The U.S. House of Representatives has a panel that’s supposed to help keep payday lenders in check. Those are stores and Web sites whose loans come due the day of the borrower’s next paycheck. Rep. Luis Gutiérrez (D-Chicago) chairs the panel and says he’s trying to crack down on payday lending abuses. That hasn’t stopped him from accepting tens of thousands of campaign dollars from the industry. WBEZ has been asking Gutiérrez about those donations for months. Now a statement from the congressman says he’s swearing them off. We report from our West Side bureau.

Most people who take out payday loans have a hard time getting credit elsewhere. They’re willing to pay a fee up front for an advance on their paycheck. That’s what Gabrielle Warren did. 

WARREN: I just felt desperate.

In 2006, Warren says she was making less than $9 an hour. She was struggling to pay the rent on her apartment in Chicago’s Humboldt Park neighborhood. So she started going to payday loan shops. Warren was willing to pay a $15 fee for every hundred dollars she borrowed. For repayment, she left the shop a personal check to cash on her next payday.

WARREN: It’s so easy to get it and, ‘It won’t cost much. You’re just going to pay it back.’ But then, if something else comes up and you can’t pay it all back, then they put you on an installment loan. It’s basically just the interest that you’re paying.
MITCHELL: How much interest are you paying?
WARREN: 400 plus.
MITCHELL: 400 percent?
WARREN: Yes.

HYNES: Industry proponents will argue that payday lending offers consumers a choice.

The University of Virginia’s Rich Hynes studies the industry.

HYNES: And they will give an example such as a debtor who has an automobile problem and needs a repair. If the debtor can get a payday loan, the debtor can fix the automobile, get to work, avoid losing his or her job...

...and avoid bouncing a check or getting in trouble with credit cards. Payday loans have proven popular: They’re now available at about 22,000 locations across the country.

But Rep. Luis Gutiérrez (D-Chicago) didn’t like them. He knew many of his constituents, people like Gabrielle Warren, got stuck paying the triple-digit interest. So, two years ago, Gutiérrez decided to take on the payday lenders. He introduced a bill stripping them of tools like holding the borrower’s personal check. The bill would have crippled the industry, and consumer groups loved him for it.

Today some of those advocates are less happy with the congressman.

Ambi: (Gavel pounds.) This hearing of the subcommittee...

Gutiérrez now chairs a House panel on consumer credit. In this hearing a couple months ago, he argued for a softer package of payday loan regulations.

GUTIERREZ: As our constituents are faced with even tougher economic conditions during this recession, they are more and more likely to turn to the services offered by the payday lending industry to pay for emergency car repairs, an unexpected doctor’s bill and even groceries for their families. Many of these families have been ignored or shut out of the mainstream financial services industry and have nowhere else to turn for credit.

Gutiérrez’s legislation would cap payday lending fees at what amounts to 391 percent annual interest. The congressman says that’s lower than what 23 states allow.

GUTIERREZ: I think that improving protections for 113 million consumers is a significant step in the right direction.

The payday lending industry doesn’t like this version. It says the interest cap is too low. And Gutiérrez’s new bill would not stop states from enacting tougher regulations. New York and few others have already outlawed payday lending.

But many consumer groups are opposing the legislation. Jean Ann Fox of the Consumer Federation of America testified at the hearing.

FOX: Congressional approval for a bill that caps rates at this high rate will undermine the momentum in other states.

The consumer groups haven’t publically accused Gutiérrez of selling out. But they’ve noticed some additions among the congressman’s top donors. During the last election cycle, Gutiérrez’s campaign accepted at least $29,900 from the payday-loan industry. That’s according to federal data the Washington-based Center for Responsive Politics analyzed for WBEZ.

Ambi: Oh, hey. My favorite...

Cocktail dresses and crisp suits streamed into this Gutiérrez campaign fundraiser at a Chicago nightclub last week.

Ambi: Now I still need to, I need to write a check here. Can I give that to you?

Fundraisers are routine in politics. It’s who’s participating in this one that’s raising eyebrows among consumer advocates.

MITCHELL: I’m a few feet from the nightclub’s door. The invitation for this fundraiser doesn’t mention Gutierrez’s work for immigrants. It describes him only as chair of the House Subcommittee on Financial Institutions and Consumer Credit. The invitation also lists 33 supporters. Two of them are registered lobbyists for the payday lending industry’s main trade group. Another has done legal defense for a payday lender and represented it in Springfield.

BOYLE: These are people who want the congressman’s help.

Mary Boyle works for Common Cause, a political watchdog group in Washington.

BOYLE: When someone is giving you $5,000 or $10,000 or helping you bring people and money to your fundraiser, you are going to know who they are, you’re going to know what they want in terms of business interests, and you’re going to be attentive to them.

Payday lenders are hardly alone when it comes to special interests bankrolling congressional campaigns. Even some representatives with firm grips on their seats -- like Gutiérrez -- are eager for this kind of cash.

Gutiérrez hasn’t faced a tough Democratic primary challenge since 1994. And the congressman has never won less than 75 percent of the vote in a general election. Gutiérrez is popular, but his campaign war chest itself helps keep potential challengers at bay.

Sheila Krumholz of the Center for Responsive Politics says big money helps incumbents in other ways.

KRUMHOLZ: It’s incredibly beneficial for them to be able to dole it out to junior members or candidates, to be able to trade the money as chits, to call them in later for support for legislation they’re sponsoring or bids for higher office.

When we reached her a few days ago, Krumholz doubted Gutiérrez would ever turn down money from payday lenders.

KRUMHOLZ: ...unless he thought that this would become a political liability.

WBEZ has been asking for months to speak with Gutiérrez about his campaign funding from payday lenders. On Wednesday, one of his aides sent some written responses. The congressman says no contributions have influenced the payday-lending legislation. He points out the industry’s criticism of the bill. And he offers this quote: “I want to avoid even the appearance that there is a conflict, so I will not be accepting any contributions from the payday loan industry.”

We asked whether Gutiérrez will return the money he’s already raised from the industry. So far, no response.