Payday Lending Campaign Dollars Pave Way for Industry-Friendly Laws

Dan Newman | May 23, 2007

$8 Million in Campaign Contributions Paves the Way for $4.6 Billion in Loan Fees

Report links Payday Loan Industry Campaign Contributions to Regulatory Legislation in State Legislatures

Read full report here

May 24, 2007 - In a report released today,, a nonprofit, nonpartisan research group, found that the payday lending industry has dramatically increased its state campaign contributions over the last eight years, coinciding with favorable state laws that allow these high-interest lenders to continue to operate.

The report examines, in-depth, the states that received the most campaign contributions from the payday loan industry, as a percentage of overall campaign giving in the state. These states are: Idaho, Illinois, Kansas, South Carolina, Tennessee, Texas, and Utah. The report reveals that as total industry campaign contributions in these states increased, state laws allowed the industry to continue operating without significant restrictions.

The report found that many industry contributions came from out of state. In Idaho, virtually all industry contributions to state legislators 97% came from outside Idaho. Other states with high levels of out-of-state contributions included: Utah (84%), and Illinois (50%).

The payday lending industry contributed $3.2 million to legislators and political parties in these states during 1996 to 2006. Borrowers in these states paid $1 billion in loan fees in 2005 alone.

Across all 50 states, the industry contributed $8 million during 1996 to 2006. Borrowers across the U.S. paid $4.6 billion in loan fees in 2005 alone.

In several states, large majorities of legislators received funds from the payday loan industry, coinciding with legislation that was either favorable or only minimally restrictive to industry. In Texas, for example, the payday lending industry gave campaign contributions to every Texas Senator, an average of $8,269 to each Senator. No legislation passed in Texas during the eight years studied that significantly restricted payday lending.

In Illinois, a bill favorable to the industry passed unanimously in the House, and nearly unanimously in the Senate, where 84% of House members and 88% of Senators received industry funds. Governor Blagojevich, who signed the bill into law, received $172,250 from the industry.

Payday loans, also known as cash advances or deferred deposit loans, are short-term loans secured by a post-dated check. Borrowers living from paycheck to paycheck often become trapped in debt. Unable to pay back a short-term loan, they extend the loan repeatedly, accruing effective annual rates that may exceed 400%. The U.S. payday lending industry has grown from an estimated $8 billion in loan volume in 2000 to $28 billion in 2005.

The report's findings are based on a analysis of contribution data from the National Institute on Money in State Politics and public records of legislative votes in each state. The full report is available at the website: is a nonprofit, nonpartisan organization illuminating the connection between money and politics. We shine a light on campaign contributions and related legislative outcomes, which leads to a more informed public and election reform. If our work has been helpful to you, please consider supporting us.

Read full report here