In a world of shrinking wages and rising costs of living, there should not be room for a financial industry that extracts wealth from the pockets of the marginalized. However payday loans typically carry interest rates of 300% and exorbitant fees, and are often the only line of credit available to the working poor. Payday loans are simply unaffordable; a typical payday borrower making $35,000 annually does not have enough income to repay their loan and cover other monthly expenses, and subsequently is caught in the payday lending cycle for months at a time. Lenders require the submission of a check dated at the borrower’s next payday, giving them direct access to their bank account and the ability to withdraw payment regardless of the consumer’s other expenses.
Our concerns as servants of the Kingdom of God related to predatory lending practices are deeply biblical and theological. The Old Testament and New Testament Scriptures both address the issues of fair lending practices. Exodus 22:25 is likely the earliest when it focuses the concern in reference to the poor.
If you lend money to my people, to the poor among you, you shall not deal with them as a creditor; you shall not exact interest from them. (NRSV)
This prohibition against charging interest on loans prioritizes the distressed economic plight of the borrower, and makes a judgment that God’s demands of covenant community preclude the practice of charging interest. The 217th General Assembly approved a resolution entitled “A Reformed Understanding of Usury for the Twenty-First Century,” which highlights the need to reign in the payday lending industry and can be found HERE available for download.
The Consumer Financial Protection Bureau (CFPB) has published a rule that would limit payday and car title loans. A key protection is to insist that lenders design loans that can be paid back without taking every cent that was needed for rent and other essential items. That's good - but the rule needs to be stronger. In fact, advocates in the 14 states plus DC that have restricted these loans are worried that some of the CFPB proposed language would threaten their state's stronger laws.
The comment period for the rule ends on October 7. We stand at the precipice of a Kairos moment. We seek that Presbyterians around the country add their voices to call on the CFPB to strengthen its small dollar loan proposal. Your comments are badly needed to be part of a massive outpouring of support for a strong rule. Why? Because the payday loan businesses are working overtime to protect the billions they get from trapping low-income borrowers.
People of Faith have joined in coalition called Faith for Fair Lending to call for a CFBP rule that would protect consumers from the debt treadmill of exorbitant interest. The rule should include income verifications so that lenders can ensure the consumer has the ability to repay the loan before they issue it, and protections against repaying a loan by borrowing a second or third time.
This public comment is one of our strongest opportunities to weigh in and influence the regulatory process, let us break down barriers to prosperity and help regulate predatory payday lending practices. Click HERE to submit your comment.
More information at www.faithforfairlending.org
 “The State of Lending: Payday Loans.” Center for Responsible Lending. September, 2013.