A Catholic call to end payday lending abuses

Jean HillSay the words “payday lender” and stories of friends, family members, or neighbors who sought quick loans to make ends meet and ended up caught in a devastating cycle of debt will begin to flow. Often, these stories begin with someone living paycheck to paycheck and unsure how to make a rent payment, buy food, pay bills, and cover other expenses short term. The tales end with harassing phone calls and court filings for repayment of ridiculously high-interest rate loans, and mounting debts that now include court costs.

As Catholics, we are called not only to empathize with these stories, but to act to protect the poor and vulnerable who find themselves preyed upon by unscrupulous businesses.

Prohibitions against charging outrageous interest on loans go back to Babylonian times. More than one Old Testament prophet condemned usury, along with exploitation of the poor. Yet usury not only persists in our modern economy, it prospers.  In 2010, there were an estimated 19,700 payday loan stores in the U.S. (That number does not include Internet loan sources. A recent federal agency report found at least 332 separate Internet loan providers). Thirty-two states permit loans with triple digit or no caps on the amount of interest the lenders may charge.

The Catholic Catechism insists that “economic life is not meant solely to multiply goods produced and increase profit and power; it is ordered first of all to the service of the entire human community.” In theory, payday lenders provide a service to individuals who are often barred from traditional bank loans. In practice, however, these loans are vehicles for exploiting people already in a highly vulnerable financial state.

In a typical payday loan transaction, the customer seeks to make ends meet until the next paycheck, or maybe two. Unlike a traditional loan, however, the individual will not sit down with the lender and determine a reasonable repayment structure based on ability to pay.  The customer will not be able to bargain for a better rate or realistic payment plan.  Instead, the astronomically high interest rates (the national average is above 400% per loan), fees and payment schedule will be based solely on the needs of the lenders.

In short, the loan is all about the profit of the business, rendering the persons seeking help, in the words of Pope Francis, “as consumer goods which can be used and thrown away.”

The social doctrine of our faith compels each of us to be involved in changing such an unjust system. We can raise our Catholic voices to remind payday lenders that their customers are first and foremost human beings, not profit centers. We can insist that our state and federal governments establish reasonable limits on the actions of the lenders to ensure they are not “so powerful as to reduce the [consumer] to subservience.”

Now, as the Consumer Financial Protection Bureau considers regulations to address some payday lending abuses, is an opportune moment to challenge our congressmen and women to take additional actions against usury to protect the working poor, as our Pope and our doctrine urge us to do.

Jean Hill is Government Liaison for the Catholic Diocese of Salt Lake City. Salt Lake City, Utah.


Go Deeper!

 

The Catholic Relief Services Collection: Helping Jesus in Disguise

crs-facebook-2-403x504Each time we encounter a suffering person, we encounter Jesus in disguise. The Catholic Relief Services Collection (CRSC) funds six Catholic agencies that serve the disguised Jesus in our suffering brothers and sisters around the world. His disguise might be that of those suffering from natural disaster, those displaced by violence or war, or those migrants searching for a better life.

In the developing world, it is often hard for families to support themselves and their children. Sophie, a widow working in a village in Burkina Faso, was struggling to feed her family and pay for schooling for her children. Thanks to the help of Catholic Relief Services, one of the CRSC supported organizations, her village was able to set up a Savings and Internal Lending Community (SILC). Through the SILC, members contribute what they can afford, allowing them to pool their resources and save collectively. Members can then borrow money to meet pressing needs or develop business opportunities. Through the SILC, Sophie was able to take out a $200 loan to cover startup costs for her own canteen, a sum that would be nearly impossible for her to save. Her canteen has been very successful and began to pay off in only six months. Her community has benefited too, as she has been able to hire three assistants to work with her. Without the SILC and the work of CRS, it would have been nearly impossible for her, and others like her, to create a sustainable life for her and her family.

2016-crs-montage-text-270x200Even in the developed world, it is difficult for immigrants to navigate the American justice system and to know their rights. Another organization that receives funds from the Catholic Relief Services Collection is CLINIC, the Catholic Legal Immigration Network, Inc. The BIA Pro Bono Project that CLINIC manages uses funds from the CRSC to provide support and legal representation to immigrants facing the Board of Immigration Appeals (BIA). Pedro entered the United States to provide a better life for his family and to flee violence and persecution. He entered the United States without inspection, but nearly 20 years later, Pedro was taken to an immigration detention facility away from his wife and three children while the BIA decided whether he could stay in the country. Thanks to the BIA Pro Bono Project, law students discovered that he had never been considered for Temporary Protected Status, and local legal counsel represented him. This counsel helped determine that he was in fact eligible for this legal status. After a year in a detention facility, separated from his family, Pedro was able to return home.

This Lent, remember our suffering brothers and sisters and Jesus in Disguise.

Funds acquired from the CRS Collection are also distributed to these organizations: USCCB’s Migration and Refugee Services for refugee resettlement USCCB’s Department of Justice, Peace, and Human Development for advocacy The Holy Father’s Relief Fund for emergency relief USCCB’s Secretariat of Cultural Diversity in the Church for evangelization and ministry

“Amen, I say to you, whatever you did for one of these least brothers of mine, you did for me.” (mt 25:40)

Bevin Kennedy, Office of National Collections at the USCCB

Bevin Kennedy, Office of National Collections at the USCCB

Bevin Kennedy is the Assistant Director for Promotions in the Office of National Collections at the USCCB.

The need for relief for island nations burdened with debt

Richard Coll, policy advisor for the Office of International Justice and Peace at USCCB

Richard Coll, Policy Advisor for the Office of International Justice and Peace at USCCB

In Pope Francis’ message for the 2016 celebration of World Peace Day on January 1, he asks that leaders of nations “forgive or manage in a sustainable way the international debt of the poorer nations…” This is an important issue, especially for many island nations.

Highly indebted island nations, located in the Caribbean and the Pacific, are burdened by debt obligations that impede their ability to foster economic development, reduce poverty, and provide adequate social services. These island nations include Barbados, Dominica, Grenada, Jamaica and St. Kitts, among others. In each of these countries, the Catholic Church, along with ecumenical partners, has been actively engaged in addressing both the causes and the consequences of debt, while championing the human rights and the common good of affected populations.

The human consequences of high levels of indebtedness can be very severe. By requiring a high percentage of their national income to be devoted to the servicing of foreign debt, little is left over for investments in infrastructure, education, or health.

Not only does this put at risk the economic growth and development of the country, but it may also lead to severe deprivations in nutrition and medical care for the affected population. One hears, for example, of nations with such inadequate water systems, due to disrepair, that mothers are forced to offer their children bottled soda rather than risking their children the exposure to the dirty and polluted water they face in the local water systems.

As Pope Francis said when he addressed the United Nations General Assembly in September, “The International Financial Agencies are should care for the sustainable development of countries and should ensure that they are not subjected to oppressive lending systems which, far from promoting progress, subject people to mechanisms which generate greater poverty, exclusion and dependence.”

Inspired initially by the call of Saint Pope John Paul II for Jubilee 2000, the global Jubilee movement aims to influence worldwide decision makers, including the United Nations, the World Bank, and the International Monetary Fund, to promote poverty reduction and advance solutions to international financial problems.

USCCB has long stood in solidarity with the Church in the Caribbean, as well as with the work of Jubilee USA, in alleviating the debt burdens of highly indebted nations.

For this reason, my colleague Dr. Stephen Colecchi, Director of the Office of International Justice and Peace, and I attended a recent conference in Grenada hosted by Jubilee. The commitment of the Church in the Caribbean regarding this issue was evidenced by the participation of a number of prominent religious leaders, including Catholic bishops from Barbados, Dominica, Grenada, Jamaica, and St. Kitts, as well as the Apostolic Nuncio to these nations.

There we discussed strategies for effective debt relief, as well as greater level of financial accountability and administrative diligence on the part of the borrowing nations. Participants urged lending institutions to assure that loans are structured in ways that make successful development and repayment possible.

The religious leaders at the conference agreed to establish a formal structure of consultation and advocacy throughout the Caribbean region to address on a systematic basis the concerns of these highly indebted nations.

The efforts of these religious leaders, including Catholic bishops and other Christian leaders from the Caribbean, deserve support, including here in the United States.

USCCB will continue to pursue and support energetically these important endeavors, thereby expressing solidarity and providing support for both debt relief and poverty reduction.

 

Richard Coll is a policy advisor for the Office of International Justice and Peace at the United States Conference of Catholic Bishops.


Learn more information about the USCCB’s position on debt relief.

 

Payday Lending Hurts Families

Tom MulloyOn a visit last year to a community organization that receives funding from the Catholic Campaign for Human Development, I heard the story of a woman working in a retail store, barely keeping her head above water. When the bills piled up, she took out a two-week payday loan. Six months later, she was still repaying the loan. It had been “rolled” multiple times. Although she had paid fees equal to the original loan many times over, she still owed more. The fees and interest worked out to an interest rate of close to 200% APR (annualized percentage rate).

Welcome to the perverse world of predatory lending, where the person who needs a lifeline gets tossed a boulder.

Payday lending is deceptively simple. A borrower in a pinch, using their next paycheck as collateral, is given a loan and charged a fee. The loan is then paid back when that paycheck rolls in.

The reality is rarely that quick and harmless. Most payday loans, in fact, are predatory and exploitative.

Predatory because they are built to become debt traps that borrowers cannot escape:

  • The overwhelming majority of loans–90 percent–are taken out either immediately (i.e. rolled) or within the same two-week pay period.
  • Borrowers are in debt, on average, seven months out of the year (remember, these are marketed and sold as two-week loans).
  • Many borrowers pays more in fees than the cost of the original loan. In fact, a typical two-week payday loan can carry an interest rate of nearly 400% APR.

Exploitative because these loans are targeted to take advantage of vulnerable people and families:

  • The typical borrower makes $22,400 a year.
  • Seven out of ten borrowers use the loans to cover everyday expenses.
  • A third are married; close to 40% have children.

Think about it–it’s called payday lending because most borrowers (75 percent) are employed. But their jobs don’t pay enough to make ends meet, so they desperately seek out more money.

If this sounds like a brazen affront to human dignity, you’re not alone in that conclusion. Pope Francis told a gathering of advocacy groups last year, “When a family has nothing to eat, because it has to make payments to usurers, this is not Christian, it is not human! This dramatic scourge in our society harms the inviolable dignity of the human person.” The Catechism of the Catholic Church declares, “Those whose usurious and avaricious dealings lead to the hunger and death of their brethren in the human family indirectly commit homicide, which is imputable to them” (no. 2269).

To fight this dramatic scourge of payday lending in America, the USCCB has joined with Christian partners in Faith for Just Lending, to call attention to the abuses of predatory payday lending and demand better financial options for vulnerable people. FJL includes a broad spectrum of Christian groups and is committed to being a voice for exploited working families.

To learn more about the USCCB’s work on payday lending, see our webinar, download this PowerPoint presentation, and read Bishop Stephen Blaire’s letter to the Consumer Financial Protection Bureau.

To learn more about the FJL campaign, access even more resources, and get involved, go here.

For a concrete story of hope, find out how the Texas Conference of Catholic Bishops is helping communities confront payday lending.

Tom Mulloy is a policy advisor in the U.S. Conference of Catholic Bishops’ Department of Justice, Peace & Human Development.


Statistics in this post are from Payday Lending in America (The Pew Charitable Trusts) and the Consumer Financial Protection Bureau.