Apr
21
Ethics in Action – Payday Lending
Filed Under Ethics In Action
By Amy Wiles
I remember sitting at my desk on the first day of my internship at the Christian Life Commission – nervous, excited, and feeling a bit like a fish out of water.
I had recently ended a five-year teaching career as a public school music teacher to follow a call to ministry and attend Austin Presbyterian Theological Seminary. My seminary education and experience serving and attending churching communities had taught me that pursing justice was a part of the Christian call to discipleship. My problem – I had no idea how to do that. Don’t misunderstand me. I had wonderful opportunities to serve people through mission trips to places like New Orleans, Toronto, Kenya, and my own hometown. Still, I had very little experience working to change the systems that created poverty, inequality, and injustice around me. I had done the important work of treating the symptoms of these systems, but had never reformed the systems themselves. Serving others in church ministries had raised many questions. Why do people live in poverty? What can be done to fix the problem? How can I help to change systems of injustice? But, I didn’t have the answers and didn’t know where to find them. So when I heard about the internship at the CLC from Suzii Paynter, I jumped at the opportunity to learn more about advocacy, public policy, and how I could help.
On my first day, Suzii tasked me with learning more about predatory lending and had given me a report from the Commission on Thrift to read. The report talked about credit cards, gambling, and sub-prime mortgages – topics that I vaguely knew. Then, I began reading about payday lending, and I was shocked by what I found.
Payday loans are small dollar loans with enormously high service fees and interest rates that offer instant cash with no credit check. On average, these fees and interest rates amount to 500% APR. Borrowers secure the loans with a checking account and are expected to pay back the full amount in two weeks. If they cannot pay the full amount, the borrower rolls over the loan paying another high fee. Many borrowers roll over loans multiple times before being able to pay the entire loan. Payday lenders profit from creating this cycle of debt. Even worse, they prey off of the most vulnerable in our society. A recent survey conducted by Texas Appleseed (pdf) found that most borrowers work for $30,000 a year or less and use the loans to secure basic necessities like groceries, rent, mortgages, or medical expenses.
The Texas Finance Code sets restrictions on fees and payment periods. Yet, many lenders operate as Consumer Service Organizations (CSOs) in an effort to avoid regulation. CSOs register with the Secretary of State but are not regulated by or required to obtain a license from the Office of Consumer Credit Commissioner. This business model takes advantage of a loophole in Texas law and sidesteps many state regulations on the books. Consumers have no place to voice complaints, and data concerning industry business practices cannot be collected. Without closing the loophole, the Office of Consumer Credit Commissioner cannot react to the industry’s wrongful business practices.
I was outraged that this multi-billion dollar industry was preying off of the poor and no one was stopping them. Everyday during those first few weeks of my internship, I would rush home to share what I had learned with my husband, my mom, or a classmate. I relished the opportunity to write articles for the Baptist Standard and speak at conferences and with student groups. Like myself, most of the people I talked to had no clue that this industry was running rampant in Texas.
When I talk to Christians about payday lending, they are shocked, appalled, and generally ask, “Why are payday lenders unregulated? How are they getting away with exploiting the poor? How can I help?” They ask the same question that I was asking at the beginning of my internship. But, now I have a few more answers.
As Christians, we are called to be a prophetic voice to a hurting world. We are called to speak up for those who have no voice. We are called to speak for the victims of predatory lending and find ways to pull them out of the cycle of exploitive debt. We can make our voice heard by urging local government officials to pass resolutions calling on the state legislature to close the loop hole in the 2011 Legislative session. More cities can pass ordinances like Irving and Richardson that restrict zoning regulations of payday and auto title lenders. People can sign petitions and share personal stories about how payday lending has negatively affected them. Churches can offer financial education classes like Money Smart to warn people about the predatory practices of payday and auto title lenders.
The AARP and Texas Appleseed along with other partnering groups have initiated the 500% Interest is Wrong campaign to further educate people about the devastating effects of payday lenders and offer avenues for people to speak out against predatory lending. I encourage Christians to educate themselves about the issue of predatory lending, join the campaign, and speak out for those who have fallen victim to payday loans.
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