Democracy Thwarted: The Case of the 14 Year Loophole

The General Assembly again failed to end the carve-out allowing payday lenders to charge up to 260% interest.

The saga continues. The General Assembly again failed to end the carve-out allowing payday lenders to charge up to 260% interest. The issue is emblematic of the state’s democracy problem. Reform would pass easily if it came to a vote. Only a handful of lawmakers and a powerful lobbyist support the predatory practice. So, what’s the story?

Due to a concentration of power, the Senate President and the House Speaker decide which bills will be considered. Legislative sponsors must request their bills to be brought forward.

In 2023, two House sponsors, Representatives Karen Alzate and John Lombardi, persuaded the Speaker to schedule a vote to close the payday loan loophole. Representative Lombardi circulated a letter calling for a vote that was signed by a majority of his colleagues. The measure passed 70-2, with support from Democrats, Republicans, and the Independent member. However, the Senate didn’t even hold a hearing on the bill.

This year, the Senate President permitted a pro forma hearing to be conducted but refused to allow the bill to be considered.

News coverage generally credits William Murphy, a former Speaker turned lobbyist, who is paid $30,000 annually by payday loan company Purpose Financial (Advance America) for the ongoing blockade.

Advocates fought hard for this year. An open letter from dozens of organizations and hundreds of individuals (myself included) as well as the Governor, Attorney General, and Secretary of State appealed to the Senate President and House Speaker to allow a vote.

However, it became clear that the lobbyists had prevailed once again when the Providence Journal quoted a Senate spokesperson explaining that the bill would not pass because “senate leaders” believed the industry’s claims. Such a statement could not be verified because no vote was taken.

Two other clients of Murphy’s did extremely well in the 2024 session. In the final days of the session, the legislature voted to double the credit limit allowed at Bally’s Casinos from $50k to $100k and for a $15 million tax cut for Citizens Bank. The Bally’s vote took place within six weeks. The tax cut was brought to the floor of both chambers in just four days. Meanwhile, a vote on payday loan reform was stalled for the 14th year.

An examination of the lobbying reports may prove instructive. While Citizens Bank and Bally’s employ multiple lobbyists, it is notable that William Murphy’s firm is paid $5,000/month by Bally’s and $25,000 annually by Citizens Financial. Among Murphy’s reported donations were $1500 to both the Senate President and House Speaker between January and May.

The corporate bills passed easily, but not unanimously. Thirty out of 37 Senators and 57 out of 75 House members voted to approve the Bally’s and Citizens Bank bills. Had the payday loan reform come to a vote, the House could have again approved it overwhelmingly, with a similar margin in the Senate. But they didn’t get the chance. Nor did they vote on a bill to close the loophole that gives casinos an exemption to the smoke-free workplace law.

In a functioning democracy, our elected representatives would have the opportunity to vote on all pending matters, not just those favored by special interests. As we face significant challenges to our national democracy, let us strive to improve here in Rhode Island.