An attempt by lawmakers to ease the grip of payday lending on Colorado families has turned into a swirl of controversy in the attorney general's race.
Boulder District Attorney Stan Garnett, a Democrat trying to unseat Republican incumbent John Suthers, has raised questions about $10,350 in contributions from 12 payday lenders to Suthers' campaign — which came precisely at the time Suthers' office was writing rules to implement the state's new, more restrictive payday lending law.
It boils down to timing: On June 18, Suthers' office released some pretty stringent regulations. Between June 28 and July 7, the industry opened its wallet. Then on July 29, Suthers' office released a new version of the rules that eased up on the likes of Mister Money Inc., and Pay Day Lenders. For instance, some fees disallowed in the first version were reinstated, and the way interest was computed was more generous for lenders in the rewrite.
The same industry that poured money into Suthers' campaign this summer gave him less than $1,000 during his 2006 campaign, records show, when he had no influence on payday lending rules.
Are the donations a coincidence? Yes, if you believe the person who wrote both versions of the proposed rules: Laura Udis, a 30-year AG employee, who has worked for officeholders from both parties.
"The attorney general never saw the proposed rules before I put them out," Udis says in an interview. "My position is nonpartisan. I would have no idea what monies are coming into a political campaign. Nobody asked me or pressured me to do anything."
Suthers' campaign spokesman, Andrew Cole, says Suthers can't be bought, and that the donations had nothing to do with the proposed rules. Hence, Suthers won't give the money back, Cole says.
That's unfortunate, Garnett counters: "As I've gone around the state, what people want to do is believe in and trust their government. This sort of thing undermines that."
House Bill 10-1351, passed at session's end, was designed to clamp down on an industry that charges an average of 300 percent annual interest and other fees, which "can lead Colorado families into a debt trap of repeat borrowing," as the bill says. The bill extended loan terms from 40 days to six months and capped interest at 45 percent for a six-month loan.
But tacked-on, last-minute provisions for maintenance and origination fees, Udis says, essentially pushed the annual percentage rate to 200 percent. The bill also bore contradictory provisions, creating confusion over how it should be interpreted.
That's why, after the initial version of rules went out, she did more research, even visiting a lawmaker who sponsored the legislation, and decided lenders had the right to impose higher charges.
All that said, it still looks odd to see 20 donations pour in from payday lenders in Colorado, Washington, Ohio, Nevada, Arizona, Texas and Kansas while Suthers' office is changing the rules.
Ethics Watch Colorado's director Luis Toro says Suthers should return the donations. "The payday loan industry has a long and well-documented history of using targeted campaign contributions as incentive or reward for regulators who weaken industry oversight," he says in a statement. "These contributions to John Suthers' campaign seem to fit that pattern to a 'T.'"
Senate President Brandon Shaffer, D-Longmont, admits he hasn't studied the two sets of rules in detail, but says he's suspicious.
"The fact he's taking contributions from the industry when writing regulations for an industry he regulates calls his independent, non-biased judgment into question," Shaffer says.
Seeking donors' perspective, we contacted eight of the 12 contributors, including all five in Colorado. Seven didn't return our calls. The other — David Larsen of Cash Fast Inc., in Longmont — couldn't get off the line fast enough after learning the nature of the call. "I'd rather not talk to you. I'm sorry," he said, and hung up.
The next step is for Udis to analyze public comments. Five written statements came in by Monday's deadline, three from industry sources, including Moneytree Inc., of Seattle, one of Suthers' donors, which called the rules "unclear." Gov. Bill Ritter's office pointed out the increased charges in the July 29 version would be "an absurd result" that's "contrary to the stated legislative intent." Coloradans for Payday Lending Reform, which wants to lower borrowing costs, also weighed in.
Next Tuesday, Udis will hear additional comments at a public hearing in Denver before forwarding her final version of the rules to a panel of citizens, industry reps and either Suthers or his designee. That panel has final say.
Meantime, Suthers wants more money, noting in a fundraising message that Garnett "wrote himself a $50,000 check." Suthers has raised $428,686 so far, which includes about $170,000 he had before Garnett announced in February. Garnett had raised roughly $245,000 as of Aug. 1, including the $50,000 from personal savings.
Speaking of campaign finance, Garnett is accused by the nonprofit Colorado Government Accountability Project of failing to close his 2008 DA campaign before entering the AG's race. Garnett says he thinks the law means a candidate can't have two active committees during the same election cycle. He closed the DA committee about a month ago. A hearing is set for next week.