By Charlene Crowell
More than 80 members of the clergy from 22 states, representing multiple denominations, converged on Capitol Hill from November 17-19 in a unified advocacy effort. Following two days of training that included discussions about the negative impact of payday lending their communities, updates and key data points, clergy on the third day urged lawmakers to enact legislation that extends to all consumers the same protections now benefiting military members and their families – a 36 percent interest rate cap.
The efforts take aim at the triple-digit interest rates now charged by payday lenders across the country. Although 14 states and the District of Columbia have enacted double-digit rate caps, the rest of the nation is subjected to lending rates that can reach as high as 600 percent or more.
The Military Lending Act (MLA), passed in 2006, received strong bipartisan support to limit interest rates on consumer credit to no more than 36 percent. Costs and fees for add-on products were a part of the rate cap. Underscoring the need for its enactment, the Department of Defense (DOD) earlier found that predatory lending undermined military readiness.
At that time, Senator Richard Shelby (R-Ala.) said, “These lenders often count on the fact that borrowers will be unable to pay the loan in full when due, forcing borrowers to seek additional loans, which generate more fees.”
The DOD proposed new rules in September that would add more protections for military families.
Many of the clergy noted how their respective congregations are surrounded by payday lenders who prey upon poor people caught into a cycle of debt that becomes harder to break with each loan renewal.
As co-chair of the event, the National Baptist Convention’s Rev. Willie Gable, Jr. said,
“As clergy, we have a moral duty to vigorously oppose what we know and believe to be sinful. Those who prey and profit from our most vulnerable in the community cannot be allowed to continue to take from those who have the fewest financial resources.”
Similarly, Galen Carey, vice-president of government relations at the National Association of Evangelicals, told The Christian Post, “We think it is an injustice so we’re asking churches to step up their help to people in need and also asking the government to regulate the lending so that these unfair practices are not allowed.
“Teachings about lending are found in Christianity, Judaism and Islam,” said Rachel Anderson, the Center for Responsible Lending’s Faith and Credit Director and coordinator of the event. “All three faiths condemn excessive interest. The moral voice of the religious community is crucial to payday reform efforts.”
“We would like to see interest rates capped at 36 percent and strong regulations from the Consumer Financial Protection Bureau (CFPB) that would require loans to be made on the basis of an individual’s actual ability to repay” continued Anderson. “We also urge CFPB to limit the length of time a household can be kept in high-cost debt.”
This recent faith-based advocacy adds to the growing momentum for payday loan reform at the state and federal level.
In March 2013, after analyzing 15 million transactions, the CFPB found that the cycle of repeat lending drives the bulk of payday loans. Seventy-five percent of all payday loan fees are generated from borrowers with more than 10 loans a year.
This summer, the CFPB reached a $10 million settlement with ACE Cash Express in response to allegations of using aggressive debt collection tactics to flip its borrowers into new loans. The firm operates in 36 states and in the District of Columbia with 1,500 storefronts, 5,000 associates and online loans driven by a business model premised on flipping customer loans.
In October, 467 consumer advocates representing every state in the nation and more than 1 million consumers called for specific minimum standards in the small-dollar rulemaking.
As CRL President Mike Calhoun, has said, “We need to end the debt trap model to make more room for affordable and responsible loan products that both benefit lenders and leave their customers better, rather than worse, off.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: Charlene.firstname.lastname@example.org.