In the wake of the biggest financial crisis since the Great Depression, a high-living, politically connected Tennessee businessman who made a fortune by lending money to the poor at sky-high interest rates has ties to a successful effort to water down financial regulatory reform.
Meet W. Allan Jones, who in 1993 founded Check Into Cash, a pay-day lending chain that says it now has 1,100 stores in 30 states. The company offers short-term loans designed to tide customers over until their next paycheck. But the interest rates can be as much as 400 percent on an annualized basis, meaning that they lead many borrowers to end up digging themselves deeper into debt.Lately, Congress has been mulling how to structure a new Consumer Financial Protection Agency (CFPA), so as to avoid a repeat of the financial crisis. And reform advocates have argued that increased regulation of pay-day lenders is an essential piece of the puzzle. But after lobbying by an industry group that Jones helped establish, Sen. Bob Corker (R-TN) acted to thwart the new agency’s ability to effectively monitor Jones’s industry.
As Harper’s noted in a story on the pay-day lender industry last year entitled “Usury Country,” “a payday loan essentially becomes a lien against your life, entitling the creditor to a share of your future earnings indefinitely.”
“It’s the craziest business,” Jones told a reporter in 2008. “Consumers love us, but consumer groups hate us.”
The business has been good to Jones, 56, however. In 2005, a Tennessee business magazine put his net worth at $500 million — high enough to put him on a list of the state’s richest 20 people, alongside FedEx founder Fred Smith and Thomas Frist Jr., the hospital entrepreneur and father of former Senate leader Bill Frist.
And Jones hasn’t been shy about displaying that fortune. According to the magazine, Jones’s 400-acre home boasts an air-conditioned muscle car garage, which includes a $300,000 Maybach; an on-site greenhouse with a full-time horticulturist; a three-story tree house; and — get this — a regulation-sized football field with lights, a scoreboard and supporting field house and stand, which he used to host the first-ever private college football game, raising $100,000 for University of Tennessee-Chattanooga.
But everyone needs to get away sometimes. Jones also owns a 223-acre commercial dude ranch in Jackson Hole, Wyoming, which borders on 1,300 acres of national forest.
Jones also used to own a 136-foot Mefasa yacht, which had previously belonged to King Juan Carlos of Spain. But it burned in a fire near Palm Beach. Never mind — Jones replaced it with a 157-foot boat, named after his wife, Janie, with an estimated price tag of $24 million. NASCAR driver Jimmie Johnson has honeymooned on it. You can charter it for $25,000 a day.
And he’s the founder and owner of the Bald-Headed Bistro, an upscale Cleveland, Tenn. restaurant named for himself, for which he “personally chose the elegant dÃ©cor,” according to the restaurant’s website.
Jones does give back though. He gave $4 million to the University of Tennessee’s athletic program, to create an aquatic center, completed in 2008, that now bears his name.
All of this wouldn’t amount to much more than a rather severe lapse in taste (although we admit the three-story tree-house sounds cool) were it not for recent events in the U.S. Senate.
There, Corker reportedly has weakened the section of the major financial regulatory reform bill that deals with pay-day lenders. Thanks to Corker, who sits on the Senate Banking committee, the new CFPA will have to get permission from a body of regulators in order to enforce rules against payday lenders and other non-bank financial companies — a step that consumer groups say will significantly hamstring the agency’s ability to crack down on predatory lending practices.
Corker’s intervention came after intense lobbying from the Community Financial Services Association (CFSA), a trade group of pay-day lenders created in 1999 by Jones and others in the industry. In the last three months of 2009, CFSA spent $500,000 lobbying Congress on the financial regulatory reform and other issues affecting regulation of the pay-day loan industry, according to disclosure records examined by TPMmuckraker. (One of the top Washington lobbyists hired by CFSA, Wright Andrews of Butera & Andrews, was also the prime lobbyist for the sub-prime mortgage industry earlier this decade.)
Jones is a longtime backer of Corker — as well as of several other lawmakers, from both parties, on the Banking committee. Since 2001, Jones, his relatives, and his employees, have contributed $31,000 to the campaigns of Corker, a former Chattanooga mayor, according to the New York Times.
The pay-day lenders say it was the banks, not them, that caused the financial turmoil, so they shouldn’t be penalized for it. But consumer groups, and their allies in Congress and the Obama administration, argue that the competitive pressure on the banks from less regulated sectors like the pay-day lenders prompted the banks to lower their lending standards, helping to create the mortgage crisis. And they add that the predatory practices of the pay-day lenders merit greater regulation in their own right.
As for Jones, who did not immediately respond to a request for comment, he says he’s always looked out for the less fortunate. He once explained that his father had taught him: “I should always give more than my fair share.”