Many people know someone who's been caught in the payday loans trap. Perhaps some of us have even been there ourselves. It's an issue that has plagued communities in America for decades damning cycles of borrowing and debt that can quickly spin out of control. One of the hardest-hit states has been Oklahoma, where payday loan debt has become a major issue. Among those most attuned to the negative impacts of payday loans are clergy members. Now, they're joining together to fight the companies that profit off of predatory lending.
Preying on the Vulnerable
First, a quick overview of the problem with payday loans.
Here's what a typical scenario looks like. First, you receive your regular paycheck, just like normal. But then, out of the blue, an unexpected expense comes up. It could be a medical bill, a car repair bill, or just a few random expenses that add up. Suddenly you're a week away from your next paycheck, and you're out of money. What do you do? If you aren't lucky enough to have a generous friend or relative, which many people aren't, you might choose to get a payday loan.
Companies like Pay Day Advance, Cash America, and Moneytree offer cash advances to just about anyone who walks in the door no credit check required. In theory, they provide a helpful service to people who need a hand up. In practice? Not so much.
Here's the thing: when it comes time to pay that money back, you better have it. If not, you're in trouble. Interest rates on payday loans are astronomically high meaning that if you aren't able to pay the money back with your next paycheck, you'll suddenly owe more than you borrowed in the first place.
Worst of all, payday lenders actively encourage "rollovers" a term given to repeat-borrowers. Can't pay back the money this month? No problem, we'll give you another loan! This vicious cycle targets people in poor communities who may not understand the consequences of high interest rate loans. Often, it leaves people worse off than when they started in way over their heads and wallowing in endless cycles of debt.
Fighting Back
A group of ministers in Oklahoma became so familiar with the consequences of these predatory lending practices, that they finally said enough is enough. Fed up with watching these morally-suspect companies destroy the lives of their parishioners, they've begun speaking out against the payday loan industry.
Local pastor Mitch Randall explains that as clergy members: "We are to bring good news to the poor. Payday lending is not good news to the poor. It is the worst news possible."
"They are making money on the backs of the poorest citizens of our state and that is immoral. It's wrong and they need to be out of business," said Randall. "This is an evil practice."
"Predatory lending, it is a debt trap. They seek out those who are most vulnerable," added Jill Hatcher, the wife of a Baptist preacher.
Clergy Stand Up Against Lobbyists
After defeating a bill pushed by payday loan lobbyists last year, Oklahoma faith leaders again rallied to the cause when a similar bill was reintroduced this year. It too was defeated, thanks to a public awareness campaign and pleas from the clergy.
Reverend Lori Walke wrote a letter to the legislators, which was signed by many other local clergy. It read:
"As members of the clergy, we find these predatory lending practices an affront to our moral center and in violation of the most basic tenets of our faith. Scripture condemns usury lending time and again. The prophet Nehemiah denounced those who exacted crippling interest rates on the poor, saying, "But now you are selling your own kin!" and ordered lenders to mend their ways. In the Gospel of Matthew, Jesus reminds us that, "Truly I tell you, just as you did not do it to one of the least of these, you did not do it to me," so if we do not protect the vulnerable, we have failed to protect Jesus.
Ultimately, we adopt the self-professed mission of Jesus found in the Gospel of Luke to "bring good news to the poor." The way we treat the poorest of our citizens reflects our commitment to that which we profess. Will we be found faithful?"
Ministers are typically told not to get involved in politics. However, for many people, this issue goes beyond politics. Do you have any experience with payday loans? In your opinion, were the clergy right to get involved?
17 comments
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loveunquenchedblog
I feel that Pay Day Loans are a Blessing; and that the business should continue. GOD Bless. :-)
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Bill Fox
Proverbs 22:7New International Version (NIV) 7 The rich rule over the poor, and the borrower is slave to the lender.
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Rev Ned
Payday lending is just loan sharking made legal.
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Sandy
I most certainly agree with you, Reverend Ned!!
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Father Gene
A 2014 study by the Pew Charitable Trusts found that interest rates for payday loans topped 500 percent in many states.
http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs/content-level_pages/fact_sheets/stateratelimitsfactsheetpdf.pdf
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Father Gene
According to the Consumer Financial Protect Bureau the typical payday loan is for less than $400.
"“A fee of $15 per $100 is quite common for a storefront payday loan, and would yield an APR of 391% on a typical 14-day loan.”
Of course, industry trolls will talk about the "value" of payday loan services and not the costs.
http://files.consumerfinance.gov/f/201304_cfpb_payday-dap-whitepaper.pdf
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Joseph E Knopick
I live in NY, these lenders are banned. They cannot give you a loan of this type nor can you receive one. It is against the law. If a consumer were to receive a payday loan while a resident of New York State, and cannot pay it back, as the loan was issued is agents the law, they cannot collect on it neither. If they claim you owe them a debt, residents are encouraged to turn all their notices over to the State Attorney Generals office.New York banking regulation do not permit credit interest rates to exceed 25%. These loans are in excess of 300 and 400%. New York AG office considers them criminal and a form of loan sharking.
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Roy L. Patterson
We use to have Pay Day loans here in Arizona. We got rid of them. Now we have Auto Title Loans. Another high interest loan. Might be OK in a pinch, but not like some do. As soon as they pay off one loan, they get another.
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Sue Nicholai
I don't th manypeople understand how to budget,or do without if you are not making enough or to give up something if something changes in your budget. Too many if something goes wrong have no room forchange and even a small problem can turn into an avalanche. Although I think it is good to bring attention to these kind of places I think it would be more importand to teach our groups good stewardship.
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rebadams7
For a tiny minority, they get the loan, for a week, and they pay it - they are the MINORITY These loans are horrible and it would be so much better if another solution could be found. What can we do to help folks over a tough spot, or educate them on all the options. Those places are traps
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John Owens
What is really sad is that so many people grow up without really learning how to perform critical thinking. Gambling casinos, payday loans, almost ANY credit or banking are somewhat predatory. People playing the lottery. It's all so desperate. I'm glad to see pastors intervening, but the real teaching and learning needs to take place in the home when children are small.
Of course, if their parents are morons, chances are the children will be too. It isn't written in stone, but that would be the most likely outcome. People need to know how to work, to save, to budget, and to RESIST temptation to buy things for which they cannot EASILY pay. I tried to teach my children and my nieces and nephews MOT to be optimistic when it comes to money, because "if you have two quarters you can rub together, someone is staying up all night figuring out how to screw you out of them. If you don't have the money to buy something now, what on EARTH will make you think you are going to have it 6 months from now."
Most of the time, the sales pitch is something like, "You don't have credit? That's okay, WE'RE good people. We believe in you. We will give you credit," or that is the message they are sending, subliminally. "You should have the crap you want without waiting until you have the money. Let US provide you with the money." In reality, THEY know you are a terrible risk, and they hope you are, because they will take something more valuable than the loan plus interest. What is scary, is that some people don't learn. I don't even think it is very much related to literacy or education. The circumstances may vary widely, but the symptoms are very similar. People buy what they can't afford for similar reasons, and borrow what they can't repay to buy it.
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BethKZ
I lived in Oklahoma from 2005-2010, in a town of around 15,000 people. There were literally DOZENS of payday loan places - from each of these chains, and several independently owned ones. Good people would get into one of these, end up in the revolving-door cycle, then get into another one, the same way. Very soon, they could barely pay off the fees to get the loans rolled into another loan. They were soon out of a home, unable to afford food, clothing - much less anything resembling entertainment. Time which had been spent doing recreational or entertaining things soon became stay at home (maybe with friends who were in the same boat) and drinking cheap beer. There was a VERY HIGH rate of alcoholism there, very high rates of poverty, very high usage of services like soup kitchens, lots of people moving in with friends or family... and these were WORKING PEOPLE who needed these services which are usually for the extremely poor.
We pay, donate, or volunteer for services which help the truly needy get back on their feet. These services are not supposed to go to people who should be on their feet, but are having most of their income siphoned off by predators. That makes less support available for those who really are "down on their luck", moreover, setting up to make more of them by substituting activities, classes, sports, arts, and entertainment with drug and alcohol abuse.
I haven't seen anything that extreme in any other place I've ever lived. I'm glad that these Oklahoma clergy are taking steps to get rid of that problem.
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Rev. Hoagie
Beth, I understand how emotional you liberal ladies get so I'm going to attempt to speak logically in the hope you understand.
You state there were "DOZENS" of payday loan places in your town. How many bars, taverns, liquor stores, beer distributors and lounges were there? Businesses go where the market is Beth. If the "good people" of your town did not create the demand neither the payday lone businesses nor the alcohol sales businesses would exist. Yet you did mention no matter how bad their loans "rolled over" they still had money for "cheap beer". Oh my! Perhaps your next case of outrage could be against alcohol.
Payday loans did not cause a "VERY HIGH rate of alcoholism" nor poverty, nor soup kitchens. They all existed before Payday loan companies. You know what else existed before Payday Loan companies? Loan sharks. You know, the guys who loan you money and when you can't pay they break your legs. If you still can't pay you'll be floating in Fife Creek.
Again, the answer is to set down rules for the businesses, not abolish them. They serve a purpose. Use that to the people's advantage. Or take responsibility for the broken bones and dead bodies you create.
BTW, there is nothing stopping you from opening your own Payday Loan company and charging low fees and no rollovers. You may just find out why the loan companies do what they do when YOUR money is on the line.
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Rev. Hoagie
I hope the ministers are willing to fork up the money when these folks need it. Otherwise it's just more virtue signaling with "the poor" having their cars repoed or being thrown out of their apartments when they can't borrow the money.
The right way to go about it is to realize this is a needed service or it would not be used. Secondly set rules about rates, penalties and how many "turnovers" are permitted. Then the lenders will adjust themselves to earn a profit within those guidelines or they will find it unprofitable and no longer offer it.
These ministers sound like your typical leftist do-gooders. They are "outraged" about something and want it abolished without offering a viable alternative to what the market created. If they were sincerely concerned these people were being exploited they would do what any intelligent businessman would do: start their own "payday loans from God" business and help them rather than cut off their only source of funds. But leftists are always long on outrage and short on solutions.
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Rev Ned
An old saying says "When somebody says 'It's the principle.", it's the money." More money to the payday lender, less in the collection plate.
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Teresa Boyd
to Rev. Ned, That is really cynical of you. Accusing the clergy of involvement so they can receive more money for the altar plate. I really hope the clergy involved are less self-interested than that, although part of me fears your point might be true. Minister Boyd
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Although most of us would do well to take a free budgeting course to breath easier financially and to find savings to use towards big purchases, I don't think many people realize how rearing a family on $9,000 a year gives you much budget room for those luxuries we are accused of wasting our money on. So a flat tire or a larger repair bill for our 15 year old car is a major crisis. There are no savings and I have excellent stewardship over our family fund, as told to me by our local Consumer Finance Office, "I don't know how you survive on so little money. You do such an excellent job, I can think of no advice to give about your budget". The point is, quit acting like Republicans and assuming I am out partying on your loving charity, am eating steak and lobster for family dinners all whilst flashing designer shoes. I am glad there is such a thing as a pay day loan for a crisis or family sickness. However, like Rev. Hoagie, commenting earlier, the answer is to bring the interest rates down. That 492% hurts. Minister T. Boyd