By Sharon Felton, CBF Advocacy Outreach Specialist for Kentucky
“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. If you ever take your neighbor’s cloak as collateral, return it to him before sunset. For it is his only covering; it is the clothing for his body. What will he sleep in? And if he cries out to Me, I will listen because I am compassionate.” -Exodus 22:25-27
- 391% interest rate for payday loans in Kentucky*
- 20,000 payday and car title loan stores operate nationwide,*
- 537 locations in Kentucky**
- 17% of 1000 people surveyed had taken out a payday loan*
Payday lending has harmed enough families, taken money out of our local economies, trapped people in poverty and enlarged the racial and economic divide in our cities.
Enough is enough.
There is hope on the horizon and that hope begins with you and our faith communities!
On June 2, 2016 the Consumer Financial Protection Bureau released a proposed new rule that would apply to payday and auto title loans nationwide. However, it cannot happen without your voice! Everyone must act and act now, before October 7 to make comments to the Consumer Financial Protection Bureau about the new rule. It is a great step forward, but one that must be strengthened.
YOUR VOICE IS CRITICAL
People of faith are making a difference. When CFPB Director Richard Cordray announced the release of the proposed rule, he singled out the advocacy work of the faith community:
"Perhaps most telling of all, we have held numerous sessions with a broad set of faith leaders. They have shared searing experiences of how payday loans affect the people they care for every day in their churches and synagogues and mosques. And they have described how these loans undermine financial life in their communities. In devising this proposed rule, we have been listening carefully, and we will continue to listen and learn from those who would be most affected by it. And we will take their comments into account as we go forward and work to finalize new reforms in this area."
TELL YOUR STORY AND SPEAK FROM YOUR EXPERIENCE
What have you seen? How has your community been impacted by payday loans? How has your church been impacted? You don’t have to be a policy expert to make a comment. Help the CFPB continue to build a record that makes the strongest case possible for the rule.
Why is this form of lending wrong? What does your faith say about this practice? How does scripture influence your decision to speak out? Make your best moral argument.
BE BOLD & ENCOURAGING
The rule represents a potential major improvement in payday and auto title lending practices, and for the lives of millions of borrowers. The pressures on the CFPB are great and since by law they cannot propose a limit on fees and interest, their tools are limited. Crafting an effective rule in this environment with these constraints is difficult. They have conducted meticulous research which has served as strong evidence in support of the claims people of faith have been making for years. Encourage them to be strong in preventing the harm they have witnessed and documented.
CALL FOR IMPROVEMENTS
While the intent of the rule is exactly right, some fear that too many exceptions and potential loopholes exist. Past history demonstrates how sophisticated, creative and sneaky lenders can be in response to reform – tell the CFPB we don’t want to see the rule evaded or weaknesses exploited. There is still time for improvement so consider including these suggestions for strengthening the rule.
1) Strengthen the ability-to-repay requirements -
• Allow no more than one short-term loan without a full assessment of the ability to repay – six usurious loans per year is too many
• Make sure borrowers have enough money to live on –require objective measurements
2) Improve protections against repeated flipping of loans -
• Return to the 60 day waiting period after each short-term loan as proposed in original outline
• Tightly restrict repeated refinancing of longer-term loans
• Prevent unaffordable, long-term indebtedness due to lenders manipulating exceptions to abilityto-repay standards and offering a variety of short and long-term loans to an individual borrower
3) Make sure all possible predatory, debt-trap loans are covered -
• Cover all loans with extraordinary leverage to extract payment – bank accounts, car titles and wage garnishment – not just those that do so within 72 hours
• Lenders are notoriously creative and the incentive to avoid being covered by the rule is high
Payday lending is a fairness and justice issue, a human dignity issue and it is a race issue. In a recent survey of 1000 people created by Lifeway, African Americans and Hispanics are disproportionality affected by payday loans, 49% of African Americans had taken out payday loans and 24% of Hispanics.
We do a lot of head shaking and gasping when people talk about the destructive payday lending practices, or hear the 391% interest rate quoted, but it’s time now to take action. And right now it is as simple as making a few clicks!
Log on to www.lendjustly.com, click the button that says Learn More and Comment, and then make a comment! Feel free to use your own story, use the suggested comments above or speak from your heart about why these practices are wrong. Gather your faith community together and watch The Ordinance (www.deidox.org/theordinance), a documentary about payday lending, then have everyone make comments! First Baptist Morehead is doing this and inviting others in the community to participate as well!
The time is now to make a difference. Christ has called us to make an impact in the world through His love. Let’s love our neighbors enough to advocate for them and stop predatory lending!
*Lifeway Research www.lendjustly.com
**Kentucky Center for Economic Policy