General CBF

The lie of payday loans

By Steve Wells

Throughout your city, sharp and deadly traps are being set for the most vulnerable and desperate around you. We need to disable these traps before they snap shut, ruining even more lives.

Payday and auto title lenders promote themselves as a simple and convenient path for people to overcome a one-time cash shortage. Did your car break down? Take out a loan today, get it fixed and pay it off when your check comes in. Need extra cash for your child’s school supplies? No credit check required. 2013-10-15_11-31-17_822

What they promise, in alluring language, is a loan. What they deliver is a lie.

Payday lenders charge annual interest rates as high as 800 percent. The standard charge in Texas is $22 in interest and fees for every $100 borrowed — and that amount is repeated every two weeks!

These predatory lenders, by design, count on their “customers” being unable to fully repay the loan at the end of the two weeks. In fact, more than three-fourths of their profit comes from people who wind up taking out 11 or more loans per year — meaning the lenders’ business model is to lure people in, then sell them loans to pay back loans. It eventually and almost inevitably leads to repossession of all collateral.

Therein is the lie. Payday lenders are obligating their victims to a cycle of debt that comes from the need to continually roll over the old loan into a new one.

In my city of Houston, Texas, payday lenders drain our city of around $240 million per year in fees. They also repossess 140 cars per week (35,000 per year in Texas alone).

A man in Waco, Texas, took out a title loan on his truck and found himself trapped in this downward debt spiral. He realized he would never get out from under this burden unless something changed and so he made the decision to move into a homeless shelter to free up all of his money to pay off the loan. He had a payment due Friday, so he went to the lender to explain that his paycheck would come the following Monday. Since he no longer had rent or utility payments, he would be able to pay the loan in full in four days, if only the lender would give him an extension over the weekend.

Friday came and he loaded everything the man owned into his truck to take to the storage facility only to discover the lender had camped out at his apartment complex. The lender patiently waited there for him to put his possessions in the truck. Aware that their contract specified that if the vehicle was repossessed all the contents of the vehicle became property of the lender, it was then that the lender repossessed his truck. Bereft of everything, the man had to walk to the homeless shelter.

So why is this a problem that should compel churches to get involved?

Psalm 82 asks us, “How long will you defend the unjust and show partiality to the wicked? Defend the cause of the weak and fatherless; maintain the rights of the poor and oppressed. Rescue the weak and needy; deliver them from the hand of the wicked.”

How long?

We are, in fact, our brother’s and our sister’s keepers. And your neighbors, your brothers and sisters, are being lured toward a treacherous trap even as you read these words.

Steve Wells is pastor of South Main Baptist Church, a CBF-partner congregation in Houston, Texas. This column first appeared in the February/March issue of fellowship! magazine. Download the PDF of this column here. Sign-up for your free subscription to fellowship! – the bimonthly magazine of the Cooperative Baptist Fellowship.

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