in the near future.”
That weekend Husted called Widener. He was not about to be out-flanked by a popular new Democratic governor on an issue he had already staked out. Perhaps the simplest solution, Widener suggested, was to take away what the legislature had granted the industry back in 1995, when it exempted these short-term loans from the state’s 28 percent usury cap. That was a cap even lower than the one Strickland had endorsed, which sounded fine to Husted. Twenty-nine Republicans joined forty Democrats to pass the bill by a 69–26 margin. The bill also limited people to four payday loans in a year.
The industry made a last-ditch stand in the senate. They hired more local lobbyists, flew in more troops from out of state, and held a giant rally in front of the statehouse. About two thousand people, most of them payday employees, gathered to listen to speakers and chant, “Save our jobs!”
But it was too late. The day after the rally, the state attorney general released his report on Ohio’s payday lenders. There was “compelling evidence of an industry that uses deceptive practices to target some of the state’s most vulnerable citizens,” Marc Dann wrote. He dismissed payday loans as “a deceptively attractive choice for those in need of quick cash.” Widener’s bill flew through the senate with only minor changes and Governor Strickland signed the bill into law in early June.
The payday lenders, though, would have the last laugh. “It’s a sad day when the opinions of editorial writers and so-called consumer groups count for more than the opinions of the people,” Lynn DeVault said in a statement released on the day Strickland signed the cap into law. The next day, DeVault and her allies did something about this grave injustice when they filed paperwork with the secretary of state’s office indicating their intention to repeal the new rate cap through a statewide referendum. The foes of payday lending would have to win twice, though this time in an expensive statewide ballot fight that seemed well beyond their budget.
“I was,” Bill Faith said, “more surprised than I want to admit.” At a press conference, he told the assembled reporters, “You ain’t seen nothing yet,” but in truth he was nervous. “I had pulled every rabbit out of a hat I could think of,” he said, and his reservoir of clever ideas seemed dry.