As legislation advances in Congress to crack down on consumer-unfriendly lending practices, staffers in the offices of California Sens. Barbara Boxer and Dianne Feinstein noticed a funny thing this week: Customers of payday lenders were calling by the hundreds to oppose the bill, and all seemed to be repeating the exact same phrases.
The staffers were right to be suspicious.
Payday lenders are notorious for their high fees and interest rates, and they may face new restrictions as part of efforts to overhaul the financial services industry and create a Consumer Financial Protection Agency.
Yet customers of these companies were calling to demand that government authorities leave the industry alone and allow consumers to make their own financial decisions. They said they wanted Boxer and Feinstein to vote against the reform legislation.
"My offices were getting hundreds of calls from the same few phone numbers, and the callers all seemed to be reading from the same script," Boxer told me. "What was most surprising was that the callers were opposing a bill that was designed specifically to protect them."
She said her office had received more than 900 calls as of Thursday.
Gil Duran, a spokesman for Feinstein, said his office had received only a handful of calls, but they mirrored those received by Boxer.
"It seemed that the callers were being asked to do this," he said. "It seemed unusual."
It was. The outpouring of ostensibly spontaneous consumer rage was in fact a well-orchestrated effort on the part of the payday-lending industry to sway the vote on financial reform.
It was also an extraordinary application of pressure on a vulnerable segment of the community: people with high-interest loans who could be financially devastated if the issuers of those loans suddenly demanded their money back.
Steven Schlein, spokesman for the Community Financial Services Assn., a payday-lending industry group, acknowledged that the industry was behind the calls.
"We do have a grass-roots campaign going on," he said. "A lot of our customers and employees are calling."
Schlein said he was unable to discuss details of the campaign or whether payday lenders were handing scripts to customers.
But Norma Canel's experience was probably typical of many customers'.
She said she and her husband each took out a $300 payday loan about a year ago from a company called Check Into Cash. Her husband has been unable to work because of heart and eye troubles. "We had bills to pay," Canel, 55, told me.
The loans require them each to pay about $45 a month to the lender — that's an annual interest rate of about 180%.
When they stopped by their local Check Into Cash office this week in Clovis to make their latest payments, Canel said they were handed a piece of paper and encouraged by an employee to help the company fight legislation in Washington that it said would be bad for people like them.
"If we don't act today," the paper said, "Congress will create a new agency and a government takeover of your personal finances. This new agency would have the power to regulate and restrict your personal credit options."
The paper included contact information for Boxer and Feinstein.
"Tell them to stop the Community Financial Protection Agency," it instructed. "Tell them you're angry about healthcare and now Congress wants to control your right to get credit. Tell them you've had enough and that the senator should stand firm against the administration's attempt to interfere in your financial decisions."
It's the Consumer Financial Protection Agency, not Community Financial Protection Agency, but close enough. And what financial reform has to do with healthcare isn't made clear, although lawmakers have been busy trying to make both systems more equitable to consumers.
Canel said she was upset that her payday lender appeared to be misrepresenting the situation.
"They're trying to make this into some kind of little-guys-versus-the-big-guys issue," she said. "It's not. It's the payday lenders trying to keep their bread buttered."
Canel was also worried that Check Into Cash might retaliate if she and her husband didn't play ball. "What if they call in their loan?" she asked.
A spokesman for Check Into Cash couldn't be reached for comment.
In the end, the couple decided not to make any calls and to hope for the best. But maybe they're the exception. Maybe other payday-loan customers share the industry's concerns and are willing to express their feelings to their elected representatives.
To find out, I stopped by a payday lender on Broadway in downtown Los Angeles. Not one customer I spoke with even knew about the reform legislation.
But when I explained that a Consumer Financial Protection Agency would oversee mortgages, credit cards and other loans, and spelled out some of the other reforms on the table, everyone I met agreed that these sounded like good things.
"I have no problem with consumer protection," said L.A. resident Robert Jon, 47. "I wouldn't try to fight that."