From city to city and state to state, Black America’s access to mainstream financial institutions has been replaced with high-cost, fringe financial services. These are the storefront operations that offer loans at prices so high that the interest charged winds up costing more than the principal borrowed.
Among these high-priced, low-value lenders, payday loans are perhaps the most ubiquitous. Where payday loans are legal, borrowers pay fees of over $4.1 billion annually, with the average customer taking out 10 loans a year. In states such as Florida and California, Black and Latino neighborhoods have twice the concentration of payday stores than their white counterparts.
Although consumer advocates have long decried the harms of these small-dollar loans, clergy across the nation have now organized to fight what they believe to be moral sins that defy the Bible’s own teachings about usury.
The Faith for Just Lending Coalition and the Faith & Credit Roundtable represent diverse theological views that are unified in their advocacy to end the debt traps of triple-digit interest rates. Further, with the Consumer Financial Protection Bureau’s release of a draft payday rule, these two organizations are showing up and speaking out.
The Faith & Credit Roundtable believes responsible lending is a moral concern. Faith for Just Lending encourages churches, lenders, individuals and government to each do their part to teach stewardship, offer responsible products, use credit wisely, encourage just lending and put an end to predatory lending practices.
Both groups seek that all American consumers, receive the same protections now afforded to service members and their families through the Military Lending Act of 2006: a 36 percent rate cap. Additionally, they have asked the Consumer Financial Protection Bureau (CFPB) to close an important loophole in its draft regulation that would allow as many as 6 payday loans within a year’s time. Further as currently, lenders would not have any duty to determine if borrowers can repay the loans without being forced to re-borrow.
For many religious leaders, 6 loans are 6 too many.
“We cannot consider the latest rule just when payday lenders are still allowed to make six loans per year with 300 percent interest rates without any regards as to whether it is affordable or not,” said Rev. Dr. Willie Gable, National Baptist Convention, USA and co-chair of Faith & Credit Roundtable. “This is simply too many unaffordable loans that will sink people into an exorbitant debt trap. Such a gaping loophole is essentially a sanction of these predatory products, not a step forward to rein them in.”
“North Carolina, along with 13 states plus the District of Columbia, prohibit these 300 percent interest rates, and thankfully, are free of these destructive loan products,” noted Rev. Sekinah Hamlin, a leader of the Ecumenical Poverty Initiative and newly-appointed Faith-Based Affairs Director for the Center for Responsible Lending. “Advocates have called on the CFPB not to undermine a state’s prohibition on payday loans.”
They also call upon all interested consumers, clergy, and faith organizations to add their voices during the public comment period that ends on October 7, 2016. Sample online comments are available at http://www.lendjustly.com/comment – proposed-rule, or at http://faithforfairlending.org/faithandcredit.
“Scripture makes it clear that God condemns activity that takes advantage of the poor and the desperate,” said. Dr. Barrett Duke, Southern Baptist Ethics and Religious Liberty Commission. “We must insist that the payday lending industry’s predatory behavior is reined in.”
Keith Corbett is an executive vice president with the Center for Responsible Lending. He can be reached at firstname.lastname@example.org.