Brad Rixmann, chief executive of Burnsville-based Payday America, is a giant on the payday lending scene, operating the largest such business in the state. He also is a major player in Minnesota politics, having doled out nearly $550,000 in state campaign donations over the last decade.
As Rixmann's contributions have grown, so has his business, aided by state law that allows him to charge triple-digit interest rates on loans that can go up to $1,000. His customers pay an average of 277 percent interest, sometimes borrowing repeatedly against their next paycheck.
Rixmann, 50, first became familiar to Minnesotans as the face of Pawn America, a chain of pawn stores he started in the early 1990s. He has starred in commercials that urge viewers to bring in even broken necklaces and solo earrings for cash trade. In the early 2000s, he expanded into payday lending with Payday America. When lenders pulled back during the recession, Rixmann and the payday industry were well-positioned to step into the void.
According to the state Commerce Department, Payday America now issues about half of all payday loans in Minnesota.
Rixmann says his political contributions are necessary and legitimate actions needed to safeguard a business that provides a valuable alternative for consumers with shaky credit.
"I certainly want to protect our customers, our employees and like any business owner that's involved in the democratic process, that's important," he said in an interview with the Star Tribune. "I certainly hope that they (lawmakers) would learn about our business, and give me the time — and our customers — the time to listen and learn about what their needs are and I think that's a very important part of the democratic process."
Payday lending occurs in much of the country, although 15 states and the District of Columbia have effectively banned it outright. Minnesota is among 36 states that allow payday lending. Nine of those have set more stringent requirements, including lower limits on fees.
Reform advocates are waiting for the Consumer Financial Protection Bureau to issue national regulations next year on payday lending. The Minnesota Department of Commerce has for years unsuccessfully pursued expanded protections.
In 2014, DFLers who controlled the House and Senate pushed for regulations that would restrict payday lending. Advocates said too many people had become trapped in an endless cycle of debt by the loans.
Rixmann and his wife, Melanie, ramped up the frequency of their political giving in 2014, and Payday America spent more than $300,000 to lobby key legislators that year.
At first the 2014 bill appeared poised for success and passed the House. But it grew weaker at every phase of negotiations, got bogged down in the Senate and died at the end of the session
That was a session that saw Rixmann give $7,500 to three legislative caucus campaign funds immediately before lawmakers convened: the Senate DFL Caucus, the Republican's Senate Victory Fund and the House Republican Campaign Committee. When the session ended in May, Rixmann and his wife gave another $5,000 to House Republicans and House Speaker Kurt Daudt, R-Crown, then the minority leader.
Rixmann's lobbying efforts have not come through money alone. Last year Payday America launched what it said was a grass-roots campaign of customers willing to personally attest to the value they attached to their ability to access short-term loans.
But that effort appeared to become problematic.
Legislators have twice received thousands of signed petition cards as a way to demonstrate that Payday America customers opposed reform efforts. Store employees solicited customers' signatures when they applied for or repaid outstanding loans.
The Star Tribune obtained more than 200 of the cards. Dozens of them contained only names or e-mail addresses, making it impossible to verify their authenticity. One was filled out by a store manager who did not indicate she worked for the company.
Legislative staff for Rep. Jim Davnie, DFL-Minneapolis, encountered similar problems responding to postcards when he sponsored a failed payday lending reform bill in 2010.
"What my office discovered was that any number of those postcards were fraudulent," he said. "We had postcards coming from people who, when contacted, said they didn't sign postcards. One was from a juvenile, who by law is prohibited in engaging in payday lending. We had postcards that clearly were fraudulent return addresses."
One postcard reviewed by the Star Tribune was signed with the name Titus Stroman. Stroman is an inmate at the Faribault prison and said he never filled out the postcard and has not taken out a payday loan. Another postcard contained information for a St. Paul man, who, when reached by the Star Tribune, said he had never taken out a payday loan. He said he recognized the handwriting as his late brother's.
Told of the apparently suspect petition cards, Rixmann expressed surprise and said his company would conduct an internal investigation. "We focus on running our business on the high road," he said. He added: "I can tell you in no way, shape or form was anyone instructed to fraudulently put signatures or addresses on these postcards. I would be extremely disappointed in our staff for doing something like that."
How the 2014 bill died
Early in the session, the payday lending bill, sponsored by Rep. Joe Atkins, DFL-South St. Paul, and Sen. Jeff Hayden, DFL-Minneapolis, received quick approval from the House. It would have limited consumers to four loans a year and instituted a requirement that lenders review a borrower's ability to pay.
The bill hit a serious roadblock in the Senate, where lawmakers insisted on raising the number of loans, among other changes. The typical repeat customer at Payday borrows five to 10 times a year, according to state and company data. Such customers account for 65 percent of Payday's business.
Meanwhile, legislators were preparing a $1 billion bonding bill to fund State Capitol renovations and dozens of other projects across the state. Such bills require a supermajority to pass and usually require votes from the minority party.
House Minority Leader Paul Thissen, DFL-Minneapolis, who was House speaker at the time, said that in end-of-session negotiations, Republican leaders indicated they wanted the payday lending bill killed.
It "was one of three issues that the Republicans — Kurt Daudt and [Senate Minority Leader] David Hann … didn't want to move … or there would be no votes for the bonding bill," Thissen said.
Daudt, in an interview, confirmed that the bill was part of final negotiations, but he and Hann said Rixmann's contributions played no role in their decisions. Daudt said it is not unusual for a handful of bills to be decided at the end and not all make it.
"I don't make decisions based on political spending," Daudt said, adding that he thought the bill was controversial and failed to address what he considers the root of the problem — unscrupulous online payday lenders.
Daudt also said he opposed the bill because he felt it targeted Rixmann, a major GOP donor.
"I thought they were targeting him for political reasons," Daudt said.
Thissen said Daudt's account "pretty much sums up a lot.''
"We were trying to get a bill passed to help poor people who are getting hurt by an unfair system, and their first reaction is to protect their rich donor," Thissen said.
Rixmann has given to DFLers and in 2013 gave more money to Democrats than to Republicans.
Thissen said he grudgingly accepted the Republicans' conditions. The bill next went to the Senate, where it was approved on a near party-line vote. Only two DFLers voted against it — Sens. Terri Bonoff of Minnetonka and John Hoffman of Champlin. They each later received $1,000 in campaign contributions from Brad and Melanie Rixmann. Bonoff and Hoffman say their votes had nothing to do with the Rixmann contributions.
By the time the bill returned to the House, "I had already made the commitment to what the end-of-session deal was going to look like with Tom Bakk, David Hann and Kurt Daudt," Thissen said, referring to the other three caucus leaders. "I felt I needed to honor that deal and they put up the votes for the bonding bill."
Daudt said DFLers were at least partly to blame for the bill's demise, noting that they controlled both chambers and the governor's office.
Campaign finance records show that in 2014 the Rixmanns were the third largest individual donors to the Senate DFL Caucus. Payday America in late 2013 and again in late 2014 was among several corporate sponsors of an annual food shelf fundraiser hosted by Senate Majority Leader Tom Bakk, DFL-Cook.
Bakk declined requests for comment this week. A spokeswoman said he was busy with family.
"I have no choice"
Rixmann in an interview with the Star Tribune said his payday lending business provides a valuable service and that without lenders like him, consumers would be driven to unscrupulous online lenders or worse, simply be left without any way to borrow to make ends meet.
He said that in about 15 years of operation, the company has seen "virtually zero" complaints filed with state regulators.
Michelle Washington, a 60-year-old home health aide who earns $14 an hour, said she relies on Payday America loans. Washington is among those who participated in the postcard petition and said she would be disappointed if her access ended. Washington has borrowed against her paycheck every other week since 2007. She struggled to explain the annual interest rate on her line of credit, but said she knows she pays about $30 every time she takes out a loan. That adds up to nearly $800 annually.
Washington said she won't borrow from friends or family and likes the feeling of independence that payday loans afford her.
"I want to show my family I can make it on my own," she said on a recent afternoon, seated in the small, modestly furnished apartment where she lives alone.
Last week, the day before her usual Payday America visit, stomach pain kept her home from work, forcing her to see her doctor. She said she was worried about the looming medical bill. Though she still felt ill Friday, she said she would have to work. "I have no choice," she said.
That same day she visited Payday America. The store manager — her favorite teller, she said — tended to her transaction. He cracked a joke, saying he didn't need to see her identification unless she had a twin he didn't know about. She paid off her last loan and then borrowed $320. The finance charge was $29.
Commerce Department officials have previously proposed instituting a cap on how much interest a lender can charge customers, setting a maximum annual rate of 30 percent.
Commissioner Mike Rothman said his department supports efforts to educate Minnesotans about budgeting and other financial matters, in addition to seeking reforms.
"We want to protect financially vulnerable people from these debt traps, from the cycle of debt so they are able to achieve financial success," Rothman said.
Staffers Renée Jones Schneider, Jeff Hargarten and John Wareham contributed to this report. Ricardo Lopez • 651-925-5044