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Payday in the State House

Anne Stanton - October 19th, 2006
Did a Georgia-based company that makes “payday loans” try to influence a Northern Michigan representative?
Dan Scripps thinks so. Scripps is running against David Palsrock (R-Manistee), the incumbent Republican state representative whose 101st District includes all or part of Mason, Manistee, Benzie and
Leelanau counties.
Scripps charges that Palsrok accepted illegal and unethical contributions. He filed a formal complaint with the Secretary of State last week, but his complaint was dismissed just one day later. Palsrok countered that the contributions were completely legal and that Scripps is making a desperate attempt to discredit him four weeks before the election.
The Secretary of State deemed the contributions to Palsrok as legal, but Scripps’ complaint does shed an unflattering light on what goes on during a bill’s creation.
A payday loan is typically aimed at poor people, who can’t get a loan from a regular bank or credit card company. A person need only present his pay stub and a checking account number for a two-week loan. No credit check necessary. But the fees are high, and if the borrower can’t come up with the money when the loan is due, they get zapped with more fees.
The issue of short-term, high interest, legalized loan sharking first came up in Michigan in 2003, when Governor Jennifer Granholm vetoed Senate Bill 474. That bill would have legalized payday loans in Michigan and allowed an annualized interest rates as high as 351% for a two-week loan. After the veto, Palsrok worked to develop another bill.

That’s when the floodgates of contributions opened in Georgia, at a company known for “payday loans”—Community Loans of America, Incorporated.
The company’s president and four members of the board of directors of Community Loans of America, Inc., sent checks totaling $2,500 to Palsrock all on the same day—April 6, 2004. One of those CLA board members, Robert Reich, also gave the House Republican Campaign Committee $1,000 on 5/21/04 and $500 to state Senator Michelle McManus on 9/18/04.Community Loans’ website pitches the “payday loan” as a quick fix and touts itself in hopeful terms as “ ...the leading provider of short-term consumer finance loans to a growing segment of customers who have limited access to other sources of consumer debt.”
Palsrok was one of three reps selected to serve on a committee that resolved differences between the Senate and House bills. One year later in November 2005, a bill cosponsored by Palsrok was signed into law. The law requires that payday lenders get licensed. They may charge 15% on a $100, two-week loan on what amounts to a 390% annual interest rate.
Scripps, an attorney in Leelanau County, makes a pointed accusation. “When four board members and the president – scattered in three different states – give the maximum amount allowable on the very same day, it just doesn’t happen. That’s quite a feat of timing.”
Scripps believed the contributions were illegally based on an investigation of Geoffry Feiger by Attorney General Mike Cox for similar en masse corporate contributions (Feiger reimbursed employees for their contributions to presidential candidate John Edwards). While each of the contributions was legal on its face, the FBI found reason to believe that the aggregation of contributions provided an inference of wrongdoing and illegal activity thus violating state election law, Scripps said.
“This is exactly the type off corrupt behavior that destroys public confidence...” LEGAL CONTRIBUTIONS
Yet the contributions from the Community Loans of America board members were legal, said Rich Robinson, executive director of the Michigan Campaign Finance Network.
State law bans corporations from giving money, but corporate board members and company officers are allowed to give as individuals, which Robinson believes is their right. There is also no law against a committee accepting a corporate contribution. Also there was no evidence the corporate officers were reimbursed, according to the State Department letter.
“Because something is beyond an individual’s threshold of belief doesn’t mean he can prove it’s legal. Ethical? That’s a good question. Your readers should connect those dots for themselves and decide what it means.”
Some legislatures have completely banned payday lenders from their states with anti-usury loans, while others like Michigan decided to regulate the companies. Typically, the number of payday lenders balloons in states where they’re allowed to operate. They now number about 22,000 nationwide.

State Rep. Palsrok said he expects a full apology from Mr. Scripps for damaging his personal integrity in a “desperate attempt, four weeks before the election, to try to go negative. I don’t think it will be received very well by the voters.”
Palsrok added that if the legislation benefited Community Loans of America, then why has the company chosen not to do business in Michigan.
Scripps also charged that Palsrok’s campaign committee illegally gave $1,000 to his former boss Mike Bouchard, who is running for U.S. Senate against Debbie Stabenow. State law bans giving that amount to state candidates, but it’s legal to give that amount to a federal candidate, Robinson said. That charge was also dismissed.

The Rumor Mill & Grayling‘s New Theme Park
Rumors are flying about a pending announcement of the gigantic “Main Street USA” theme park to be located just south of Grayling, a sleepy town known for outstanding trout fishing.
New information trickling in: a formal announcement is expected on or before October 31 for the $160 million theme park. The proposed site on state land of mature oak and pine trees would take advantage of an existing rest stop exit off I-75.
Not a lot of new information other than what was reported in the Northern Express August 24th issue. At 2,000-plus acres, the theme park is expected to be bigger than Cedar Point. It is definitely not a Six Flags theme park; however, and once all approvals are gained, it is expected to take about 42 months to build. The hope is the theme park will employ about 2,000 part-time and 700 full-time workers if it can successfully draw 1.7 million visitors. Stay tuned.

Speaking of announcements, Traverse City
Record-Eagle publisher
Ann Reed expects that some kind of deal will be reached by early November for the purchase of the newspaper. There were four interested parties, and talks are ongoing with the top prospect. Rumors of a $60 to $80 million price tag have been heard.
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