Rawlings Responds to Caraway's "Payday Loan King" Ads, Discusses Tenure on Lender's Board
|Photo by Mark Graham|
"I am most concerned about the under-banked in the southern sector," he said at the beginning of our discussion. "We have too many people who need short-term cash needs, and they don't have banking relationships. It's a big issue, and I think that's the issue we need to be focused on at city council and outside of city council. And that's the primary issue. That's key."
So, no thoughts about the current mayor -- and a council member with whom you'd have to work, should you be elected -- calling you the "Payday Loan King"? None at all?
"I can work with anybody," Rawlings said. "I think it's important to realize people are more important than politics. I can't be pulled down to the political issues. We're trying to talk about people being under-banked."
But it's clearly a touchy subject: CIC Partners, where Rawlings is a managing partner, has removed Ace Cash Express from its list of "realized investments," where it could be found as recently as a March 26. On the other side, we spend a few minutes discussing his tenure on Ace's board and other thoughts on payday lenders. Jump, but mind the pile of cash.
So, I have no doubt you spoke about this with Merten a few weeks back for his cover story on the mayor's race. But I'd like to revisit your tenure on the Ace board, which obviously came about because of its affiliation with CIC Partners. As I've always understood it, it was just getting into the payday lending business when you took your seat at the table, but was deep into it by the time you left.
This is a big issue in the whole United States, not just in Texas. As the banking world has become global, local financial institutions don't see a lot of profit in working with people that aren't ... [pause] ... who don't have big balance sheets in the bank. As a director, this product was out there, and we saw it start it grow. We worked hard to make sure we went by the spirit of the law and the letter of the law throughout the U.S. and each state. But also we put together programs that made sure we were educating people on financial practices and making sure we were trying to be good corporate citizens. The business began to grow so much, and the issue became so prevalent, the board decided to sell it in 2006.
Was there a tipping point at which you decided: Yeah, it's time to jump?
In the least year, yeah. It was something we spent a lot of time talking about. I don't want to speak on behalf of the company, as I am one director, but there was a lot of discussion.
Without getting too detailed, then, could you at least characterize the kinds of discussions that led to CIC deciding to sell it?
Well, now I am getting into board of director matters, and I don't want to get too specific. Look -- this was a publicly owned business, and you had a fiscal obligation to the shareholders to maximize shareholder value. On the other hand, we wanted to make sure we were not leading the shareholders into a place where it wouldn't maximize value over the long term. As we looked at the geography out there, we thought it would be better to sell the company.
Ace entered the payday lending side long after it had been around as a check-cashing company. I recently read that in 1999, it joined up with Goleta National Bank "to strengthen and safeguard its 'payday' loan operations" at a time when many states were beginning to outlaw payday lenders ...
The way this product works is: The lenders are not the banks. The lenders are the agents of a bank, so you work with a Goleta, which makes the loans. We were never part of a Goleta. It was originally a check-cashing company: America's Cash Express. And then it began providing more services -- wiring of money, money orders, things the under-banked don't have because they don't have financial institutions. And right after the turn of the century, it got into payday lending.
When this comes back up at council, should you be mayor there won't be any conflict of interest here, right? You're completely divested ...
I am completely divested. I was never an investor but an outside director of a public company. And I brought this up with many of the Dallas leaders when I began to consider running. And I told them I would consider whatever they wanted to do with this issue. And I would put them in touch with the CEO of Ace to deal with the strategic issues in Austin, to find better laws the community would feel better about, and over specific cases of individuals where leaders felt they'd been done bad, if you will. And Ace jumped on that and made sure that what was dealt with.
I am here to solve the problem. But it's an important fact people don't realize: If you and I bounce a check we pay much more in interest than people pay in payday lending situations. So banks make a huge amount of money on overdrafts. This is a big part of bankers' business, because people get sloppy. What's happening with the payday lenders is it's isolated with people who don't have credit or a banking relationship. They are the poorest of the poor. You can go back in history and look at the profits of these businesses. They're not software companies; they're not making enormous money. The market, really, is poor people who need this money, which is a big sociological issue.
How does a small business guy with a lawn service, what does he do when his truck breaks down? There's nothing he can do. This is a big issue. Which is why it shouldn't be a political one. This is much more serious than about who wins mayor.