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Payday Lending is a Biblical Issue

Economic Security

April 7, 2015 | AL.com | Source Article

Birmingham Faith In Action

Ministers call for action to curb predatory lending

President Barack Obama speaks about the economy and payday lending at Lawson State Community College in Birmingham, Ala., Thursday, March 26, 2015. (AP Photo/Butch Dill)

During President Barack Obama's visit to Birmingham last month, he highlighted the problem of personal debt and how payday lending contributes to it.Obama pointed to the work done by the Rev. Shannon Webster, pastor of First Presbyterian Church of Birmingham, to bring attention to the issue.

Webster and another Birmingham minister active on the issue, the Rev. Marcus Singleton, have written a plea for action: 

Payday Lending is a Biblical Issue

By the Rev. Shannon Webster and the Rev. Marcus Singleton, 
Birmingham Faith in Action

We are grateful that President Obama came to Alabama last month and highlighted a problem that has afflicted communities in our state for years: payday and title loans. 
The debt trap is not a side effect of payday lending, it is the business model.

Payday lending stores, with their 456% interest rate loans, have spread like kudzu in our region. And, while they claim to be an easy way to make it through a financial emergency, we have seen these loans quickly throw borrowers into a trap they cannot escape.

The Bible's teachings on lending are clear. "If you lend money to my people, to the poor person among you, you must not be like a moneylender to him; you must not charge him interest." (Exodus 22: 25-27). Our state's 400% loans are a far cry from this Biblical model. 

We have neighbors and congregation members come to us because they cannot pay the light bill or the heat because they are being sucked dry by payday loan fees. Many payday lenders know and intend that the majority of their customers will be caught in a cash-draining cycle of debt.

predatory lending pins.jpgPins await protesters Tuesday, Feb. 4, 2014, before a rally in Montgomery, Ala. (Julie Bennett/jbennett@al.com) 

We cannot allow predatory practices driven by greed to devalue and disregard hard working people. It is a defective product that does not do what it purports, in that it does not make loans that people can repay within the time frame (4 out of 5 payday loans are rolled over). It is a moral and ethical issue in that it deceives and makes victims of working class people. The cash drain weakens our city and our neighborhoods; in 2013 $358 million left circulation in Alabama, according to a Howard University study, money that was not spent in our town on tires, diapers and burgers.

We are encouraged by the Consumer Financial Protection Bureau announcement last Thursday of a proposal to rein in predatory lending practices. The CFPB draft includes a requirement that payday lenders assess whether a borrower will be able to pay the loan back and still be able to pay for other necessities like rent, food and utilities. That's a standard that simply requires all lenders to do what we expect responsible banks and other lenders to do - make good loans. 

The real work for us now is here in Alabama. When Congress established the Consumer Financial Protection Bureau in 2010, they prohibited the agency from establishing an interest rate cap. Only Congress and state legislatures can do that. Nearly 20 states across the country have capped the rates on payday loans at 36% annualized interest or less. Alabama should do likewise. 

For the past several years, our state's legislature has considered bills capping the rates on payday loans and undertaking other serious reforms. Republican and Democratic lawmakers have worked together to bring these bills to the State House and each year they have met an unfortunate demise. In the spirit of this Easter season and with trust in the Lord's infinite power to make all things new, we believe that the effort to finally rein in the payday predators can be revived. 

We can't wait for the federal government to act in order to put an end to predatory payday lenders in our state. Now is the year for Alabama to pass payday loan reform.