If you lend money to any of my people who are poor, you shall not be like a moneylender to him, and you shall not exact interest from him.
This less-quoted scripture and others (see Deuteronomy 23:19-20, Leviticus 25:35-37, Psalms 15:5) contain instructions on how one can view lending. Many tout that this nation was founded on Christian values, yet neglect the values on the proper treatment of the poor.
Right now we have the opportunity to correct an injustice that many poor people face in the United States — immoral, predatory loans with interest rates that can reach 1,900% APR. These payday, title, and installment loans trap consumers in a cycle of debt from which they cannot escape. Predatory loans strip income and wealth out of the most financially vulnerable communities in our nation, and a plethora of short-term lenders within low-income communities of color begs the question whether there is a racial aspect to the targeting of these services.
A typical user of payday loans takes out eight loans of $375 each year and spends $520 on interest alone. Four out of five borrowers find themselves unable to pay back the loan without borrowing more or refinancing. Here in Illinois, payday lenders can charge interest rates up to 404% and car-title lenders have no cap to the interest rate they can charge!
In an ideal world, we would have no need for any of these short-term loans. However, the reality is that many Americans still need access to safe loan products outside of credit cards. Therefore, advocates push for a 36% APR cap on all loans (see assetsandopportunity.org). Congress recognized the importance of this years ago by establishing a 36% interest rate cap on the short-term loans lenders offered to members of the military.
The Consumer Financial Protection Bureau (CFPB) is currently considering regulations that could help address these immoral and predatory practices. Therefore, it’s important that they hear from all of us who believe in a moral economy that does not prey on the most vulnerable. First thing you can do is send a message to CFPB at www.consumerfinance.gov/your-story/. Next you can tweet with the hashtag #ConsumersCantWait on why you think short-term lending reform is necessary.
I believe we are all called to act in the interest (so to speak) of the most vulnerable because “whoever oppresses a poor man insults his Maker, but he who is generous to the needy honors him.” (Proverbs 14:31)