Davis Campaign: 2006 AG Letter Gave Green Light to Payday Lenders

Did Greg Abbott make it easier for payday lenders to use a legal framework written for credit repair organizations and that would allow for higher fees than under the traditional payday loan?

That's the contention made by the Wendy Davis campaign on Monday. They cite a 2006 letter sent out under the signature of First Assistant Attorney General Barry McBee that looked at changes in the payday loan industry. Reacting to new federal guidelines, "the payday loan industry developed a new model for making payday loans based on existing Texas laws authorizing credit services organizations."

“Greg Abbott’s office gave the green light to predatory lenders to expand their operations across our state," Davis said in a statement. "Greg Abbott has proven that he is an advocate for payday lenders that go after hardworking Texans, even members of our armed services, with predatory loan costs often exceeding 500 percent. It's time for a leader who believes you don't have to buy your way into Texas' future."

McBee's letter was an analysis that fell short of a formal AG's opinion. It based its conclusion that the CSO model is allowed for payday lenders in part on a ruling by the U.S. 5th Circuit upholding "an alternative use" of the model. McBee later noted that "Any discussion of whether use of this model is the best public policy choice for the State of Texas is one that must be addressed by the Legislature and has not been explored by this office."

The Abbott campaign responded on Monday by saying again that Davis bears responsibility for confirming Finance Commission Chairman William White in May 2011 — months after making her now well-known "fox in the henhouse" remark.

“If Sen. Davis thought the appointee was so bad she shouldn't have voted to confirm him. It’s ridiculous for Senators, with full access to all information, to confirm an appointee only to turn around and call for their resignation. Sen. Davis has no credibility on this issue, and calling for resignations after the vote is minor-league grandstanding that accomplishes nothing," said Abbott communications director Matt Hirsch. “As Governor, Greg Abbott will ensure his appointees are above reproach. He will go about the process of making good decisions to make Texas a better place.”