They make bad situations worse and drive people to desperation. They target poor people who won’t be able to pay off their loans when they are due. When the borrower can’t pay, the lender offers to roll over the amount owed into a new loan. The borrowers become trapped in a vicious circle of borrowing to pay off one loan after another. Borrowers are incapable of paying off the principle and are forced into paying monthly interest payments, which oftentimes are more than the original loan amounts. Interest rates run 456% and 300% for payday and title loans. These two or four-week loans often keep their borrowers mired in debt for almost a year. It is sad, but true: It is impossible to borrow our way out of debt.
In addition to hurting individuals, predatory lenders hurt their communities. Like the so-called “electronic bingo” parlors, they infest areas where poverty and desperation run high. They decrease property values and increase crime. They locate near each other and become eyesores, making it harder to bring in business and jobs. They ruin a community's reputation and lower its quality of life. The only people who profit from them are the loan sharks who own them.
Several communities have started working to rid themselves of these predators. The question is should they be eliminated or capped and more tightly regulated. Personally, I would prefer their total elimination. However, we live in a real world governed by laws and regulations made by politicians, some of whom can be influenced by money. The best the people may hope for at this time may be greater regulation and a cap on interest rates at 36%. There seems to be a consensus on that.
You can help make this situation better. Call your representatives. Tell them what you think about predatory lenders and what should be done. Let them know you will be tracking how they vote on this issue. Even better, go to the state capitol, attend the subcommittee meeting, and any subsequent meetings that deal with this issue.
The God we serve is deeply concerned that the poor and needy receive justice. The poor are mentioned more than twenty-five times in the book of Psalms, usually in terms of what the wicked are doing to them, or what God is doing for them. Thus, to be on God’s side is to champion the cause of the poor. Jesus said, “. . . whatever you did not do for one of the least of these, you did not do it for me” (Matthew 25:45).
Note: The financial data shared in this article is based on information shared at a Fair Lending Rally held at the YWCA in Birmingham, Alabama on January 10, 2014.
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