Payday lenders are like McDonald’s and dry cleaners–good businesses that want good locations to provide ready accessibility to customers who need good financial services.
Payday lenders offer a popular product in economically tough times for which customers express overwhelming satisfaction. Only a few complain, according to a payday lending spokesperson.
There’s an “elitist anti-payday loan bias” among those who don’t need this service, claimed Jabo Covert, vice president of government affairs for Check Into Cash, Inc., a payday lending company with headquarters in Cleveland, Tenn. It would be wrong to curtail this financial service for working Americans who need such assistance, said Covert, who spoke for payday lending on the editorial page of the Tennessean on Sunday.
Nashville’s Metro Councilman Erik Cole spoke against payday lenders, asking what interest rate was acceptable. “[W]hat about a 390 percent APR? Or 459 percent?” asked Cole. “Those are the amounts our neighbors are paying–legally, under state law, when they take out a 14-day payday loan in Tennessee.”
Noting that Ohio had limited short-term loan rates to 29 percent, Cole pointed out that in Tennessee “consumers continue to be exposed to these searing triple-digit rates of interest. Our state laws, unfortunately, do not adequately regulate anti-consumer practices. These loans can, and do, lead to foreclosure, bankruptcy and decimated credit ratings.”
He called payday lenders “loan sharks” and accused them of using “deceptive advertising” to target the “less-savvy and more financially vulnerable customers.” Cole argued for a zoning plan that would prohibit payday lenders in certain areas of Nashville.
The editorial board of the Tennessean agreed with zoning restrictions against the “opportunistic lenders preying on communities susceptible to offers of quick cash.” “It is no coincidence that those businesses are concentrated in areas where ethnic minorities live or where low-income neighborhoods exist,” said the editorial. “They are not so much responding to a high customer demand as they are seizing upon people who are desperate and vulnerable, and the lenders know they have a customer base that is not savvy to high-interest gimmicks.”
The editorial rightly asserted that payday lending has become a national issue, but questionably claimed that “it appears the payday lenders hear the hoof beats of lawmakers.” Would that more hoof beats were heard.
Gov. Ted Strickland (D-Ohio) is set to sign a bill this week that will profoundly alter the operation of the state’s 1,600 payday lenders. According to The Columbus Dispatch, “The measure would slash payday-lending interest rates from the current 391 annual percentage rate ($15 per $100 on a two-week loan) to 28 percent ($1.08 per $100). It also would limit borrowers to four loans per year, require that loan terms be at least 31 days, and ban Internet payday lending.”
That’s good news for the citizens of Ohio. But “the hoof beats of lawmakers” need to be heard in a lot of other states.
Driving to the beach for family vacation last week, I was surprised that payday lenders appeared almost as visible as churches between the Bay Minette exit off I-65 and Gulf Shores, Ala.
A payday lending reform bill appears stalled in the South Carolina state house, where Rep. Harry Cato (R-Greenville), a recipient of payday campaign contributions, has blocked action.
“This industry should be regulated more tightly,” said a Greenville News editorial, calling for a vote this week. “[R]easonable regulations would protect the state’s most vulnerable consumers.”
An editorial in The Virginian-Pilot said that Virginia religious and consumer groups had achieved “modest protections” against the payday lenders, which still retain exorbitant interest rates. The paper also warned about the predatory practices of the unregulated “car title lenders.”
Given the predatory nature of payday lenders in vulnerable communities, Christians have an obligation to protect the weakest among us from harm, especially since at the top of Jesus’ moral agenda was good news for the poor. One way to implement concretely good news is to restrict, regulate or remove payday lenders from our society.
Robert Parham is executive director of the Baptist Center for Ethics.