Baptists Lead Charge Against Predatory “PayDay” Lenders
Abortion, homosexuality and church-state separation. These are all issues on which Baptists have made their diverse opinions loudly known to the public. But predatory lending is definitely not an issue that many associate with Baptists.
Yet, Baptists in several states have been fighting against the wealthy and powerful multi-billion dollar predatory lending industry in recent years.
At a regional meeting of the New Baptist Covenant in Oklahoma City in 2009, participants learned about the dangers and growing popularity of payday loans, especially among the working poor. Participants heard from Stephen Reeves, public policy director for the Texas Baptist Christian Life Commission, who offered the example of a military veteran who took out a $4,000 loan against his truck in order to help his daughter. Unable to pay off the loan in full, the veteran was charged a $1,200 penalty fee per month. “He could pay $1,200 per month forever and never pay off that loan,” according to Reeves.
These predatory loans, popularly dubbed payday loans, allow a borrower to post-date a personal check for a small amount plus a fee, payable to the lender, in return for cash. The borrower is then to pay back the loan at his or her next “payday.” Interest rates sometimes exceed 500 percent for a mere two-week loan. In Texas, the average borrower is likely to pay in excess of $800 for a $300 loan.
While payday loans are banned in 12 states, this form of predatory lending ensures that 12 million Americans are kept in a never-ending cycle of debt. According to a study by Pew Charitable Trusts, around 20 percent of borrowers are over the age of 50 and white women are the demographic most likely to take out a payday loan.
Reeves and other Baptists in Texas have been leading the charge against predatory lenders where the payday loan industry had been completely unregulated and unlicensed until recently. There, in Texas, payday lenders are not subject to the same regulations and usury limits as banks and credit unions. In 2011, the Texas Baptist Christian Life Commission helped pass two bills in the Texas legislature to regulate the payday industry. The first bill allows the state to collect information about payday lenders and the second bill requires payday lenders to disclose to the borrower the amount to repay the loan in two weeks, one month, two months or three months.
However, a third bill failed to pass that would have limited the number of times that payday fees could be charged to a borrower. In response, several large Texas cities took matters into their own hands and passed zoning ordinances to limit the expansion of this industry further into their own backyards.
With the Texas legislature back in session in 2013, Baptists in Texas, along with other faith groups, are once again taking aim at the usurious predatory lending industry. In late February, former Texas House Speaker Tom Craddick filed a bill to regulate payday lenders by applying the same interest rate and fee regulations that consumer lenders already face. Reeves said that Craddick’s bill “upholds Texas’ longstanding opposition to usury in its financial markets.”
Meanwhile, the Christian Action Commission of the Mississippi Baptist Convention isopposing legislation to allow consumer lenders to charge an annual percentage rate of up to 99 percent on installment loans ranging from $500 to $4,000. Chambers explained, “We are opposed to financial products that prey upon those who are financially vulnerable.”
Interestingly, a 2008 statistical study by Steven M. Graves and Christopher Peterson published in the Catholic University Law Review found that “states with a powerful conservative Christian populations tend to host relatively greater numbers of payday loan locations per capita as well as a greater commercial density of payday lenders.” Graves and Peterson continued, “These findings propound a tragic and sad irony. Those states that have most ardently held to their pious Christian traditions have become more infested with the progeny of money changers once expelled by Christ from the Hebrew temple. Legislators in those states, who have effectively used biblical principles to shape their legislative agenda on social and cultural issues, have failed to consistently apply biblical principles to economic legislation.”
These professors did not provide a causal explanation. It is quite clear, however, that the popularity in recent decades among Christian conservatives of an anti-regulation political philosophy has something to do with this sad correlation. Unfortunately, issues of economic justice have received scant attention in the midst of multiple decades of culture warring over abortion and gay rights.
Nonetheless, it is encouraging to see some Baptists take action against predatory lending. Perhaps others will follow their prophetic lead in 2013 and become anti-usury advocates as well. It’s the biblical and Baptist thing to do.
This column first appeared in the March 2013 edition of the Baptist Studies Bulletin, the monthly publication of the Baptist History & Heritage Society.