Washington Post, August 30, 2013

Obamacare is upon us, and already fraudsters are out to cheat people.

With a lot of confusion about the health insurance marketplaces, consumers are receiving phone calls from people claiming to provide insurance cards needed under the Affordable Care Act. Keep your guard up, says Edward Johnson, president and chief executive of the Better Business Bureau of Metro Washington and Eastern Pennsylvania.

One of the more controversial and confusing provisions of the law, and one that con artists might try to exploit, is the provision that requires most Americans to maintain “minimum essential” health insurance coverage. A just-released Kaiser Family Foundation poll found that about half of respondents do not understand how the law will affect their own families.

Kaiser found that just over a third of the public, including the uninsured, say they have tried to get more information, most often through a general Internet search.

That should please the con artists. Fraudsters are pretty clever about creating Web sites that spoof legitimate Internet sites.

Johnson said health insurance schemes will only get worse over the next four to six months as the Affordable Care Act is implemented.

“Scammers take advantage of the latest policy or new program to hook potential victims with something new in the news that they don’t yet know much about,” Johnson said.

The Federal Trade Commission is hosting a roundtable Sept. 19 to discuss health care-related scams. The agency is bringing together federal and state consumer-protection officials, legal-service providers, community organizations and consumer advocates to discuss how best to help consumers avoid potential scams. The roundtable will be broadcast on the Web.

“We have lots of eyes on the marketplace already,” said Lois Greisman, associate director of the FTC’s division of marketing practices.

So how might one of the scams work?

You might receive a call from someone claiming to be from the federal government, Johnson said. The caller informs you that you’ve been selected as part of the initial group of Americans to receive insurance cards through the new Affordable Care Act. That’s the hook — and a lie. Before he or she can mail your card, you are told, you need to provide some personal information. That’s the heart of the scam.

The goal is to get you to provide personal information, such as your bank account or Social Security number. Scammers can use this information to open credit cards in your name or steal from your bank account.

There are no special insurance cards being issued as part of the enrollment for the Affordable Care Act. Further, open enrollment doesn’t start until Oct. 1. So anyone claiming they can sign you up now is deceiving you.

Here are some tips from the BBB to protect yourself:

● Government agencies normally communicate through the mail, so immediately put up your guard if you get an unsolicited call, text message or e-mail from someone claiming that he or she will help you sign up for health insurance. The way the exchanges work, you must take the initiative to sign up.

● If you get an unsolicited call regarding health care insurance, hang up. Don’t engage the person. If you need any information, go to www.healthcare.gov, the official insurance marketplace Web site. You can also dial a toll-free number — (800) 318-2596 — 24 hours a day, seven days a week. Hearing-impaired callers using TTY/TDD technology can dial (855) 889-4325 for assistance. Kaiser found that few people were turning to health insurance companies, nonprofit or community organizations or government Web sites to become informed. Be sure you are searching legitimate sites.

● Don’t trust your caller-ID screen. Scammers have access to technology to manipulate the screen to display any number or organization name.

● Never give out personal information such as credit card numbers, bank account or Social Security numbers or your date of birth to unfamiliar callers.

If you suspect a scammer has contacted you or if you’ve been conned, file a complaint atwww.ftc.gov. To file a complaint in English or Spanish, click on the link on the home page that says “Consumer Complaint?” You can also call the FTC at (877) 382-4357. Tell the BBB by going to www.bbb.org/scam.

“We have lots of eyes on the marketplace already,” Greisman said. “Consumer complaints are critical in helping us identify and stop these scams. We want to hear from consumers.”

Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or singletarym@washpost.com. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to postbusiness.com.

Liberty Tribune, August 31, 2013

The Missouri Public Service Commission has approved a request filed by KCP&L-Greater Missouri Operations Co. to change the fuel-adjustment charge on the monthly bills of its electric customers.

The FAC change reflects fuel and purchased power costs during the six month period December 2012 through May 2013. It also reflects the company’s annual FAC true-up. In that filing, GMO stated the true-up reflects an under-collection of approximately $314,400 from customers in the MPS rate district (Kansas City area) and an under-collection of approximately $357,600 from customers in the L&P rate district (St. Joseph area).

The change in the FAC will take effect Sunday, Sept. 1. It will mean an increase of approximately $0.78 a month for the average residential customer in the territory served by MPS and an increase of approximately $1.29 a month for the average residential customer in the territory served by L&P.

The fuel adjustment charge was authorized by the Commission for KCP&L-GMO in a regular rate case in 2007. The FAC tariff allows the company to pass increases or decreases in its net fuel and purchase power costs to customers outside of a general rate case.

The FAC allows the company to recover most — up to 95 percent — of its costs to encourage conservation and prudence in fuel use by the company. Any charges resulting from the fuel adjustment clause must appear in a separate category on customers’ bills.

Fuel adjustment charges are intended to help companies deal with volatility in fuel pricing. The FAC tariff requires regular adjustments to reflect changes in prices the company has incurred for fuel and for wholesale power purchased to serve customers.

KCP&L-GMO provides electric service to approximately 312,700 electric customers in Missouri.

St. Louis Post-Disptach, July 3, 2013

Laclede Gas Co. would not raise natural gas delivery rates for St. Louis area customers for at least two years under an agreement submitted this week to help the utility win approval of its $975 million purchase of Missouri Gas Energy.

The 43-page agreement, filed Tuesday with the Public Service Commission, was signed by Laclede, the Missouri Office of Public Counsel, the PSC staff and several other parties. [CCM note: The agreement includes Consumers Council of Missouri.]

It still must be approved by the five-member commission.

The agreement as submitted would bar Laclede from seeking a gas-delivery rate increase before Oct. 1, 2015, unless there’s an “unusual event” such as a terrorist act or severe downturn in financial markets that produces a net loss greater than

$5 million.

The utility also would not be allowed to recover any transaction-related costs from utility customers or any costs related to the acquisition premium.

But that doesn’t mean gas bills won’t rise during the next two years.

The agreement would permit Laclede to pass through changes in fuel costs, which make up about two-thirds of residential gas bills. The utility would also be allowed to seek increases in an infrastructure surcharge to raise money for the replacement of older cast iron and bare steel gas mains.

The agreement also allows Laclede to seek a rate increase for its MGE Division service area in western Missouri if it does so before Sept. 18. Otherwise, the utility cannot ask for higher rates until Oct. 1, 2015.

St. Louis-based Laclede in December agreed to a $1.04 billion purchase of two natural gas utilities. The centerpiece of the deal is Missouri Gas Energy, which serves about 500,000 customers in the Kansas City area.

The transaction would produce the fourth-largest gas distribution utility in the nation and almost double Laclede’s customer base in its home state.

Earlier this year, Laclede agreed to forgo a proposed $48.4 million rate increase to provide PSC staff additional time to focus on its analysis of the Missouri Gas Energy acquisition.

In a statement Wednesday afternoon, Laclede Gas President Steve Lindsey said the company is “pleased to have reached an agreement in principle with most of the parties to the Missouri Gas Energy acquisition case. This is a transformative transaction for Laclede, our shareholders and our customers.”

Laclede expects to close the transaction by the end of its fiscal year on Sept. 30.

The Beacon, August 19, 2013

A few years ago, Missouri had a surplus of funds for assisting visually impaired people in the state but had difficulty reaching these clients. The state sought the help of the Missouri Association of Area Agencies on Aging, based in Jefferson City.

“The state couldn’t spend all of the money because it couldn’t find the population needing the services,” explains Catherine Edwards, executive director of the association. “They came to us and guess what? We used our outreach network to get out there, and we found many new clients for the rehabilitation services.”

Edwards mentions this incident as a reason federal officials might have selected the association as one of two Missouri groups to find and help tens of thousands of Missouri residents sign up for the insurance exchange program, which begins Oct. 1. The Department of Health and Human Services awarded the association $750,000 for exchange work. Slightly more than $1 million was awarded to Primaris Healthcare Business Solutions.

The two groups will use the money for what’s known as navigators, people trained to help consumers buy health coverage through an insurance exchange, which is still being developed. Navigators will educate people about coverage options and how to choose insurance plans based on their family’s needs and the subsidies they might be eligible for. The federal agency awarded $67 million for navigators nationwide.

“We’ll help people see how the insurance exchange will work and show them options so that they can make informed decisions.” Edwards says. “But we cannot enroll them or point them to a particular insurance plan. We will show them what this plan has and what the other has, but the individual will have to make the decision.”

She says the association will partner with a range of community organizations and use public meetings, radio announcements and other means “to get the word out that there is help and assistance for people who want to sign up for insurance.”

She says the association is a logical recipient because it runs several programs, including meals on wheels, that keep them in touch with hard-to-reach populations. Some members also have experience in helping seniors sign up yearly for supplemental insurance under Medicare.

“We have at least seven years of experience in helping people enroll in the Medicare” supplemental insurance program. “That’s similar but in this case (of the insurance exchange), the program will be for people of all ages under 65 and will be for private insurance rather than Medicare.”

Jennifer Bersdale, executive director of Missouri Health Care for All, says the announcement of federal navigator grants will spur more activity to prepare the uninsured for the health reform law.

Rather than helping to enroll clients, her group’s focus will be on getting out the word to encourage people to enroll.

“We will be trying to reach some of the underserved populations,” she says. “Our role is to spread the word, give people information and help them get to the navigator organizations” and others that will help educate consumers about the enrollment process.

“One exciting thing about the announcement is that we now have more information about the first question of where to go for help,” she says,. But she notes that answers to questions about actual health plans for Missouri and the benefits are still being developed. She is grateful that Missouri will get more money than anticipated – nearly $1.8 million rather than the $1.3 million previously mentioned by federal officials.

Other major groups gearing up for the insurance enrollment program on Oct. 1 are the Missouri Foundation for Health and its Cover Missouri project. The group is hosting a summit in Columbia on Aug. 27, titled Cover Missouri Summit: Ready, Set, Enroll!

The mission, says Ryan Barker, the MFH’s director of health policy, is targeted at nonprofits, civic, academic and health-care organizations. They will be provided with “information, skills and strategies” to educate and enroll the uninsured in the exchange. The MFH also has said it would donate up to $8 million in grants for activities related to exchange enrollment in Missouri.

Consumers Council of Missouri advocated for the expansion of Medicaid to give more Missourians access to affordable health care — one of CCM’s primary issues — in testimony before the Missouri House Interim Committee on Citizens and Legislators Working Group on Medicaid Eligibility and Reform.   Joan Bray, Interim Director of CCM, spoke before the committee on Wednesday, August 14, at Forest Park Community College.

Bray’s two main points were for the state of Missouri to fulfill its obligations to provide healthcare and maximize cost-effectiveness by operating Medicaid as a large business would by self-insuring and to provide each healthcare consumer with a medical home for consistency and continuity.  The full text of Bray’s comments follow:

Testimony

Thank you, Mister Chairman and members of the committee.  I appreciate the opportunity to appear before you today.  My name is Joan Bray.  I am the interim director of the Consumers Council of Missouri.  Consumers Council is a non-for-profit advocacy organization that represents the interests of individual consumers collectively.  We spend most of our efforts in three areas:  utility law and regulation; healthcare access; and personal finance.

Today I want to speak to you about our interest in the transformation of Medicaid in Missouri by expanding it and making it more consumer friendly.

We have two recommendations.  Missouri should operate Medicaid in the same way most large businesses provide healthcare to their employees.  And every consumer of healthcare should have a medical home.

The state of Missouri should look at itself as a large business providing healthcare.  A very large business.  In the Medicaid program alone, more than 1 million people could be eligible.

Rather than pass along the risk to an insurance company, Missouri should self-insure Medicaid as a group health plan.  A self-funded plan, as it is also called, is one in which the employer assumes the financial risk for providing health care benefits to its employees.  In practical terms, self-insured employers pay for each out-of-pocket claim as it is incurred instead of paying a fixed premium to an insurance carrier.  Typically, a self-insured employer sets up a special trust fund to earmark money (both employer and employee contributions) to pay incurred claims.

Reasons most large businesses self-insure would also apply to the state:

1.  The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a one-size-fits-all insurance policy.
2.  The employer maintains control over the health plan trust fund, enabling maximization of interest income.
3.  The employer does not have to pre-pay for coverage, thereby providing for improved cash flow.
4.  The employer is free to contract with the providers or provider network best suited to meet the healthcare needs of its employees.

By self-insuring the state enjoys the likelihood of spending less on administering healthcare and more on ensuring better health for its Medicaid population.

But the state should explore putting all its obligations for healthcare –Medicaid, all the state employee pools – including all the departments and universities – and the prison system into the same risk pool and delivery system to come up with the most efficient and effective use of tax dollars for healthcare.

Consumers Council’s second point is to provide each Missourian under its care with a patient-centered medical home.  This is a team-based model of care led by a medical professional who personally provides continuous and coordinated care throughout a patient’s life to maximize health outcomes.  The consumer learns to know and to trust the team.

Costs for such a model can be based on monthly care coordination payments, fee for service based on visits, and performance or outcomes.  The model enables not only the highest and best use of public money but also the appropriate deployment of a variety of medical professionals.  The most satisfying result is high consumer satisfaction.

In fact, Missouri has invested in the medical home model in pilot programs in small pockets of the state and through federally qualified health centers.  It should expand this practice for access to all in its care.

Again, thank you for the opportunity to speak to you.

Commentary in The Beacon, July 22, 2013

Many challenges face the future of the Universal Service Fund Lifeline telephone program, which extends affordable, discounted telecommunication service to elderly people, people with low incomes or disabilities, and those receiving government assistance. It has been successful in connecting and keeping millions of customers on the telecommunications network and thereby linked to 21st century life.

Unfortunately, Lifeline, as with many worthy programs that assist our society’s most vulnerable members, has been a victim of waste, abuse and fraud. As a result, the program must also contend with perceptions of it formed by half-truths, rumors and confusion, as evidenced in the recent commentary by M.W. Guzy.

Part of Lifeline’s problem has been lax policing, poor reporting and less than diligent accountability. Services to disadvantaged people often seem to be the target of opportunists and scam artists.

The program was begun in 1985 under the Reagan administration landline service. But as technology advanced, in 2005 the Bush II administration expanded it to include cell phone service. In January 2012, the Federal Communications Commission adopted comprehensive reform and modernization of the program.

Calls to end Lifeline are better directed to monitoring the FCC’s efforts and looking for new ways to address universal service and access to new technologies in the future.

The telecommunications companies that participate in the Lifeline program process the applications, verify eligibility by reviewing qualifying affidavits and documents and connect service. It’s a federal crime to misrepresent facts concerning eligibility.

To obtain the “eligible telecommunications carrier” designation, the wireless carriers who join the program offer a cell phone and a fixed number of minutes of use – 250 minutes a month — at a price discounted from normal retail price. The Universal Service Fund pays the cell carriers for the revenue they lose due to the discounted basic package, just as it does for landline carriers. Over the years, the payment has been about $10 a month per household.

Of course, the wireless companies do not want to miss an opportunity to “sell up.” Many of them offer additional minutes, upgraded plans and extra equipment to the Lifeline enrollees. But the extras do not qualify for USF reimbursement. Under the rules of the program, only one Lifeline landline or cell phone line is permitted per household. The customer may have one or the other, but not both.

Another confusing aspect of the program is the USF surcharge on telephone bills, which many customers read to be a federal tax. It is confusing because the telecom companies make it look like a tax and do little to clarify it. It actually is the USF’s assessment on the companies. But the companies pass it through as a direct surcharge on customers, which goes back to the companies. It appears on the bill with the service rate, taxes and other surcharges, thereby requiring customers to subsidize the full cost of providing the Lifeline program. The Federal Communications Commission and the USF Board allow the companies to present the pass-through as they do as a “business decision.”

Lifeline’s problem is also one of identity and public relations. Lifeline carriers are required to make diligent efforts to publicize the availability of their Lifeline plans. Mass media advertising, cold call telephone solicitations and internet ads for Lifeline intermix similar or similarly named services. That makes it difficult for customers to sort out which is a Lifeline provider and what are the authorized reimbursable benefits.

Companies have been known to give away a phone and call it “lifeline” or a government-issued cell phone. But that does not make it part of the USF Lifeline program. With the cost of a cell phone and service declining, a company can afford to charge $10 or give away a phone with the expectation that the customer will “buy up” by adding lines, texting and more minutes. Nothing prohibits a company from selling more minutes, texting or other upgrades in connection with its USF Lifeline solicitation or program since USF doesn’t pay for those items outside of the Lifeline benefits.

Companies that are not USF Lifeline providers or are just sharp operators have also been known to use a free phone giveaway to make it sound like the federal government is handing out taxpayer-paid cell phones to everyone who wants one. The internet is littered with websites with pitches that use the terms “lifeline,” “government program” and even set out the federal eligibility requirements. Of course, those companies include solicitations for more minutes and more expensive plans.

The Lifeline program is also haunted by internet rumors that it provides an “Obama Phone,” a free cell phone and free minutes given out to garner votes. The rumor is easily debunked as a myth. Street-corner and parking-lot phone giveaways that Mr. Guzy saw, and the internet rumors, would not be lawful under the USF Lifeline program. They have no eligibility screening and would not otherwise be anywhere close to compliance. They should be reported to the FCC because fraudulent enrollment is a federal crime.

A USF Lifeline lookalike is probably being offered by a company that resells someone else’s service, like AT&T’s or Verizon’s, and gives away a cheap phone with a small number of minutes. Credit cards or prepaid phone cards can be used to reload the phone with minutes for higher-than-normal rates, and the phone may be upgraded at an additional prepaid price.

Lifeline serves poor people — primarily rural, elderly and families with children — and promotes national interests by enabling them to more fully engage in productive lives.  -The program fulfills the congressional mandate of the Communications Act of 1934 to ensure the availability of communications to all Americans at just, reasonable and affordable prices. Since then, Lifeline has helped tens of millions of low-income Americans afford basic phone service that has enabled them to find jobs, stay in touch with their families and access emergency services.

Many assistance programs are plagued by people who game the system and ruin it for those who deserve benefits. Lifeline should not fall prey to the spoilers. It should meet accountability tests and continue to work to include all Americans in our hyper-connected society.

The authors:  Joan Bray is interim director of Consumers Council of Missouri. Mike Dandino is the retired chief legal adviser for the Missouri Office of Public Counsel and a former board member of  Consumers Council of Missouri.

St. Louis Equal Housing and Community Reinvestment Alliance, August 2, 2013

Eagle Bank and Trust Company of Missouri has received a “Needs to Improve” rating on its Community Reinvestment Act (CRA) exam dated May 21, 2012.  The Federal Deposit Insurance Corporation (FDIC) released the CRA evaluations for banks that were recently evaluated on how services are meeting the credit needs of the community.

The St. Louis Equal Housing and Community Reinvestment Alliance (SLEHCRA)
provided a public comment letter in March 2012 to the FDIC for consideration in Eagle
Bank and Trust’s CRA exam.  The comment letter detailed concerns with the bank’s
service to low- and moderate-income communities and minority communities.

SLEHCRA was concerned that the bank’s assessment area excluded portions of north
St. Louis City and north St. Louis County. Both of these areas have substantial
minority populations and low- and moderate-income communities.  SLEHCRA was
also concerned with low levels of lending to minority borrowers and communities and
urged the FDIC to conduct a thorough fair lending investigation.

According to Eagle Bank and Trust’s CRA examination, the FDIC found substantive
fair lending violations of the Equal Credit Opportunity Act and the Fair Housing Act.
The FDIC also found violations in how the bank designated its assessment area that
excluded low- and moderate-income census tracts. The FDIC revised the bank’s
assessment area to include all of St. Louis County, St. Louis City and Jefferson County.  SLEHCRA’s concerns are also detailed in the bank’s CRA examination.

This is the first time that the FDIC has given a “Needs to Improve” rating to a bank in
the St. Louis metro area since 1995.  SLEHCRA applauds the FDIC for taking steps to
better enforce the CRA.  In giving banks lowered ratings for poor performance, the
FDIC is ensuring that banks are held accountable for services provided to the
community, particularly communities that have been underserved by mainstream
financial institutions.  SLEHCRA hopes that the FDIC continues to conduct rigorous
CRA and fair lending exams and continues to take action on serious community
concerns related to bank performance.

Eagle Bank and Trust Company of Missouri is headquartered in Hillsboro, Missouri,
and operates 14 branches. The bank reports $893 million in assets. The FDIC’s Kansas
City regional office conducted the bank’s CRA examination, which is available online
here.

SLEHCRA is a coalition working to increase investment in low- and moderate- income
communities, regardless of race, and in minority communities, regardless of income, by
ensuring that banks are meeting their obligations under the CRA and fair lending laws.
SLEHCRA regularly reviews bank performance and provides public comment letters
on CRA and fair lending performance.  All bank analyses and public comments are
posted online at www.slehcra.org.

SLEHCRA also partners with banks to assist in developing strategies to better serve all parts of the community. SLEHCRA member organizations stand ready and willing to partner with Eagle Bank and Trust to help identify ways of improving performance to low- and moderate-income communities and communities of color.

St. Louis Post-Dispatch, August 11, 2013

In the payday loan industry can be found the full fruits of many of the political and economic evils that plague modern America. Joseph Pulitzer, founder of this newspaper, called it by its name 106 years ago: predatory plutocracy.

On Sunday and Monday of last week, the Post-Dispatch co-published, with ProPublica, the independent investigation journalism organization, an examination of the payday loan industry written by Paul Kiel. This editorial page has written a lot about the industry and its tactics in Missouri, but Mr. Kiel uncovered a rich bed of new sleaze.

When legislatures are full of fast-buck artists willing to allow predators to charge usurious interest rates to desperate people, when state regulators are underfunded, when Congressional Republicans gut financial regulatory reform, when the Supreme Court allows unlimited anonymous corporate campaign contributions and when the economy makes it harder and harder for the working poor to make ends meet, what you get is the payday loan industry.

And when that industry is run by people whose sense of personal morality is deeply flawed, what you have is a national disgrace.

The industry piously proclaims that it is just meeting a need for short-term credit for people who can’t qualify for it elsewhere. At 36 percent a year they might be meeting a need. At 400 to 1,400 percent, they should be carrying sawed-off shotguns.

Missouri, thanks to its compliant Legislature and its worst-in-the-nation campaign finance and lobbying ethics laws, has become a major hunting ground for the payday loan sharks. The average annual percentage rate on two-week payday loan in Missouri is 455 percent — 100 points higher than the national average. The average customer rolls it over 10 times a year. The signs on the stores might as well read “quicksand.”

The state is home to more than 1,400 stores offering high-interest short term payday loans and related products like high-interest installment loans and auto title loans.

Last year, after years of getting nowhere with the Legislature (a key member of the House Financial Institutions Committee had run Quik-Cash of Cabool), reformers mounted a petition effort to get a measure on the November ballot limiting interest rates to 36 percent a year. Mr. Kiel’s story details what happened next:

An organization called Missourians for Equal Credit Opportunity popped up, funded with $2.8 million from a front group called Missourians for Responsible Government. MRG was organized as a 501(c)(4) “social welfare” organization under Internal Revenue Service Code. This ploy, which became common after the Supreme Court’s 2010 Citizens United “corporations are people” decision, meant it could keep its donors’ names secret. It’s safe to assume the money came from the payday loan industry.

MECO created a bogus petition drive of its own to confuse voters. People gathering signatures for the actual reform petition found themselves hounded by paid activists. MECO filed three lawsuits trying to stop the petition drive and threatened churches who supported reform with legal action. Though churches aren’t allowed under IRS rules to take part in partisan politics, getting involved in social justice issues is part of their mission and entirely legal, though some pastors don’t know that.

A different organization called Stand Up Missouri, which represented installment loan companies, hired two prominent African-American political figures — former Missouri PSC chairman Kelvin Simmons, who also had headed the Office of Administration for Gov. Jay Nixon, and former St. Louis city lobbyist Rodney Boyd — to run interference with the African-American community. Though nearly a quarter of the victims of predatory lenders are black, everyone has his price.

It’s true that nobody puts a gun to someone’s head to make him take out a payday loan. They might as well; some 37 percent of payday loan customers surveyed by the Pew Charitable Trust said it made no difference how high interest rates were, they needed the money.

There are many reasons for this. A lack of personal responsibility is one of them. But so is a lack of education and basic financial knowledge. So is trying to keep afloat in an economy where jobs are scarce and low-paying and the deck is stacked.

Next year, reformers plan to try again to get a 36 percent rate cap on the ballot in Missouri. It deserves full and aggressive support. As a society, we owe our fellow man better than using him as chum for sharks.

St. Louis Post-Dispatch (ProPublica) – August 2, 2013

As the Rev. Susan McCann stood outside a public library in Springfield, Mo., last year, she did her best to persuade passers-by to sign an initiative to ban high-cost payday loans. But it was difficult to keep her composure, she remembers. A man was shouting in her face.

He and several others had been paid to try to prevent people from signing. “Every time I tried to speak to somebody,” she recalls, “they would scream, ‘Liar! Liar! Liar! Don’t listen to her!’”

Such confrontations, repeated across the state, exposed something that rarely comes into view so vividly: the high-cost lending industry’s ferocious efforts to stay legal and stay in business.

Outrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.

Last year, activists in Missouri launched a ballot initiative to cap the rate for loans at 36 percent. The story of the ensuing fight illuminates the industry’s tactics, from lobbying state legislators and contributing lavishly to their campaigns; to a vigorous and, opponents charge, underhanded campaign to derail the ballot initiative; to a sophisticated and well-funded outreach effort designed to convince African-Americans to support high-cost lending.

Industry representatives say they are compelled to oppose initiatives like the one in Missouri. Such efforts would deny consumers what may be their best or even only option for a loan, they say.

QUIK CASH AND KWIK KASH

Missouri is fertile soil for high-cost lenders. Together, payday, installment and auto-title lenders have more than 1,400 locations in the state — about one store for every 4,100 Missourians. The average two-week payday loan, which is secured by the borrower’s next paycheck, carries an annual percentage rate of 455 percent in Missouri. That’s more than 100 percentage points higher than the national average, according to a recent survey by the Consumer Financial Protection Bureau. The annual percentage rate, or APR, accounts for both interest and fees.
The issue caught the attention of Mary Still, a Democrat who won a seat in the state House of Representatives in 2008 and immediately sponsored a bill to limit high-cost loans. She had reason for optimism: the new governor, Jay Nixon, a Democrat, supported reform.

The problem was the Legislature. During the 2010 election cycle alone, payday lenders contributed $371,000 to lawmakers and political committees, according to a report by the nonpartisan and nonprofit Public Campaign, which focuses on campaign reform. The lenders hired high-profile lobbyists, and Still became accustomed to their visits. But they hardly needed to worry about the House Financial Institutions Committee, through which a reform bill would need to pass. One of the lawmakers leading the committee, Don Wells, owned a payday loan store, Kwik Kash. He could not be reached for comment.

Eventually, after two years of frustration, Still and others were ready to try another route. “Absolutely, it was going to have to take a vote of the people,” said Still, of Columbia. “The Legislature had been bought and paid for.”

A coalition of faith groups, community organizations and labor unions decided to put forward the ballot initiative to cap rates at 36 percent. The main hurdle was collecting the required total of a little more than 95,000 signatures. If the initiative’s supporters could do that, they felt confident the lending initiative would pass.

But even before the signature drive began, the lending industry girded for battle.

In the summer of 2011, a new organization, Missourians for Equal Credit Opportunity, or MECO, appeared. Although it was devoted to defeating the payday measure, the group kept its backers secret. The sole donor was another organization, Missourians for Responsible Government, headed by a conservative consultant, Patrick Tuohey. Because Missourians for Responsible Government is organized under the 501(c)(4) section of the tax code, it does not have to report its donors. Tuohey did not respond to requests for comment.

Still, there are strong clues about the source of the $2.8 million Missourians for Responsible Government delivered to MECO over the course of the battle.

Payday lender QC Holdings declared in a 2012 filing that it had spent “substantial amounts” to defeat the Missouri initiative. QC, which mostly does business as Quik Cash (not to be confused with Kwik Kash), has 101 outlets in Missouri. In 2012, a third of the company’s profits came from the state, twice as much as from California, its second-most-profitable state. If the initiative got to voters, the company was afraid of the outcome: “Ballot initiatives are more susceptible to emotion” than lawmakers’ deliberations, it said in an annual filing. And if the initiative passed, it would be catastrophic, likely forcing the company to default on its loans and halt dividend payments on its common stock, the company declared.

In late 2012, QC and other major payday lenders including Cash America and Check into Cash, contributed $88,000 to a group called Freedom PAC. MECO and Freedom PAC shared the same treasurer and received funds from the same 501(c)(4). Freedom PAC spent $79,000 on ads against Still in her 2012 losing bid for a state Senate seat, state records show.

MECO’s first major step was to back three lawsuits against the ballot initiative. If any one of the suits was successful, the initiative would be kept off the ballot regardless of how many citizens had signed petitions in support.

THREATENING LETTERS

Meanwhile, supporters of the ballot initiative focused on amassing volunteers to gather signatures. The push started with umbrella organizations such as Metropolitan Congregations United of St. Louis, which ultimately drafted more than 50 congregations to the effort, said the Rev. David Gerth, the group’s executive director. In the Kansas City area, more than 80 churches and organizations joined up, according to the local nonprofit Communities Creating Opportunity.
Predominantly African-American congregations in Kansas City and St. Louis made up a major part of the coalition, but the issue crossed racial lines and extended into suburbs and small towns. Within a mile of Grace Episcopal Church in Liberty, a predominantly white suburb of Kansas City, there are eight high-cost lenders. “We think it’s a significant problem and that it was important for people of faith to respond to this issue,” said McCann, who leads the church.

Volunteers collected signatures at Roman Catholic fish fries during Lent and a communitywide Holy Week celebration. They went door-to-door and stood on street corners.

In early January 2012, some clergy opened their mail to find a “Legal Notice” from a Texas law firm sent on MECO’s behalf. “It has come to our attention that you, your church, or members of your church may be gathering signatures or otherwise promising to take directions from the proponents’ political operatives, who tell churchgoers that their political plan is a ‘Covenant for Faith and Families,’” said the letter.

“Please be advised that strict statutes carrying criminal penalties apply to the collection of signatures for an initiative petition,” it said in bold type. Another sentence warned that churches could lose their tax-exempt status by venturing into politics. The letter concluded by saying MECO would be watching for violations and would “promptly report” any.

Soon after the Rev. Wallace Hartsfield of Metropolitan Missionary Baptist Church in Kansas City received the letter, a lawyer called. Had he received the letter? Hartsfield remembers being asked. He responded, “If you feel like we’re doing something illegal, you need to try to sue, all right?” he recalls. Ultimately, no suits nor other actions appear to have been filed against any faith groups involved in the initiative fight.

MECO did not respond to requests for comment. The law firm behind the letter, Anthony & Middlebrook of Grapevine, Texas, referred comment to the lawyer who had handled the matter, who has left the firm. He did not respond to requests for comment.

Payday lenders and their allies took other steps as well. A Republican lobbyist submitted what appears to have been a decoy initiative to the Missouri secretary of state that, to the casual reader, closely resembled the original measure to cap loans at 36 percent. It proposed to cap loans at 14 percent but stated the limit would be void if the borrower signed a contract to pay a higher rate — in other words, it wouldn’t change anything. A second initiative submitted by the same lobbyist, Jewell Patek, would have made any measure to cap loan interest rates unlawful. Patek declined to comment.

MECO spent at least $800,000 pushing the rival initiatives with its own crew of signature gatherers, according to the group’s state filings. It was an effective tactic, said Gerth, of the St. Louis congregations group. People became confused about which was the “real” petition or assumed they had signed the 36 percent cap petition when they had not, he and others who worked on the effort said.

MECO’s efforts sowed confusion in other ways. In April 2012, a local court sided with MECO in one of its lawsuits against the initiative, throwing the ballot proposition into serious jeopardy for several months until the state Supreme Court overturned the lower court’s ruling. During those months, according to video shot by the rate cap’s supporters, MECO’s employees out on the streets warned voters who were considering signing the petition that it had been deemed “illegal.”

MECO also took to the airwaves. “Here they come again,” intones the narrator during a television ad that ran in Springfield, “Washington, D.C., special interests invading our neighborhoods.” Dark figures in suits and sunglasses can be seen descending from a plane. “An army of outsiders approaching us at our stores and in our streets,” says the voice. “But together we can stop them: If someone asks you to sign a voter petition, just decline to sign.”

Although the ad discloses that it was paid for by MECO, it does not mention payday lending or capping interest rates.

OTHERS JOIN THE FRAY

Installment lenders launched a separate group, Stand Up Missouri, to fight the rate-cap initiative — and differentiate themselves from payday lenders.
As the group’s website put it, “special interest groups masquerading as grass-roots, faith-based alliances” were not only targeting payday loans but also “safe” forms of credit such as installment loans. “Stand Up Missouri does not represent payday lending or payday interests,” the group said in its press releases.

Unlike payday loans, which are typically due in full after two weeks, installment loans are paid down over time. And while many payday lenders also offer such loans, they usually charge higher annual rates (from about 300 to 800 percent). The highest annual rate charged by World Finance, among the largest installment lenders in the country and the biggest backer of Stand Up Missouri, is 204 percent, according to its last annual filing.

Still, like payday lenders, installment lenders such as World Finance profit by keeping borrowers in a cycle of debt. Installment and payday lenders are also similar in the customers they target. In neighboring Illinois, 56 percent of payday borrowers and 72 percent of installment loan borrowers in 2012 had incomes of $30,000 or less, according to state data.

World Finance was the subject of an investigation by ProPublica and Marketplace in May. The company has 76 locations in Missouri: Of all high-cost lenders, only payday lenders QC and Advance America have more locations in the state.

Stand Up Missouri raised $443,000 from installment lenders and associated businesses to oppose the rate-cap ballot initiative, according to state filings.

To broadcast their message in Missouri, the installment lenders arranged a letter-writing campaign to local newspapers, placed ads, distributed video testimonials by satisfied customers, and held a rally at the Capitol. Like MECO, Stand Up Missouri also filed suit with their own team of lawyers to block the initiative.

Tom Hudgins, chairman of Stand Up Missouri, as well as president and chief operating officer of installment lender Western Shamrock, declined to be interviewed but responded to questions with an emailed statement. Stand Up Missouri acknowledges that “some financial sectors” may require reform, he wrote, but the initiative backers didn’t want to work with lenders.

“Due to their intense lack of interest in cooperatively developing market-based reforms, we have and will continue to meet with Missourians in all corners of the state to discuss the financial market and opportunities to reform the same.”

COMING MONDAY • The high-cost lending industry’s high-powered effort to influence African-American community leaders.

St. Louis Post-Dispatch, August 5, 2013

In February 2012, the Rev. Starsky Wilson of St. Louis sat down at a table in the Four Seasons Hotel. The floor-to-ceiling windows revealed vistas of the city’s skyline. Lined up in front of him were two lobbyists and an executive, he remembers.

The meeting was part of an extraordinary counteroffensive by payday and other high-cost lenders against a ballot initiative to cap what such lenders can charge in interest and fees. Outspending their opponents — faith, labor and community groups — by almost nine to one, the industry had launched a multipronged effort, one that offers a rare view into the lenders’ try-anything tactics to stay in business.

The lenders had targeted a community that was both important to their profits and crucial to the petition drive: African-Americans. Wilson, like the majority of his flock, is black.

So were the two lobbyists. Kelvin Simmons had just a few weeks before been in charge of the state budget and was a veteran of Missouri politics. His new employer was the international law firm SNR Denton, now called Dentons, and he was working on behalf of Stand Up Missouri, a group representing installment lenders.

Next to Simmons was Rodney Boyd, also African-American and for the previous decade the chief lobbyist for the city of St. Louis. He, too, worked for SNR Denton.

The lobbyists and Tom Hudgins, a white executive with an installment lender, urged Wilson to rethink his commitment to the rate-cap ballot initiative.

Wilson was not swayed, but he was only one target among many. At the Four Seasons, Wilson says, he bumped into two other leaders of community organizations who had been summoned to hear Stand Up Missouri’s message. He said he also knew of more than a dozen African-American clergy who met with the lobbyists. Their message, that installment loans were a vital credit resource for middle-class African-Americans, was convincing for some. As a result, Wilson found himself mounting a counter-lobbying effort. A spokesperson for Simmons and Boyd’s firm declined to comment.

In Kansas City, the Rev. Wallace Hartsfield also received an invitation from the lobbyists — but that was not the only case, as Hartsfield puts it, of an African-American being “sent into the community to try to put a good face on this.”

Willie Green spent eight seasons as a wide receiver in the NFL and won two Super Bowls with the Denver Broncos. After he retired in 1999, he opened several payday loan stores of his own and went on to hold a series of positions serving as a spokesman for payday lending, especially to minority communities. While African-Americans comprise 13 percent of the U.S. population, they account for 23 percent of payday loan borrowers, according to a Pew Charitable Trusts survey. Green was “senior advisor of minority affairs” for the Community Financial Services Association, the payday lenders’ national trade group, then director of “community outreach” for Advance America, one of the largest payday lenders. Finally, in 2012, he opened his own consultancy, The Partnership Alliance Co., which, according to his LinkedIn profile, focused on “community relations.” Over the past decade, he has popped up during legislative fights all over the country — North Carolina; Georgia; Washington, D.C.; Arkansas; and Colorado.

It is unclear who hired Green in 2012 — he declined to comment, and Missourians for Equal Credit Opportunity (MECO), the state group formed to advocate for payday lending, did not report paying him or his company. But to Hartsfield, it was clear he was there on behalf of payday lenders.

Green once wrote an open letter to Georgia’s legislative black caucus arguing that government regulation on payday loans was unneeded and paternalistic: Opponents of payday lending “believe that people unlike them are just po’ chillin’ who must be parented by those who know better than they do what’s in their best interest,” he wrote, according to the Chattanooga Times Free Press.

During their private meeting, Hartsfield said, Green made a similar argument but also discussed church issues unrelated to the ballot initiative. The payday lending industry might be able to help with those, Hartsfield recalled Green saying. The message the minister received from the offer, he said, was “we’ll help you with this over there if you stop this over here.”

Green referred all questions to his new employer, the installment lender World Finance. In a statement, World did not address specific questions but said the company was “pleased to have Mr. Green as a member of its team to enhance World’s outreach to the communities that it serves and to provide him the opportunity to continue his many years of being personally involved in and giving back to those communities.”

Hartsfield did not take Green up on his offer, but the former athlete has served as a gateway to the industry’s generosity before. In 2009 in Colorado, where payday loan reform was a hot topic (a bill ultimately passed in 2010), Green presented the Urban League of Metro Denver with a $10,000 check on behalf of Advance America. Landri Taylor, president and chief executive of the organization, recalled that Green had approached him with the offer and that he was glad for the support. He also said that lending was not a core issue for his organization and that even if it were, the contribution couldn’t have bought its allegiance.

In Georgia in 2007, Green, then a registered lobbyist, gave a state lawmaker $80,000 a few weeks before the Legislature voted on a bill to legalize payday lending. The lawmaker, who subsequently pleaded guilty to unrelated federal charges of money laundering, was one of 11 Democrats to vote for the bill.

After the Atlanta Journal-Constitution broke news of the transfer, Green produced documents showing that it had been a loan for a real estate investment: The lawmaker had promised to repay the loan plus $40,000, but had never done so, Green said. The state ethics commission subsequently found Green had broken no state laws, because lobbyists are allowed to engage in private business transactions with lawmakers.

MISSING PETITIONS

By the spring of 2012, supporters of the Missouri initiative were in high gear. Volunteers, together with some paid employees, were collecting hundreds of signatures each day. They were increasingly confident they would hit their mark.
In some areas, such as Springfield, the work resembled hand-to-hand combat. Through intermediaries, such as ProActive Signature Solutions, the initiative’s opponents hired people to oppose it.

“It was a well-funded effort,” said Oscar Houser of ProActive. He declined to say which company had retained ProActive. However, only MECO reported spending funds on what it said were signature gatherers. Those employees, according to Houser, eventually focused solely on trying to prevent people from signing the initiative.

Marla Marantz is a Springfield resident and retired schoolteacher who was hired to gather signatures for the 36 percent cap initiative. Just about every day, she could expect to be joined by at least one, and often several, of ProActive’s employees, she says. Wherever she went — the public library, the department of motor vehicles — they would soon follow. It was a tactic both she and her adversaries (with whom she became very familiar, if not friendly) called “blocking.”

“What we’re doing is preventing them from being able to get signatures,” one ProActive employee says on a video shot by a Missouri State University journalism student. Asked to describe how “blocking” works, the employee says, “Usually, we get a larger group than they have, we pretty much use the power of numbers.” In the video, Marantz is surrounded by three ProActive employees as she stands outside a public building.

ProActive’s employees did not identify themselves to voters as affiliated with payday lending, Marantz says. They sometimes wore T-shirts reading “Volunteer Petition Official” or held signs urging citizens to “Stand up for Equal Opportunity.”

Marantz shared photos and videos of her experiences. In one video, a library employee tells a group of ProActive employees they will be asked to leave if they continue to make patrons uncomfortable. At other times, Marantz says, exasperated public employees or the police simply asked anyone collecting signatures to leave the area.

The Rev. Susan McCann of Grace Episcopal Church in Liberty, Mo., also gathered signatures for the initiative and experienced “blocking.” “I had on my clerical collar, and they seemed to address a lot of their vitriol at me,” she remembers.

In May 2012, Missourians for Responsible Lending, the organization formed by supporters of the initiative, filed suit in county court in Springfield, alleging that MECO, through ProActive, was illegally harassing and assaulting its signature gatherers. The suit included sworn declarations by Marantz and three others who had said they had endured similar treatment, and it called for a temporary restraining order that would keep MECO’s employees at least 15 feet away.

MECO fired back. The suit was an unconstitutional attempt by supporters of the initiative to silence their political opponents based on alleged “sporadic petty offenses,” MECO argued. Even if the initiative’s detractors “engaged in profanity-laced insults all of the time,” they said, such behavior would still be protected by the First Amendment.

Houser called the suit “frivolous” and said he was happy to let MECO’s lawyers handle it. The suit stalled.

“Blocking” wasn’t the only problem initiative supporters encountered. Matthew Patterson ran a nonprofit, ProVote, that coordinated signature gathering in the Springfield area. On the night of April 25, 2012, Patterson put a box of petitions in his car. Then, realizing he had forgotten his phone in his office, he locked his car and went back inside.

When he returned, his passenger side window was broken and the box of petitions was gone, according to Patterson and the police report he filed. The box had contained about 5,000 voter signatures, about half of which were for the 36 percent cap initiative, Patterson said.

No arrest was ever made. Volunteers from Kansas City and St. Louis converged on the area to recoup the lost signatures. The final deadline to submit signatures to the Secretary of State’s office was less than two weeks away.

23,000 OVER, 270 UNDER

In August, the Missouri secretary of state announced that supporters of the initiative had submitted more than 118,000 valid signatures, about 23,000 more than needed.
But the state’s rules required that they collect signatures from at least 5 percent of voters in six of the state’s then nine congressional districts. They had met that threshold in five districts — but in the First District, which includes North St. Louis, they were 270 short.

A week later, initiative supporters filed a challenge in court, arguing that local election authorities had improperly disqualified far more than 270 signatures. MECO and Stand Up Missouri argued not only that signatures had been properly excluded but also that far more should have been tossed out.

Eventually, with only a couple of weeks before the deadline to finalize the November ballot, backers of the initiative decided they could not match the lenders’ ability to check thousands of signatures. They withdrew their challenge.

“It was so frustrating, disappointing,” McCann said. “People had spent hours and hours and hours on this initiative.”

LOOKING TO 2014

The initiative’s supporters now have their eye on 2014, and they have made the necessary preparation by filing the same petition again with the secretary of state.
The industry has also made preparations. MECO has reported adding $331,000 to its war chest since December. Stand Up Missouri has raised $151,000.

Last May, Jewell Patek, the same Republican lobbyist who filed the industry’s initiatives in 2011, filed a new petition. It caps annual rates at 400 percent.

The installment lenders have continued their effort to woo African-Americans. In December, Stand Up Missouri was a sponsor of a Christmas celebration for Baptist ministers in St. Louis, and in June, it paid for a $20,000 sponsorship of the National Baptist Convention, hosted this year in St. Louis. It has retained the same high-powered African-American lobbyists and added one more: Cheryl Dozier, a lobbyist who serves as executive director of the Missouri Legislative Black Caucus. Lastly, Willie Green, according to initiative supporters who have spoken with the ministers, has made overtures to African-American clergy on behalf of the installment lender World Finance.