Wednesday, September 21, 2011

Our State's Embarrassing Situation


This post originally appears in the September 1 issue of "The Southwest Spirit."

In recent days and weeks, many of us have noticed the added press a particular ballot initiative has been receiving all across our state.  This initiative concerns efforts to tighten the restrictions on payday lending in the state of Missouri.  “Payday” loans are short term loans with very high interest rates and fees marketed as potential emergency stop-gaps to allow a person or family to cover an unexpected, emergency cost until the next “payday.” 

The Post-Dispatch, as well as the Kansas City Star and the Columbia News Tribune, have run multiple articles presenting the maneuvering of various political action committees on both sides of a current ballot initiative aimed at curbing abusive lending practices.  As we observe these actions, it can be difficult to discern exactly what is going on.  We will all need to be particularly diligent as more information comes to light.

However, there are several truths which are a part of this debate and not in dispute.  By any measure, Missouri has the most lenient and permissive regulations on payday lending of any state in the nation.  No state has a higher maximum cap on APR (annual percentage rate) than Missouri; currently, lenders in Missouri are allowed to charge interest rates up to 1,950%, in addition to other fees.  The average interest charged on payday loans last year was 444.61%.  No other state in our country allows such high rates on these loans – in fact, many states have caps at less than half of what Missouri allows.

It is also estimated that over 95% of these loans are actually eventually paid back, even with high interest rates and fees.  These are not individuals and families abusing any system. It means our state is allowing the most vulnerable to be victimized by an industry which targets the poor.  This is not a Republican or Democrat issue.  This is a moral issue, and our state should be embarrassed.

As Christians, we can not justify building an industry entirely on the backs of the working poor who find themselves in desperate situations.  The argument some payday lenders are making against reforming our regulations is that it will cripple a thriving and growing Missouri industry.  While this argument may be debatable, what we must ask ourselves is do we want an industry to thrive only by preying on the less-fortunate?

I hope you will join me in paying close attention to this important debate, both at the local and state level.  It is impossible for me to believe the Old Testament prophets or Jesus, both of whom spoke at length about maintaining justice for the poor, would support predatory lending practices.  The time may be upon us for Christians of good will to stand together to oppose these practices today.

Grace and peace,
James

12 comments:

LittleAlsBigIdeas said...

Reverend. Thank you for keeping the gospel on the internet but your hate is blinding your ability to see the simple facts about the payday business. My pops uses it and my gramma too. It helps. They make money by charging a fee for the money not by charging interest like credit cards and bank loans. Have you needed to use a payday loan yet? Do it and see if it's predatory. cool?

LittleAlsBigIdeas said...

And...i found this on google from a local commenter and it makes sense to me. will you read it and think about its logic. maybe i;m missing something!
http://voices.kansascity.com/entries/scandalous-payday-loan-rates-missouri-prompt-petitions/#storylink=rss

James Hill, Jr. said...

I would say the goal should not be to drive all payday lenders out of business, but to reform the system to try to curb abuse and predatory practices. As I point out, every other state in the nation has laws which try to do this better than Missouri.

I do know several who have used a payday loan and am pretty familiar with how it works. If your family is able to make a living in this industry using fair and just practices, more power to them.

LittleAlsBigIdeas said...

No, my family has used payday loans. They don't make payday loans. My feeling is that words like "predatory" turns people like my pops in to words like "prey". He isn't anyone's prey and even went to Vietnam. People like us should not be looked at like victims just because we don't have a lot of money to spend. See?

Kat Bells said...

First, God is great for his blessings of the internet to allow us to commune over time and space!

The title of your post imparts shame onto people and maybe that's what troubles the other commenter. We should remember our savior's mandate to walk the extra mile when confronted with hostility. That gives us time to contemplate everyone's feelings.

James Hill, Jr. said...

My apologies, as it was not my intent to offend. I certainly do not look upon those who use payday loan services as "prey." However, I do believe many lenders treat them as such.

My concern is what sometimes happens to those in a tough spot. For example, let's say you took out a payday loan and an emergency immediately affected your family, preventing you from paying it back in time. Missouri's laws would allow a lender to charge huge additional fees and interest, even far exceeding the amount of the loan. Does this seem right to you?

Kat Bells said...

Mr. Hill,

I find it morally reprehensible that a "payday"bank could charge a fee greater than the loan amount. Does this actually ever happen in Missouri or elsewhere? Is there a news story or testimonial I can read for myself?

"Keep looking up"

JustGina said...

A friend send me this thread because I think banks are turning our country in to debt slaves.

That said, with all due respect, I cannot believe that any business could keep customers with practices like charging late fees in excess of of principal loan amount. Even if it's public policy, can it really be actual practice? I am going to Google it and see what comes up. I suspect banks are spreading a rumor to protect their monopolies on our wallets and freedom.

James Hill, Jr. said...

JustGina, I do not know why your last couple of comments have not been posted; they have not been intentionally deleted.

Here is a link to some more information on this topic. Remember, the key here is late fees, penalties, AND enormously high interest rates.

http://moresponsiblelending.org/facts.html

JustGina said...

What I wrote on the missing posts was that the state courts.gov website is very clear that late fees cannot exceed $50 for loans past 30 days.

http://www.courts.mo.gov/hosted/probono/consumer_loan_matrix.htm

Omar said...
This comment has been removed by a blog administrator.
James Hill, Jr. said...

Comments have moved off topic or appear to be spam. I've closed comments on this post.