The Inside Man: Patrick O’Shaughnessy of Advance America

Patrick O’Shaughnessy is the CEO of Advance America, one of the nation’s largest payday lenders. He is also Chair of the Board of Directors of Community Financial Services Association of America (CFSA) – the payday industry’s special interest trade group, which has a history of trying to block efforts in Washington and across the nation to protect hard working families from the predatory practices of its member companies.

The Consumer Financial Protection Bureau (CFPB) handpicked O’Shaughnessy for a three-year term on its Consumer Advisory Board (you read that right… Consumer Advisory Board).

At the time of his appointment, CFPB Director Richard Cordray said Advisory Board members would “provide valuable input to help us better understand the consumer financial marketplace.” The CFPB – the government agency charged with overseeing that marketplace, including payday lenders like O’Shaughnessy’s Advance America – is considering new rules for the payday lending industry that would protect consumers from predatory lenders like O’Shaughnessy. Talk about a fox in the hen house!

In his capacity on the CFPB’s Consumer Advisory Board, O’Shaughnessy is likely to go to bat for the interests of the payday lending industry. What exactly is his view on the subject? Well for starters, he thinks regulators discriminate against payday lenders. Seriously. And when banks tightened their restrictions on credit after the financial crisis, he attempted to swoop in and take advantage. After all, what does it matter if someone cannot meet the terms of their short-term credit agreement if companies like Advance America are banking on customers remaining in a cycle of perpetual debt so they can rake in piles of cash?

When it comes to payday lending reform, O’Shaughnessy has very strong opinions. In fact, he thinks putting caps on interest rates (so lenders can not charge 400% for example) or limiting the number of consecutive payday loans a consumer can take out would be “detrimental” to his business. And why should he support strong reforms that favor hard working families? He hilariously believes that his hard-luck customers choose payday loans because of the “transparency” of such options.

And what about the payday lending company O’Shaughnessy runs? A former manager of Advance America said “an overwhelming percentage” of its customers re-borrow every two weeks and can’t get out of “what appears to be a never-ending cycle of payday loan debt.” The manager is right. Take 2011 for example. That year, Advance America reported serving 1,347,000 customers and originating 10,561,000 cash advances, which averaged out to nearly 8 cash advances per customer. In other words, these hard working men and women see no other choice but to take out new payday loans in order to pay off old payday loans. Advance America’s Senior Vice President Carol Stewart has gone on the record stating that the company cannot survive if they are forbidden from giving customers more than 5 payday loans – a cap that would make it easier for consumers to escape the debt cycle Advance America relies upon.

Believe it or not, Advance America’s debt collection tactics are far worse than simply signing folks up for additional loans – how it convinces customers to take out additional loans is perhaps even more problematic. As PR Watch reported:

“A primary goal is to get customers to continually renew their loans. ‘We had to call in our numbers every night to Advance America’s corporate headquarters. They were not interested in numbers on who paid off their loans, but on who renewed their loans. They wanted folks to pay the interest rate and keep the loan going and going,’ says the former [Advance America] employee.

“This employee also worked for a time in the collection department, where he was instructed not to visit people at home, but to go to people’s place of employment first. ‘We would not tell their bosses where we were from, but we would carry a clip board with our name on it in a prominent way. We would request that a person be pulled off the factory floor, not to collect, but to keep them on the hook. The key was embarrassment and intimidation.’”

It is – by design – a vicious cycle that has paid off handsomely for O’Shaughnessy. He has received millions of dollars in compensation and spent hours of personal travel time on Advance America’s corporate jet.

It has paid off for others too. During the past few election cycles, O’Shaughnessy has contributed at least $70,200 to the campaigns of powerful politicians and payday lending special interest PACs, which have also donated large sums of money to the campaigns of elected officials.

The Details:

O’Shaughnessy Bragged about Payday “Earnings Growth,” No Doubt Fueled by his “Millions” of Customers

• In the First Nine Months of 2011, Advance America had a Net Income of $41 Million. October 28. Spartanburg-based Advance America, Cash Advance Centers Inc. reported Thursday its earnings increased almost tenfold during the third quarter. The company said its net income for the quarter was more than $14.5 million, compared with $1.4 million during the same quarter last year. For the first nine months of the year, Advance America’s net income has more than doubled to more than $41 million, compared with $20 million during the same period a year prior. “We are pleased to report our third consecutive quarter of center gross profit and earnings growth,” Patrick O’Shaughnessy, president and CEO of Advance America, said in a statement. “Customer service is the core of Advance America’s business, and our strong results this quarter reflect our steadfast efforts to satisfy the varied needs of American consumers.” [Herald Journal, 10/28/11]

• Advance America Website Claims to Have Had Millions of Customers Since the Late 1990s. [AdvanceAmerica.net, 10/8/14]

Then Oversaw the Sale of Advance America to a Mexican Corporation

• Under O’Shaughnessy, Advance America was Purchased by Grupo Elektra in 2011 for $10.50 Per Share. “In what it said would be its final bid, Grupo Elektra on Dec. 15, 2011, offered to acquire all Advance America’s common stock at a cash purchase price of $10.50 per share. After continued negotiations, Advance America approved a merger agreement Feb. 15, and the two sides issued a joint press release announcing the deal after the close of trading.” [SNL Financial Services Daily, 3/28/12]

A Powerful Payday Industry Insider, O’Shaughnessy Is Board Chair of the Payday Industry’s Special Interest Trade Group

• O’Shaughnessy is Board Chair of the Consumer Financial Services Association of America [cfsaa.com, 10/20/14]

Further Cementing His Insider Status, O’Shaughnessy was Appointed to the Consumer Advisory Board of the CFPB, Which Oversees Payday Lenders

• CFPB Announced O’Shaughnessy’s Appointment to a Three-Year Term on its Consumer Advisory Board. At the time of his appointment, CFPB Director Richard Cordray said in a press statement that Advisory Board members would “provide valuable input to help us better understand the consumer financial marketplace.” [CFPB Press Release, 8/24/14]

• CFPB Oversees Payday Lenders like O’Shaughnessy’s Advance America. “The CFPB has authority to oversee the payday loan market and began its supervision of payday lenders in January 2012.” [CFPB Press Release, 11/6/13]

• CFPB Is Considering New Rules for the Payday Lending Industry That Would Likely Protect Consumers. “During a field hearing Tuesday on payday lending, CFPB director Richard Cordray said the bureau has been working to find the right approach to protect consumers in the marketplace for payday loans. ‘As we look ahead to our next steps, I will frankly say that we are now in the late stages of our considerations about how we can formulate new rules to bring needed reforms to this market,’ he said.” [Consumerist, 3/25/14]

The Numbers Don’t Lie, Advance America Relies on the Debt Cycle to Profit

From 2009-11 Advance America Reported That Customers Received an Average of About Eight Cash Advances Per Year

• In 2009, Advance America Reported Serving 1,316,000 Customers and Originating 10,860,000 Cash Advances Which Averages to 8.25 Cash Advances Per Customer. [Advance America 2011 SEC 10K]

• In 2010, Advance America Reported Serving 1,310,000 Customers and Originating 10,027,000 Cash Advances Which Averages to 7.65 Cash Advances Per Customer. [Advance America 2011 SEC 10K]

• In 2011, Advance America Reported Serving 1,347,000 Customers and Originating 10,561,000 Cash Advances Which Averages to 7.84 Cash Advances Per Customer. [Advance America 2011 SEC 10K]

Former Advance America Staff Paint a Picture of Hardball Tactics with Customers

• A Former Manager of Advance America Said That “An Overwhelming Percentage” Of Customers Re-Borrow Every Two Weeks and Can’t Get Out of The “What Appears to Be a Never-Ending Cycle of Payday Loan Debt.” Stephen Martino wrote, “Since I’m a former manager for Advance America, I feel like I have to respond. Payday lenders argue that customers seek payday loans as a “responsible way” to manage their finances. What they tactfully ignore, however, is the high rate of frequency at which customers use the payday loan product. The truth is, an overwhelming percentage of customers pay their loan every two weeks and then re-borrow upon every visit. In many cases, this goes on for years because customers just can’t seem to get out of what appears to be a never-ending cycle of payday loan debt. The fact is, that’s how these companies make their money. Payday lenders make it sound as if their product is a one-time deal. They also claim their fee of $40 for a $400 loan is not only sensible, but affordable. But in my own experiences, I’ve seen customers continue borrowing for years. Time and again I’ve witnessed customers get caught-up in the so-called payday loan debt cycle, and it was my job to restrict customer repayment plan options and encourage the repetitive use of the payday loan product.” [Patch, 6/2/12]

• Former Employee of Advance America: We Would Come in Early On The 3rd Of The Month When Disability and Social Security Benefits Arrived for Our Customers to Cash Their Checks and Wipe Out Their Checking Accounts. “One former employee of Advance America explains some tricks of the trade. Speaking on the condition on anonymity (because he and other employees were forced to sign a confidentiality agreement upon leaving the firm), this former shop employee says that many of his clients were on disability or Social Security: “They would come in for a small loan and write a check to the company dated the 3rd of the month, when their government checks would arrive. All the Advance America employees were required to come in early on that day, so we could quickly cash their checks and wipe out their checking accounts.” [PR Watch, 9/16/10]

• Advance America Employee: A Primary Goal Was to Get Customers to Renew Their Loans and Corporate Offices Were More Concerned with Renewal Rates Than Paid Off Loans. A primary goal is to get customers to continually renew their loans. “We had to call in our numbers every night to Advance America’s corporate headquarters. They were not interested in numbers on who paid off their loans, but on who renewed their loans. They wanted folks to pay the interest rate and keep the loan going and going,” says the former employee.” [PR Watch, 9/16/10]

• Advance America Employee: We Would Go to The Place of Employment of Our Customers Who Were Late On Payments: “The Key Was Embarrassment and Intimidation.” This employee also worked for a time in the collection department, where he was instructed not to visit people at home, but to go to people’s place of employment first. “We would not tell their bosses where we were from, but we would carry a clip board with our name on it in a prominent way. We would request that a person be pulled off the factory floor, not to collect, but to keep them on the hook. The key was embarrassment and intimidation.” [PR Watch, 9/16/10]

Advance American Admits It Needs Debt Cycle in Order to Survive

• Advance America On Loan Cap of Five Per Person: “We Can’t Live On Five.” “On Wednesday, Del. G. Glenn Oder, R-Newport News, a foe of payday lenders, expressed frustration with the cash-store operators, who dispensed nearly $1.5 billion in loans last year. “The industry wants nothing,” Oder said in a chance encounter with Carol Stewart of Advance America, a publicly traded lender. “We can’t live on five [loans],” Stewart replied.” [Richmond Times-Dispatch, 2/29/08]

Through it All, O’Shaughnessy Has Made Millions Hocking Payday Loans

• O’Shaughnessy Had a Total Compensation, Including Stock Awards, of $2,992,791 in 2011. He received a salary of $550,000 and a bonus of $1.1 million for a total cash compensation of $1.65 million. “For 2011, we granted only performance-based bonuses. In early 2012, the Committee determined, the Board of Directors approved and we paid performance-based bonuses under our Bonus Program based on $1.09 EPS achievement, the highest recorded EPS in our history, which represented greater than 100% achievement. Mr. O’Shaughnessy’s 2011 performance-based bonus was $1,100,000, representing 200% of 2011 base salary and consisted of $550,000 for the EPS Component and $550,000 for the Individual Performance Component, which was awarded at the discretion of the Committee.” [Advance America, 2011 SEC Form 10K]

He Even Traveled in Style on the Advance America Corporate Jet

• O’Shaughnessy Used the Advance America Corporate Jet for Many Hours of Personal Use. “In 2011, pursuant to our policy regarding personal use of aircraft, Mr. O’Shaughnessy used 8.7 flight hours for personal matters in aircraft owned or leased by us. The imputed income of the 8.7 flight hours used by Mr. O’Shaughnessy is approximately $11,635. [Advance America, 2011 SEC Form 10K]

Not Surprisingly, O’Shaughnessy Has Gone to Bat to Protect the Source of His Wealth

• O’Shaughnessy: Payday Lenders Are Discriminated Against by Regulations. “But, despite these evolving habits, old regulations remain. Many lenders are not licensed or regulated at all, with operations designed to evade state and federal regulations governing consumer financial services. Many bank and nonbank services that consumers use interchangeably are subject to different regulations and disclosure rules. For instance, banks are not required to disclose the annual percentage rate associated with fees for overdraft credit and there typically is no limit on the number of times consumers can overdraw their account. In contrast, short-term lenders offering a comparable service must disclose their flat fee as an APR and several states restrict access to credit through annual loan limits or outright prohibition. This regulatory approach favors some services and discriminates against others. As a result, current regulations impede rather than facilitate consumers’ ability to comparison shop and make informed financial decisions. This creates a lopsided, less-competitive market, with winners and losers dictated by regulators rather than consumers. Such narrow policymaking creates additional barriers to credit access, undermining consumer empowerment, economic mobility and competition. To put money back into Americans’ pockets and bolster the U.S. economy, the nation must develop more consistent policies that ensure meaningful disclosures and reporting to underpin how consumers actually access and use financial services, especially credit.” [Advance America, 1/14/14]

• After the Financial Crisis, O’Shaughnessy Pushed to Lure Consumers from Traditional Banks with Heightened Credit Requirements. “Payday lenders like Advance America are pushing hard to lure away customers from traditional banks. The effort is getting a boost from the industry’s loan crunch, especially for borrowers with blemished credit, and toughened regulation of fees and interest rates charged by the nation’s 7,760 banks and savings institutions. Those curbs aren’t a problem for payday lenders, a hodgepodge of publicly traded companies and mom-and-pop locations largely regulated by states. In Florida, such companies can charge interest rates as high as 391%, compared with a limit of 39% on most loans made by banks. Emboldened by their competitive advantages and the banking industry’s retrenchment, payday lenders are aggressively pitching debit cards and online bill payment. Some companies are opening payday-loan branches next door to banks and designed to look like them, even hiring former bank-branch managers. “We believe that we’re starting to see a benefit of a general reduction in consumer credit, particularly … subprime credit cards,” Patrick O’Shaughnessy, Advance America’s chief financial officer, told investors in November. The Spartanburg, S.C., company has 2,360 payday-loan offices, including 13 opened this year. Company officials plan to open an unspecified number of additional offices, partly to take advantage of the upheaval.” [Wall Street Journal, 12/24/10]

• O’Shaughnessy: Fee Caps and Limits on Refinances are “Detrimental to Our Business.” In Missouri, there’s a bill that would be — that has a lot of protections that would definitely be harmful to our economic results there, including putting in fee caps and limitations on numbers of refinances among other things. It’s not — as I said, it would be detrimental to our business there, but it’s been sort of portrayed in the media there as the industry sponsored bill, the pro-industry bill. So, it may not pass for that very reason. [Fair Disclosure Wire, “Advance America Q1 Interest Call,” 4/28/11]

• O’Shaughnessy: People Choose Payday Loans Because of Transparency. “Advance America’s new disclosure shows examples, in simple terms, of what borrowers will pay (typically a one-time, fixed fee of $15 per every $100 borrowed), when the loan repayment is due (usually in 14 days or 30 days) and how the borrower must repay it (in person with cash or check, or through the post-dated check written following the signing of the loan agreement). “Transparency is one reason consumers choose short-term loans,” notes O’Shaughnessy. “Many comparable products come with hidden fees and confusing disclosures or no credit disclosures at all.” [Daily Inter-Lake, 11/18/13]

During the past three election cycles, O’Shaughnessy has contributed at least $70,200 to the campaigns of politicians and special interest PACs. [Center for Responsive Politics, 5/23/16]

• 02/21/2008 – $5000 – Advance America Cash Advance Centers Inc. PAC
• 03/11/2009 – $5000 – Advance America Cash Advance Centers Inc. PAC
• 09/21/2010 – $5000 – Advance America Cash Advance Centers Inc. PAC
• 03/15/2011 – $5000 – Advance America Cash Advance Centers Inc. PAC
• 04/19/2011 – $5000 – Community Financial Services Association of America PAC
• 03/05/2012 – $5000 – Advance America Cash Advance Centers Inc. PAC
• 11/20/2012 – $2500 – Warren, Elizabeth
• 03/14/2013 – $5000 – Advance America Cash Advance Centers Inc. PAC
• 03/25/2015 – $25,000 – Right to Rise (Jeb Bush Super PAC)
• 06/26/2015 – $2700 – Bush, Jeb
• 07/15/2015 – $5,000 – Community Financial Services Association of America PAC
• Total – $70,200

Special thanks to National People’s Action for allowing Allied Progress to use its extensive research on payday lending industry executives.