October 5, 2015 Government, In The News, News

Complaint alleges Rep. Scott Garrett, others helped payday loan industry prior to campaign donations

By Herb Jackson, The Record, 10/5/2015

Rep. Scott Garrett is one of 11 House members cited in an ethics complaint filed Monday by a watchdog group that accuses lawmakers of taking actions to protect the payday loan industry around the time they received campaign contributions.

The complaint by the Campaign for Accountability asked the Office of Congressional Ethics to investigate Garrett and 10 others, including two Democrats. Most are members of the House Financial Services Committee, on which Garrett is a subcommittee chairman.

The group’s complaint requests an investigation into whether the House members “violated House rules and criminal law,” but there is no guarantee any investigation will be conducted or that any official decision about the complaint’s merits will become public.

The complaint against Garrett focuses on $3,500 in contributions he received between March 2011 and August 2013, a time when his campaign account raised nearly $2.6 million, according to an analysis by The Record of records filed with the Federal Election Commission.

In both years, the contributions were made within weeks of an official act Garrett took that would have protected payday lenders from government scrutiny, the watchdog group charges.

“Those contributions seem to be directly tied to actions that he took and that, from our perspective, is really the key here,” said Ann Weismann, executive director of the Center for Accountability. “I understand members accept contributions from industry all the time and there’s nothing per se illegal about that. It is illegal if you accept contributions and it is in exchange for exercising your official authority or taking an official act.”

Garrett’s office issued a statement through his spokesman that did not respond directly to the allegations but defended his actions as part of an effort to fight onerous government regulations by the Consumer Financial Protection Board.

“Rep. Garrett has always made his decisions based on his principles and what is best for hardworking New Jersey families who are trying to reach their financial goals,” spokesman Chris Carofine said. “The CFPB is a creation of Dodd-Frank and has been insulated from congressional oversight despite its hugely negative impact on almost every facet of American business, which is why Garrett has always supported a complete overhaul of the agency.”

The complaint notes that the indictment in April of Sen. Bob Menendez, a Democrat from Paramus, accused him of bribery for allegedly performing official acts around the time his codefendant, Salomon Melgen, made contributions to a political committee supporting Menendez’s 2012 re-election.

The ethics complaint against Garrett says he signed on as a cosponsor of a bill that the Campaign for Accountability says would have limited the CFPB’s oversight of the payday loan industry on March 16, 2011. On March 31, 2011, he received a $1,000 contribution from payday lending executive Ian MacKechnie of Amscot Financial.

The bill, which was not enacted, would have replaced the management of the bureau, currently by a presidentially appointed director, with a five-member commission made up of a vice chairman of the Federal Reserve and four appointees requiring Senate confirmation.

“It would have drastically weakened the CFPB, thereby ensuring the payday loan industry escaped greater regulation,” Weismann said.

Payday lenders offer small loans that borrowers agree to repay within a short period of time, such as from their next paycheck. The lenders have been criticized for trapping people who are least able to pay into a cycle of ever-rising debt because people who cannot repay are offered bigger loans with higher fees.

Garrett also signed an Aug. 22, 2013 letter to Attorney General Eric Holder and FDIC Chair Martin J. Gruenberg opposing a program called “Operation Choke Point,” which was designed to prevent “payday lenders and other unscrupulous Internet-based companies from gaining access to the banking system through intermediaries,” the complaint said. On Oct. 4, 2013 Garrett received a $2,500 contribution from the political action committee of payday lender QC Holdings Inc.

Garrett got the smallest total amount of contributions of anyone in the ethics complaint. Amounts received by others ranged from $5,000 to $68,200.

Also named in the group’s ethics complaint were Reps. Steven Fincher, R-Tenn.; Alcee Hastings, D-Fla.; Jeb Hensarling, R-Texas; Blaine Luetkemeyer, R-Mo.; Patrick McHenry, R-N.C.; Gregory Meeks, D-N.Y.; Randy Neugebauer, R-Texas; Pete Sessions, R-Texas; Steve Stivers, R-Ohio; and Kevin Yoder, R-Kansas.

Possible violations listed in the ethics complaint include bribery, honest services fraud, acceptance of an illegal gratuity, and conduct not reflecting creditably on the House. Any member of the public can request an investigation by the Office of Congressional Ethics, and the watchdog group’s allegation has no legal authority.

The Office of Congressional Ethics, made up of public appointees, will decide in private whether to investigate further, and if it decides not to do so, no information at all will be made public, according to rules established by the House.

If two of the office’s six voting board members – one must be from each party — decide there is merit to the complaint, a two-step investigation process with increasing standards of proof follows, after which the case can be referred the House Ethics Committee.

About 90 days after that point, the recommendation by the office to the committee will become public. The committee can then decide, in private, if it wants to drop the case or conduct its own investigation.