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After attacks by payday lenders, former lawmaker returns fire

Published December 27, 2013 8:37 pm

Swallow probe • Brad Daw says findings should spur legislation to better regulate payday loans.
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Payday-loan companies gave new meaning to the term "predatory lender" when they set out to ruin a critic, former Rep. Brad Daw, according to Utah House investigators. The Orem Republican is returning fire now by calling for legislators to go after that industry based on what investigators found.

They reported last week that in retribution for Daw pushing a bill last year to restrict the industry, lenders used shell groups created by the campaign staff of former Attorney General John Swallow to funnel money for nasty mailers and phone attacks that helped defeat Daw without the public knowing who paid for them. The same type of campaign money "laundering" was used to pay for TV and radio ads against Swallow's Republican primary rival, Sean Reyes, who recently was named attorney general by Gov. Gary Herbert after Swallow resigned.

These shadowy tactics were described as Swallow returning favors for big donations and other help from lenders.

"They [payday lenders] are the instigators of all this, the ones who were really behind the throne with all that power, and are the ones completely and totally unscathed," Daw, a former four-term legislator, told The Salt Lake Tribune after returning Thursday from a holiday cruise with his family.

"I'm gone. John Swallow is gone. Jason Powers [Swallow's political consultant] will have a tough time getting any clients for a while," Daw said. "But unless somebody steps up and runs that [payday-loan regulating] legislation", lenders "are going to get away with everything they wanted."

Daw proposed a bill in 2012 that would have banned payday lenders from making loans — which now average 474 percent annual interest in Utah — to people who already have one. It would have created a database of loans that lenders would need to check before issuing additional loans.

Daw says he proposed the bill after hearing for years from constituents about how such lenders trapped friends and families into renewing high-interest loans as long as allowed by law, then persuaded them to take out more to pay off earlier loans until they were drained financially.

Lenders contend that is rare.

"The idea was if you get too far underwater, let's not keep pushing you down," Daw said of his bill, adding it was designed to copy a system used in Florida.

He called opposition to his bill by payday lenders "visceral," and found they would not negotiate on any compromise. "It was kill or be killed," Daw said. The bill died.

Soon afterward, a dozen different mailers were sent to Daw's constituents attacking him — with copies sent to members of the Legislature. House investigators conjectured the copies to colleagues were meant as a warning to lawmakers that lenders would go after critics.

Daw said he quickly figured the attacks were coming from payday lenders.

"I looked at what legislation I had run that would get somebody that ticked off — we're talking $50,000 to $100,000 ticked off," he said. "The only people who I offended to that level who wanted to keep their name off the [funding] check were payday lenders."

He said push polling — a phone campaign masquerading as a survey using unflattering descriptions — also came against him.

And House investigators say money from payday lenders apparently bought $2,000 worth of campaign signs for Rep. Dana Layton, R-Orem, who defeated Daw in the GOP primary. She reported that she thought a vendor she was working with had dropped them in her driveway — and she did not realize they came from Powers until after the primary election.

Powers and others working for Swallow set up nonprofit groups that by law did not need to disclose their donors, investigators said, then funneled money through other political-action committees to mask the hundreds of thousands of dollars coming from payday lenders."The payday [loan] industry provided a huge benefit to John Swallow by helping to defeat his opponent [Reyes]," with big hidden donations, said House investigator James Mintz. "And Swallow, through his campaign, provided a huge benefit to [Check City owner] Richard Rawle and the payday industry by helping defeat their opponent [Daw]."

"I am pleased that I ran the bill and I'm pleased that it exposed some fundamental problems in this state that I hope will be addressed," Daw said. "If there's any justice in the world, that legislation will pass. I think it's absolutely necessary."

He also hopes the House will continue the Swallow investigation to push subpoenas that may show more about the payday-loan industry's actions. He said if lenders think it is morally "OK to destroy people as long as they don't get caught doing it, I think they are going to do it again. Why wouldn't they?"

Because of the murky attacks that helped to defeat him, Daw worked with House Majority Whip Greg Hughes, R-Draper, this year to pass two bills requiring better disclosure of donors to corporations, including nonprofits, and those who fund push polls.

Daw said he is also considering running for the Legislature again, especially after what investigators found. "I'm exploring options right now. There were a lot of people who were distraught at my defeat," he said. "It's been a fascinating journey."

The Utah Consumer Lending Association, which represents the payday-loan industry, was asked for comment on this story. Its lobbyist, Frank Pignanelli, said while his lobbying firm acts as spokesman for that group, his firm was not consulted or advised about contributions made by payday lenders to Swallow's campaigns and groups, so he could not comment on it.

"We found out about it last Friday with everyone else," he said. Pignanelli said he had not known about any plans for retribution against Daw for his bill. —

Another call to investigate payday lenders

The Coalition of Religious Communities, a longtime critic of the Utah payday-loan industry, is calling for an investigation by the federal Consumer Financial Protection Bureau because of findings from the probe into former Attorney General John Swallow.

"The undue influence the payday-loan industry has had in the Utah attorney general's office has allowed that industry to behave in an outrageous manner with impunity," the coalition said. "The legislative investigation has also raised serious questions about the corrupt and unethical methods that Utah's payday-lending industry has used to influence politics in recent years."

Linda Hilton, director of the group, said legislators are discussing bills to better regulate the industry because of the investigation.