“It took me years to overcome that mistake,” Elder Joseph Wilson told members of Columbia Faith Voices during a meeting last year. “I’m still working to overcome what happened to me.”
Wilson took out a payday loan for $700 that resulted in $3,500 in total payments after interest was tacked on. The average interest borrowers pay in Missouri is more than 400 percent. People like Wilson get trapped in the system for up to two years.
His story made it hard for those in the room to fight back the tears. Taking out one of those loans, followed by the struggle to pay it off, is perceived as a problem faced by those we don’t know.
It’s what those people go through because they lack the intelligence necessary to say no to high interest. Wilson reminded those in the room that it happens to people they know and share ministry with.
Put cap on loans
The fight to cap the interest rates on payday loans began before President Barack Obama was elected the first time. It’s been a long grueling fight to get the public behind the issue.
Could it be because people believe it’s what those who take out payday loans deserve?
“Many regard payday lending as an issue that impacts the poor,” said Cassandra Gould, executive director of Missouri Faith Voices and pastor of Quinn Chapel AME Church in Jefferson City.
“There are people in your congregations who have taken out these loans. It’s not just poor people.”
Gould challenged clergy to ask members of their congregations to raise their hands. Who knows a person or is a person who has received a payday loan?
She asked those in the room to begin a conversation with their congregants regarding how these loans impacted their finances.
“Faith for Just Lending” was formed and they began asking questions and interviewed 1,000 Christians to measure the impact of payday lending.
The survey found that 58 percent of black people know someone who has borrowed a payday loan.
Forty-nine percent have taken a loan themselves , and 35 percent of the clergy and service providers interviewed know someone who has obtained a payday or car title loan.
Protect the vulnerable
On June 2, the Consumer Financial Protection Bureau will meet in Kansas City to release a proposed payday, car title and installment lending rule. Members of Faith Voices of Columbia and Jefferson City will join “Faith for Just Lending” for the National Day of Action to End Predatory Lending.
“Ethical lending is an honorable business,” said Galen Cary, vice-president for governmental relations with the National Association of Evangelicals, in an interview with St. Louis American. “But ensnaring vulnerable people in debt traps is not. We need just laws and regulations that meet legitimate needs while preventing the egregious abuses that are now committed by too many payday lenders.”
It begins as a simple solution to what appears to be a short-term problem. Money is needed to make it until the next paycheck, just enough for the necessities.
Borrowing against the next paycheck shouldn’t be a problem — those who borrow think. They sign without reading the small print. In some cases they do, but the need outweighs the penalty.
Missouri allows annual interest rates as high as 1,950 percent. Missouri Faith Voices has placed predatory lending at the top of their list of issues to bring before the General Assembly.
Republican legislators have refused to consider a recommendation to cap interest at 36 percent. Critics of the proposal argue forcing interest limits will shut the industry down by removing the last line of credit for those who need the loans.
Proponents also argue borrowers know the consequences of obtaining a payday loan. They know they can’t go elsewhere to get the money they need. Why should the industry be regulated for offering a service to those who have no other option?
Back in the day, we called them loan sharks. Back in the day, the government enacted usury laws to regulate the interest that could be charged on a loan. These laws helped curtail the activity of organized crime.
Each state is given the responsibility of setting its own usury laws. These laws are established and enforced to protect people from the consequences of their own decisions.
Put another way, payday lenders are gangsters protected by our state government. They wreak havoc on families who make the decision to pay high interest rates because they have few options. Although governments are quick to regulate the usury of gangsters, they are slow to place caps on the activities of businesses that do the same thing.
“Communities already suffering due to economic inequities are falling prey to these financial predators,” Gould said. “As a pastor, I have become aware of the cycle of shame. The real culprits are these unregulated profiteers who are extracting wealth from families. They are contributing to the poor health of communities and individuals.”
Wilson exposed a truth hidden behind layers of assumptions. It is true that blacks are disproportionally impacted by payday loans. Wilson, who is black, challenged ministers committed to the cause to press deeper.
People caught in the trap could be your neighbors. It could be a person sitting next to you during worship. It could be the person preaching that day.
It could be me, or it could be you.